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I recently discovered narrow banking (https://www.narrowbanking.org/ https://www.narrowbanking.org/) which basically states the idea of narrow banking which can

I recently discovered narrow banking (https://www.narrowbanking.org/ https://www.narrowbanking.org/) which basically states the idea of narrow banking which can only make it so that the bank doesn't have the issues with fractional reserve banking if you are worried about it Stablecoins feel the most practical way I suppose for narrow banking although there is this UK bank and this Danish bank as well which are the two examples of narrow banking. Honestly I am sort of interested in gold pegged currencies right now because US Dollar (let's be honest) feels really shaky right now and even America's debt itself is fueled by it being de-facto currency and I am feeling like previously it helped but I feel like debating that even America itself would benefit from if less foreign nations held US treasury bonds. There already are some gold pegged stablecoins and theoretically with things like revolut or some instant way to sell crypto without too much hassle/losses and transfering it easily, its rather possible to do such.

staplers 10mo ago
There already are some gold pegged stablecoins Which require blind faith in reserve numbers.
- msla 10mo ago
  Hey, so does gold-backed currency! How do you know how much gold the government is holding? Ask them! How do you know the government isn't lying? Ask this question loudly enough and meet people with guns!
  - eru 10mo ago
    That's why you should bank with private counterparties, not the government. If you buy eg a gold ETF, you can ask all these questions without any guns coming out. You can also go and exchange them for physical gold whenever you feel like it. Without any guns coming out. If they break their promises, you can sue them. Without any guns coming out.
    - philipwhiuk 10mo ago
      > If they break their promises, you can sue them. Without any guns coming out. Providing you and they are in a country who is prepared to use 'guns coming out' to enforce the outcome of said suing.
      - eru 10mo ago
        Private contracts are a lot more robustly enforced in most parts of the world than promises of the government. You can also do jurisdiction shopping: many companies deliberately contract under eg London law instead of local law.
  - philipwhiuk 10mo ago
    Welcome to "monopoly over violence" - it's only been around 12,000 years or so.
- Imustaskforhelp 10mo ago
  I wouldn't call it blind faith similar to how it isn't blind faith to get usd stable coins I think paxos and xaut have audits etc. from what I know/ I have heard. Although having more audits is always a neat idea but I was just proposing that there are ways to invest in things like gold and have things like liquid gold perhaps via stablecoin or some other means too basically allowing you to instantly sell gold and gold is a pretty good hedge against stablecoin imo. I actually once wrote about this idea of narrow banking discovering it accidentally where I wanted a bank which could invest in treasury bonds for inflation protected money or gold. https://gist.github.com/SerJaimeLannister/c3db4eb84da96decfc4a62af9b7e856b https://gist.github.com/SerJaimeLannister/c3db4eb84da96decfc...
  - philipwhiuk 10mo ago
    > I think paxos and xaut have audits etc. from what I know/ I have heard. Ah, yes, the almighty auditors. Auditing proves you passed the audit. Nothing more, nothing less. The audit can be at any level that suits the person paying for the audit. In this case it's the company who has the vested interest in passing the audit.
littlestymaar 10mo ago
> here already are some gold pegged stablecoins Something backed by a volatile asset isn't, by definition, a stablecoin, though.
- mothballed 10mo ago
  On a long timescale gold is way more stable than the dollar. Dollar is nonvolatile on a long timescale in the sense the expected returns are negative and it does it reliably at usually anywhere from a return around negative 2-10%. But in terms of price stability gold would be far far far far more stable on anything but the most short-sighted of timescales.
  - kaibee 10mo ago
    > On a long timescale gold is way more stable than the dollar. This is a nonsense claim. How many flat screen TVs could you buy for a pound of gold over a 'long time scale'? Cancer treatments? Acres of land in midwest? Hours of a normal person's time? The fact of the matter is that you cannot actually store labor or time for later, so the amount of stuff you can get your gold is gonna vary wrt the broader economy. Economic reality on the ground is what actually determines the 'value' of your gold. And look, if you want some asset that you're pretty sure you could still trade for bread after the apocalypse or whatever, gold isn't the worst choice. And its deflationary, as the amount of gold isn't increasing at pace with the productivity of the global economy. And people like to hoard it when the future becomes less certain, because of the aforementioned 'tradeable for bread after the apocalypse', so I guess its an okay speculative hedge?
    - mothballed 10mo ago
      Non-responsive paragraph. You've attacked what could interchangeably be dollar or gold asking what it might buy or store, failing to recognize I was measuring relative stability rather than absolute stability. The dollar has lost over 95% of its value since inception of the federal reserve (at which time dollars nature changed significantly) in 1913 against some imperfect measures of CPI. That gives you a 20x difference over time, downward. Gold has not perform nearly that bad at price stability. We could go back further than that when the dollar was a lot more stable... but at that time dollar was backed by gold and there wasn't (mostly) a central bank nor gold possession bans that let them mess with the price quite in the same way they did later.
mothballed 10mo ago
Narrow banking was denied a depositor account at the fed IIRC so it's basically DOA as they've envisioned it. IIRC the fed said that narrow banking threatens the stability of the banking system since private credit expansion (and ultimately, the risks that come with that) is in their estimation desirable. Regulators want nothing but to crush the idea.
- Imustaskforhelp 10mo ago
  > IIRC the fed said that narrow banking threatens the stability of the banking system since private credit expansion (and ultimately, the risks that come with that) is in their estimation desirable. Regulators want nothing but to crush the idea. But why? I don't understand, I feel like certain exceptions like (credit cards?) or house loans can be built or some personal loans but we all see a disaster which will be billed by govt. thus impacting everybody The govt itself can then buy ETF's once again / invest money from one way or other via pension funds or other funds (sovereign funds?) to the stock markets themselves or other avenues. banks basically arbitrage the fact that they are FDIC insured and loans. Nothing wrong with it except the fact that most banks would keep most of the money with themselves and only give chump change to average person or even 0%. If that's the case, why isn't there a bank which can just provide 3% treasury funds or similar or (gold?) and then just help the average person. I saw a lot of points I agreed upon the narrow banking website on and I'd love to discuss more about the harms of narrow banking compared to fractional and why regulators shot it down/just comparing the two of them.
  - em500 10mo ago
    Here's John Cochrane take on Fed vs Narrow Banks: https://johnhcochrane.blogspot.com/2019/03/fed-vs-narrow-banks.html https://johnhcochrane.blogspot.com/2019/03/fed-vs-narrow-ban... TLDR: Cochrane thinks the Fed wants keep a lid on narrow banking because it believes it can cross-subsidizing lending to households and businesses from retail deposits.
eru 10mo ago
You are mixing up a lot of different ideas and concepts. Historically, the combination of fractional reserve banking and the classic gold standard was very successful. Just because your bank uses grams of gold as the unit of accounting (or something that's effectively equivalent to grams of gold), doesn't mean they need to have that much of gold in their vaults. Similar to how today a bank will give you dollar bills when you ask for them, but that doesn't mean they need to have their vaults stuffed full of dollar bills. They just need enough solid assets to sell for dollars, so they can give you dollars when you want to withdraw. (Having some gold or dollars on hand is just a convenience, so you don't have to wait for the bank to liquidate assets.) About narrow banking: there's at least two different definitions of the idea. What your website describes might be called 100% reserve banking. The website is a bit silly: you can already get 100% reserve banking today, if you want it. The website is also extremely misleading and dishonest about fractional reserve banking. You can eg just follow their own link to the Bank of Amsterdam and read up on it. The second definition of 'narrow banking' can be seen at eg https://en.wikipedia.org/wiki/Narrow_banking https://en.wikipedia.org/wiki/Narrow_banking > Narrow banking is a proposed banking system that would restrict commercial banks to hold only safe and liquid assets, like government bonds, against customer deposits, while prohibiting traditional lending activities. Under this model, banks would function as custodians and payment processors, separate from the lending function performed by other financial intermediaries. This is like a normal fractional reserve bank, but the only asset they invest in is government bonds. This can still go wrong, if you are not careful: Silicon Valley Bank invested mainly in government bonds, but had a maturity mismatch. Their long term government bonds lost in value (because market interest rates went up), so they went bankrupt. Alas, they still got bailed out. You can approximate this kind of narrow bank for yourself, by just putting your money either in government bonds directly, or into a money market fund that only invests in government bonds. > [...] I feel like debating that even America itself would benefit from if less foreign nations held US treasury bonds. In what sense would America benefit? On an inflation adjusted basis, foreigners often get a negative real interest payment, ie they lose money, for the privilege of lending to the US. That seems like an extremely good deal for America. > There already are some gold pegged stablecoins and theoretically with things like revolut or some instant way to sell crypto without too much hassle/losses and transfering it easily, its rather possible to do such. Wise offers to keep your money in a fund and they transparently sell your fund shares, when you are buying a coffee with your card. They transparently buy fund shares, when money comes into your account. See https://wise.com/help/articles/3luodUQFD9YWzNc8PvIfVK/holding-your-money-as-stocks https://wise.com/help/articles/3luodUQFD9YWzNc8PvIfVK/holdin... and https://wise.com/sg/interest/ https://wise.com/sg/interest/ and https://wise.com/help/articles/74dYRhMCItIf2IBJLTpFQs/how-do-i-use-interest-and-stocks https://wise.com/help/articles/74dYRhMCItIf2IBJLTpFQs/how-do... --- Addendum narrow banking in the sense of only holding government bonds: I think that should be legal for banks to do, and in fact it's a good argument in favour of eliminating deposit insurance. At least the (explicitly or implicitly) government backed deposit insurance that you have eg in the US. It creates a moral hazard where the incentives for monitoring risks are all but dulled. People who still want the equivalent of deposit insurance should just put their money into a bank that only invests in short term government bonds: after all, a government backed deposit insurance can't really be safer than these short term government bonds anyway.

staplers 10mo ago

There already are some gold pegged stablecoins Which require blind faith in reserve numbers.

msla 10mo ago
Hey, so does gold-backed currency! How do you know how much gold the government is holding? Ask them! How do you know the government isn't lying? Ask this question loudly enough and meet people with guns!
- eru 10mo ago
  That's why you should bank with private counterparties, not the government. If you buy eg a gold ETF, you can ask all these questions without any guns coming out. You can also go and exchange them for physical gold whenever you feel like it. Without any guns coming out. If they break their promises, you can sue them. Without any guns coming out.
  - philipwhiuk 10mo ago
    > If they break their promises, you can sue them. Without any guns coming out. Providing you and they are in a country who is prepared to use 'guns coming out' to enforce the outcome of said suing.
    - eru 10mo ago
      Private contracts are a lot more robustly enforced in most parts of the world than promises of the government. You can also do jurisdiction shopping: many companies deliberately contract under eg London law instead of local law.
- philipwhiuk 10mo ago
  Welcome to "monopoly over violence" - it's only been around 12,000 years or so.
Imustaskforhelp 10mo ago
I wouldn't call it blind faith similar to how it isn't blind faith to get usd stable coins I think paxos and xaut have audits etc. from what I know/ I have heard. Although having more audits is always a neat idea but I was just proposing that there are ways to invest in things like gold and have things like liquid gold perhaps via stablecoin or some other means too basically allowing you to instantly sell gold and gold is a pretty good hedge against stablecoin imo. I actually once wrote about this idea of narrow banking discovering it accidentally where I wanted a bank which could invest in treasury bonds for inflation protected money or gold. https://gist.github.com/SerJaimeLannister/c3db4eb84da96decfc4a62af9b7e856b https://gist.github.com/SerJaimeLannister/c3db4eb84da96decfc...
- philipwhiuk 10mo ago
  > I think paxos and xaut have audits etc. from what I know/ I have heard. Ah, yes, the almighty auditors. Auditing proves you passed the audit. Nothing more, nothing less. The audit can be at any level that suits the person paying for the audit. In this case it's the company who has the vested interest in passing the audit.

littlestymaar 10mo ago

> here already are some gold pegged stablecoins Something backed by a volatile asset isn't, by definition, a stablecoin, though.

mothballed 10mo ago
On a long timescale gold is way more stable than the dollar. Dollar is nonvolatile on a long timescale in the sense the expected returns are negative and it does it reliably at usually anywhere from a return around negative 2-10%. But in terms of price stability gold would be far far far far more stable on anything but the most short-sighted of timescales.
- kaibee 10mo ago
  > On a long timescale gold is way more stable than the dollar. This is a nonsense claim. How many flat screen TVs could you buy for a pound of gold over a 'long time scale'? Cancer treatments? Acres of land in midwest? Hours of a normal person's time? The fact of the matter is that you cannot actually store labor or time for later, so the amount of stuff you can get your gold is gonna vary wrt the broader economy. Economic reality on the ground is what actually determines the 'value' of your gold. And look, if you want some asset that you're pretty sure you could still trade for bread after the apocalypse or whatever, gold isn't the worst choice. And its deflationary, as the amount of gold isn't increasing at pace with the productivity of the global economy. And people like to hoard it when the future becomes less certain, because of the aforementioned 'tradeable for bread after the apocalypse', so I guess its an okay speculative hedge?
  - mothballed 10mo ago
    Non-responsive paragraph. You've attacked what could interchangeably be dollar or gold asking what it might buy or store, failing to recognize I was measuring relative stability rather than absolute stability. The dollar has lost over 95% of its value since inception of the federal reserve (at which time dollars nature changed significantly) in 1913 against some imperfect measures of CPI. That gives you a 20x difference over time, downward. Gold has not perform nearly that bad at price stability. We could go back further than that when the dollar was a lot more stable... but at that time dollar was backed by gold and there wasn't (mostly) a central bank nor gold possession bans that let them mess with the price quite in the same way they did later.

mothballed 10mo ago

Narrow banking was denied a depositor account at the fed IIRC so it's basically DOA as they've envisioned it. IIRC the fed said that narrow banking threatens the stability of the banking system since private credit expansion (and ultimately, the risks that come with that) is in their estimation desirable. Regulators want nothing but to crush the idea.

Imustaskforhelp 10mo ago
> IIRC the fed said that narrow banking threatens the stability of the banking system since private credit expansion (and ultimately, the risks that come with that) is in their estimation desirable. Regulators want nothing but to crush the idea. But why? I don't understand, I feel like certain exceptions like (credit cards?) or house loans can be built or some personal loans but we all see a disaster which will be billed by govt. thus impacting everybody The govt itself can then buy ETF's once again / invest money from one way or other via pension funds or other funds (sovereign funds?) to the stock markets themselves or other avenues. banks basically arbitrage the fact that they are FDIC insured and loans. Nothing wrong with it except the fact that most banks would keep most of the money with themselves and only give chump change to average person or even 0%. If that's the case, why isn't there a bank which can just provide 3% treasury funds or similar or (gold?) and then just help the average person. I saw a lot of points I agreed upon the narrow banking website on and I'd love to discuss more about the harms of narrow banking compared to fractional and why regulators shot it down/just comparing the two of them.
- em500 10mo ago
  Here's John Cochrane take on Fed vs Narrow Banks: https://johnhcochrane.blogspot.com/2019/03/fed-vs-narrow-banks.html https://johnhcochrane.blogspot.com/2019/03/fed-vs-narrow-ban... TLDR: Cochrane thinks the Fed wants keep a lid on narrow banking because it believes it can cross-subsidizing lending to households and businesses from retail deposits.

eru 10mo ago

You are mixing up a lot of different ideas and concepts. Historically, the combination of fractional reserve banking and the classic gold standard was very successful. Just because your bank uses grams of gold as the unit of accounting (or something that's effectively equivalent to grams of gold), doesn't mean they need to have that much of gold in their vaults. Similar to how today a bank will give you dollar bills when you ask for them, but that doesn't mean they need to have their vaults stuffed full of dollar bills. They just need enough solid assets to sell for dollars, so they can give you dollars when you want to withdraw. (Having some gold or dollars on hand is just a convenience, so you don't have to wait for the bank to liquidate assets.) About narrow banking: there's at least two different definitions of the idea. What your website describes might be called 100% reserve banking. The website is a bit silly: you can already get 100% reserve banking today, if you want it. The website is also extremely misleading and dishonest about fractional reserve banking. You can eg just follow their own link to the Bank of Amsterdam and read up on it. The second definition of 'narrow banking' can be seen at eg https://en.wikipedia.org/wiki/Narrow_banking https://en.wikipedia.org/wiki/Narrow_banking > Narrow banking is a proposed banking system that would restrict commercial banks to hold only safe and liquid assets, like government bonds, against customer deposits, while prohibiting traditional lending activities. Under this model, banks would function as custodians and payment processors, separate from the lending function performed by other financial intermediaries. This is like a normal fractional reserve bank, but the only asset they invest in is government bonds. This can still go wrong, if you are not careful: Silicon Valley Bank invested mainly in government bonds, but had a maturity mismatch. Their long term government bonds lost in value (because market interest rates went up), so they went bankrupt. Alas, they still got bailed out. You can approximate this kind of narrow bank for yourself, by just putting your money either in government bonds directly, or into a money market fund that only invests in government bonds. > [...] I feel like debating that even America itself would benefit from if less foreign nations held US treasury bonds. In what sense would America benefit? On an inflation adjusted basis, foreigners often get a negative real interest payment, ie they lose money, for the privilege of lending to the US. That seems like an extremely good deal for America. > There already are some gold pegged stablecoins and theoretically with things like revolut or some instant way to sell crypto without too much hassle/losses and transfering it easily, its rather possible to do such. Wise offers to keep your money in a fund and they transparently sell your fund shares, when you are buying a coffee with your card. They transparently buy fund shares, when money comes into your account. See https://wise.com/help/articles/3luodUQFD9YWzNc8PvIfVK/holding-your-money-as-stocks https://wise.com/help/articles/3luodUQFD9YWzNc8PvIfVK/holdin... and https://wise.com/sg/interest/ https://wise.com/sg/interest/ and https://wise.com/help/articles/74dYRhMCItIf2IBJLTpFQs/how-do-i-use-interest-and-stocks https://wise.com/help/articles/74dYRhMCItIf2IBJLTpFQs/how-do... --- Addendum narrow banking in the sense of only holding government bonds: I think that should be legal for banks to do, and in fact it's a good argument in favour of eliminating deposit insurance. At least the (explicitly or implicitly) government backed deposit insurance that you have eg in the US. It creates a moral hazard where the incentives for monitoring risks are all but dulled. People who still want the equivalent of deposit insurance should just put their money into a bank that only invests in short term government bonds: after all, a government backed deposit insurance can't really be safer than these short term government bonds anyway.