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by runnerup 1199 days ago
It’s dubious whether cash deposits should (in an ideal nation) be subject to risk. What would it look like if there was a federal deposit bank which offered lower savings interest rates than private banks but also guaranteed unlimited FDIC coverage?
2 comments
tialaramex 1199 days ago
The UK's National Savings & Investment Bank, which is owned by the government, offers almost exactly this, your money is guaranteed because it's the government (in taking your "savings" they are in effect borrowing your cash to run the country) so they can and will literally print money to pay you if necessary, however NS&I is intended to be used by individuals, not organisations, maximum balances even in their lower interest generic savings account top out at £2M.
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negidius 1199 days ago
That would still be subject to risk. It's impossible to completely eliminate risk.

The FDIC is not an absolute guarantee. The government could decide that it doesn't want to honour it, or could itself collapse. Both scenarios are very unlikely to happen in the near term, but the same is true for the largest and most stable banks.

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runnerup 1199 days ago
Yeah I mean a dinosaur extinction meteor could hit the planet but for most people the determination of risk ends around “Complete collapse of USA/EU governments and their currency”.

It’s probably the most fundamental axiomatic assumption underlying any normal discussion of financial risk.

In other countries, it isn’t. “How can we manage a complete collapse of the Filipino government?” Is a reasonable question.

If the US government collapses, Coinbase won’t have a market to operate in so further discussion doesn’t matter.

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negidius 1199 days ago
It seems a bit facetious to compare the collapse of the US government with an extinction event. There will almost certainly be a world after the US government, and that world will probably still include ancient banks like Lloyds and Barclays, and large gold vaults under the Swiss Alps.

If you round the risk of the US government collapsing (or refusing to honour its obligations) down to zero, you should probably do the same for many private banks.

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