Before Commerzbank unceremoniously canceled my account after more than a decade of business, they were charging me “negative interest” for quite a while, on anything over 50K EUR. That’s in addition to account fees.
My current banks in the EU? One charges up to 1% percent per transaction and yes, that includes going to the bank to make a withdrawal. Another charges 40€ per month for a basic savings account. A third will probably kick me out soon, because I’m not an EU citizen.
My first guess would be that Europeans have a perception that their banks are exploiting them, and given any other rational option they will try it out.
In the UK Monzo and Revoult have quick access free bank accounts. I don't pay anything to have debit cards and saving accounts.
1 account in Germany, I pay 2€ per month for the account, includes a saving account, but no debit or credit card, only online access.
2 accounts in Poland where I also don't pay anything, unless I don't spent 300-350PLN (65e) per month using the debit cards. If I don't use debit card enough banks subtract 14PLN (3€). My saving accounts in PLN are 7%, 8% and 10%.
Maybe talk to your coworkers about better banks and deals, you're being taken advantage of.
Revolut is run by a toxic ceo who demands people work Sundays by Slacking them asking why they’re not working, and that demands prospective employees recruit as many new customers as possible (200+ a week) to even be considered for employment.
Sounds par for the course for most tech companies?
It's not like these companies that do this don't have extremely rough interviews and clarify expectations of 55 hour weeks prior to employment. If you don't find enjoyment in working long hours, seems like that's not the company you want to be working at? There are plenty of companies with a better work/life balance, but they tend to pay less.
Demanding long hours is unfair but rather common unfortunately, you’re right.
Demanding you recruit hundreds of customers, for free, to even be considered for an interview is downright exploitative. I don’t think any but the most predatory companies do this and it’s probably not even worth the legal exposure.
I suspect however this acts as a filter. By making people jump through this hoop, you make sure you’re only keeping docile and compliant people in your pipeline who can be abused and overworked.
Not the world I want to live in and that’s why I point it out every time I can to hopefully sway customers away from them.
>Demanding long hours is unfair but rather common unfortunately
What is unfair about this? What is so wrong about dedicating yourself to a company you beleive in? Revolut is an awesome company, doing amazing things.
I worked at Tesla, and unless you had something fun to do for the weekend (Like tahoe or something) they expected you to be in the office. I LOVED working at Tesla. I ended up leaving to start my own company a few years ago, but i will remember my time at Tesla for the rest of my life.
>Demanding you recruit hundreds of customers, for free, to even be considered for an interview is downright exploitative. I don’t think any but the most predatory companies do this and it’s probably not even worth the legal exposure.
This literally makes no sense and I think you are conflaiting something here? How would i recruit customers if i didn't work at the company? Are you talking they hired a bunch of people who had very high referals to the company? I know they offer a bonus if you refer your friends, so looking through those logs and hiring all the people who have high referals sounds like a great business move to me.
> making people jump through this hoop, you make sure you’re only keeping docile and compliant people in your pipeline who can be abused and overworked.
Or you ensure you are hiring the most highly motivated people who believe in the mission. "Docile and compliant" doesn't work at high pressure, tech companies... You are eaten up and spit out pretty quickly at the brashness, demands and stress to perform.
> This literally makes no sense and I think you are conflaiting something here? How would i recruit customers if i didn't work at the company? Are you talking they hired a bunch of people who had very high referals to the company?
It’s the third paragraph in the article I linked:
> The instructions on the exercise said the applicants should recruit at least 200 clients in a week to have a chance at passing to the next interview phase.
That’s what I use as well even though they’re a tiny bit more expensive than revolut, I don’t mind the extra couple of cents per transaction to avoid giving money to revolut.
exactly. UK has fierce banking competition and you have so many digital banks that compete with the brick and mortar and beat them on pretty much everything except for not having actual branches. It's the closest you can be to being happy with..banks :)
Then you go to Greece and you pay exorbitant transaction fees for everything. 3E for any incoming transfer, regardless of amount. 10-15E to transfer 10k between banks in the country. Sky high interest rates for lending, unreasonable guarantee requirements and it's still really hard to get a loan.
And then you get 0.25% for saving accounts. e-banking that may be pretty looking but a shame functionality wise.
And you only have 4 banks (+1 zombie bank).
The bankers are still making bonuses like it's 2007 and the public is funding them with transaction fees. The traditional banking business model of making money from the spread between lending and savings rate is pretty much dead.
I can't believe there can be any other country worse than Greece in the EU. Change my mind =)
It could be useful if those who label "bad" shared "with which Institutes", and likewise for those who label "fine" - even before detailing what is specifically "bad" or "fine".
How do you get such rates? I bank with Santander in Poland, and my savings account has been stuck at 0.01% for the past 2+ years. 7% is something I recently saw on time-limited deposits, not on generic savings account.
Sounds like it. Non-US person but also not an EU citizen (or EEA or Swiss or even British) and... apart from the negative rate (which is true), I honestly never encountered unceremoniously closing accounts while Americans complain it all the time (and they usually know it's because of FATCA - they also wish it was gone but they don't make the decisions: Americans at home are the ones deciding that they really want to see everone's account in the name of tax evasion).
I have several bank accounts. One charges flat monthly fee(that’s very low), one has positive interest(way smaller than inflation), one is free. All in three different counties. But I don’t argue your experience is unique.
It’s in general very hard to open a bank account in some EU countries even though you’re a lawful resident. There’re some “money laundering laws” that prevent no money laundering.
And the quality and quantity of additional services the banks offer sucks. I actually like banking super-apps in other countries, something you won’t find here.
Use ING it's free, as long as you use that for your income.
Never heard of 40eur/month - that seems like you have some sort of super premium account with multiple credit cards or so.
> My first guess would be that Europeans have a perception that their banks are exploiting them, and given any other rational option they will try it out.
Because that's the case!
Most banks are STILL giving you 0.001% as interest, which is a joke considering everything happening around. Some banks are promising 3% p.a. for X months only (for new accounts only) - they really don't want to lose a cent. What other option do we have? Burning money on the bank with inflation going up like crazy and banks getting, as usual, even richer.
My guess is that their assets are similarly exposed like SVB or First Republic's. Any long term asset they hold has just lost a massive amount of value and so they need to make up for it by taking the ECB rate and not passing it on to customers.
The fee banks that do pass it on will only do so for newly deposited money.
Yep, and I find it so very American to leave that tid bit out of their complaint and then it getting upvoted because muh evil EU? when its really the US goverment screwing their abroad citizens in this case.
I’m a U.S. citizen and currently have bank accounts in 3 EU countries and one other non-US country.
The bank I expect will kick me out doesn’t want non-EU citizens who are not EU residents. The bank that did, I think it was because of my citizenship (I was a German permanent resident at the time) but I’ll never really know as they didn’t give a reason, just 60 days notice.
Banks will deal with you, but not all banks, and some banking products (like brokerage accounts) are off limits.
Roughly speaking Congress was worried about Americans hiding money abroad to avoid taxes so they passed extremely punitive laws. This ended up being mostly pointless because the real tax evasion is done by people who pay lawyers and lovbyists to make sure it's all legal.
If a foreign financial institution has a US depositor they have to fill out a ton of IRS paperwork. If they mess it up the IRS can impose an extra 30% tax on all the institution's US income.
Monthly fee for the privilege of allowing banks to profit off of your money. Fees for moving bits in a database. It's insane that people actually buy these "services".
Well the problem is that they're ALL like that, it's some cartel bullshit.
There is literally no bank in my country that doesn't charge fat fees. Even credit unions want at least like 8€/month for just a starter account with online banking, plus the 1.5€ fee for each SEPA transfer, seriously. Back when I learned that this isn't standard procedure worldwide my mind was completely blown.
As for alternatives, there are pseudo-banks one might use like N26, Revolut, Wise and similar, but each one of those can at any point terminate your account for no reason, some don't even allow receiving money from accounts not in your name so you can't use them as actual bank accounts. They're not exactly a thing one can keep savings in.
Hold on -- sometimes when they're all charging the same price, it's because that's actually "the market price" in the sense that it wouldn't be profitable to do it for an less, and they actually have their own high costs they have to take care of. If there's free entry into this sector, and all banks find they have to do things that way, then that might just be what's going on.
From what I understand, Europe typically has postal banking that's minimal fee and should be a release valve against other banks' excess, which would for the "legit price" hypothesis.
But if it's very very difficult to start new banks, or for existing businesses to start serving this demand, that would favor the cartel hypothesis.
I would expect it to be a mix of both, it has to be more of an expense to run physical branches while catering to a smaller market. But I would be amazed if they don't also blow those figures up beyond what's required to cover those extra expenses just because people have no real alternative to switch to. The largest bank had record profits for the last 3 years straight, and I'm not convinced it's just an inflation artefact.
Haven't heard of any postal banks, but digging a little it seems like we did have at least one... which merged with a commercial bank a decade ago. Sounds about right.
I move my money off of banks as soon as possible instead of just letting them have it. I pay off any debts and use the rest to buy property, stocks, literally anything else. It's what the bank is doing behind my back anyway.
Didn't stop SEB in Sweden from threatening to close my US national, and 10 years a SE resident, partners account when they wanted to cash the first stimulus check.
Doesn't seem ideal while simultaneously repeatedly begging the same rare US nationals with Swedish residence permits to move to work their mainframes, but who am I to judge.
Your partner can hold US account details via TransferWise for use with US matters. Why are you depositing paper checks in USD outside the US? That is madness.
Are you a resident though? If you pay your taxes in the EU, you should have access to advantageous deposit rates and you'll pay no charges for transfers (inside the EU). FWIW In France currently banks pay about 4% on deposits (up to a certain ceiling). The only charge I currently pay for my banking services is 2€/month, including a debit card.
American banks don't rip us off to that degree. They aren't nationalized.
The biggest rip-off in American banking is that narrow banking is effectively illegal (not the banks' fault), but HYSAs are starting to get around that.
A risk in any market economy, but I feel pretty good about my choices and the options in my area where both First Republic and SVB were have not significantly diminished.
It's not. A narrow bank is one that effectively passes on the federal funds rate as interest to a demand checking account. T-bills are a completely different animal.
There's one critical difference, which is that only chartered banks within the Federal Reserve system can take advantage of the federal funds rate, whereas anyone (including individuals) can buy T-bills.
The Fed, for various reasons, implicitly disallow this type of narrow bank. Several people have tried but the Fed always denied their application to join the system.
An important qualifier! I get the impression that probably 95% of consumer deposits in the US either earn zero interest or some comically low rate like 0.00121% that all of the big banks offer on their savings, Interest Checking, and even "money market" accounts. And they also exploit people with monthly fees that can only be waived with minimum balances or by jumping through hoops like debit card usage. And "using other ATM" fees from 2 banks at once usually.
But apparently it could be worse with transaction fees and negative interest!
I feel like the few in the US who are savvy about personal finance have found the banks/CUs (i won't list them to avoid sounding promotional) that don't do any of the above. It doesn't say in the article where they are seeing these outflows actually go. I wonder if Europe also has good banking options that not everyone is aware of.
Only the absolute worst bank accounts in the US have monthly fees. And effectively no credit unions do. I certainly wouldn't sign up for an account that charges me anything, but I've never had to bail on making an account because they would have.
> Only the absolute worst bank accounts in the US have monthly fees
Sure, and those worst banks have massive market share[1]. I'm sure maybe 50-60% of the people with these accounts actually manage to correctly avoid the fees by minimum balances or direct deposits or the "use your debit card 10 times a month" policies. But like, Chase, BofA, Wells Fargo, Citibank... combined, their market share is massive. Chase, BofA and Citi are $12, Wells is $10. All require you to do certain things each month to waive the fee -- which seems easy to me with a steady job and savings, but a lot of people don't have that.
So, where are they putting in the money. Reading the article, it is not very clear, but it looks like there a slight shift from Savings Accounts to Money Market Accounts. In the end, I think it is just shuffling money between banks. Nobody is stuffing their money in the mattress anymore.
Stocks dividends are now in 5-10% range, e.g. Verizon is at 7%.
Obviously, markets are volatile and are in "search of direction", but quite a few dividend-paying stocks are trading at near 5-10 year low, so picking them up is not that much of a gamble if your investment horizon is long.
For people who conduct their transactions in $'s, sure. But Europeans buying US Treasuries would be subject to currency risk, which could easily wipe out that 5% APR
Individual corporate and government bonds are traded on the German stock exchanges. A regular brokerage account is sufficient to purchase these (e.g. Flatex). Tax statements are typically handled by the broker.
Yes definitely, I didn't mean to imply therefore US stocks are the better choice, only that US fixed income isn't some straightforward escape hatch for Europeans.
Agreed. But EU fixed income is becoming very attractive and 3% risk-free short-term government debt (that can be easily bought directly from the government with minimal fees at least in some countries) is much better than a bank account paying 0% (or maybe more but probably in a less solid bank).
"Only if"..well yea. And why wouldn't it? I don't know what you're basing your thesis on, it is very common to have currency moves in either direction that massively exceed the differential in US vs Euro rates. Making bets on how it plays out is also a big market, but in that case you're a currency trader...is that the type of risk profile of a non-trader looking for short term fixed income/savings? I doubt it.
One should probably default to making returns in the currency they buy things and pay taxes in unless there's an obvious reason not to. Trying to make an extra ~2% on short term rates seems like picking up nickels in front of a steam roller. Euro is up like 16% from the bottom last summer, and when it trends it can go for a while. Sounds risky.
There are no Euro bonds in the sense of debt issued by the EU, to my knowledge (although it's been discussed). All EU government debt is still issued by national governments of the EU constituent states.
I would say stocks (index funds) probably will keep up with inflation (due to implicit government bailout guarantees) and “money in the bank” (or even government debt) will not keep up with inflation due to explicit government promise to continuously reduce purchasing power of the currency.
Useless to most Europeans though. I have to pay 15%-30% of the value of any US stock I buy in tax when i sell (to the US government), no matter the initial investment. I own about 10K euros of TSLA stock, and when I sell (as a EU citizen) the US government will take %30.
Stock dividend of 5-10% is pretty much unheard of here.
You need some actual tax advice. I deduct EU tax from my tax liabilities in US so my US tax exposure is exactly 0. Still have to file US taxes, so my accountant fee exposure is non-zero but it isn't too hard to do yourself once you have a few examples to copy from.
If you are a non-resident & non-US citizen, I think long term capital gains taxes will apply. If you hold TSLA for at least one year, your tax rate will be reduced to 15%. This tax can be offset by capital gains taxes paid in your own country.
yeah, I always DCA into a bunch of ETF's but this was the first month i ever 'picked my stocks'. Most mining companys are in distressed range because alot of metals and materials are at all time lows. They also have great P/E ratios because of the slump.
For instance, Albemarle has a revenue jump of 119% YOY% with a 33% Profit margin. but it's trading four time book value. That's insane to me. It has tech company growth, but since the price of lith is at all time lows investors are scared. Even with lith at this price, they are making a huge margin and are scaling up production. But if you beleive Lith will be in short supply in the future, it's a great opportunity.
In my case, equities. It makes zero sense for me to have money sat in a bank account earning 0.75% (3.5% below base - it’s the best savings account my bank in the U.K. offers) when I’m paying 6.5% on my mortgage with the same bank. Rather than pay off the mortgage with a stiff penalty based on current rates, I’ve stuck it in equities and funds, where at least the yield will be better than a kick in the goolies, which is the best most banks offer.
> It makes zero sense for me to have money sat in a bank account earning 0.75% (3.5% below base - it’s the best savings account my bank in the U.K. offers)
this is more of a lazyman tax than anything else
there are instant access savings accounts offering 3.5%
When they started QE, the effectiveness was heavily limited by the small size of the securities market relative to the broader banking sector (this is why they did TRLTOs and things you didn't see elsewhere). So international borrowers started issuing in EUR realising that the ECB would buy their debt, and this has only accelerated now that US rates are rising (it has also led to massive growth in private credit and other extremely inadvisable products).
The problem with this is that it isn't possible for the EU to suddenly have US-style, open financial markets where savers get paid a fair amount. It undermines the system of pensions, undermines the heavy corporatism, it undermines the whole economic model of most of Europe (even countries like Italy that have larger financial markets, it is largely due to the needs of govt finance...their govt debt cannot be financed without extraction from domestic savers...this becomes impossible if they have options).
Seems like a decent deal trading stable pensions and government services for losing the ability for a few percent of your population to use financial markets to expand their wealth constantly.
Mostly real estate that can be bought in cash without a mortgage. Everything that's under 300k seems to be bought instantly in cash and put on the market for rent.
In case you wonder why real estate prices haven't dropped significantly in Europe that's why.
The demands is still high and many people with inherited wealth are still liquid enough.
Seller probably keeps some cash but also probably takes a substantial portion of the money and pays off debt with it. At least for a lot of sales, this would happen.
Probably paying the bank back for money borrowed for the mortgage, bigger house, elderly/senior care service, being distributed as part of an inheritance, used to pay off debts or as part of a divorce settlement.
Or something else - people sell houses for lots of reasons.
As the article explains, MMFs in the EU are very small relative to deposits. Competition in the EU is limited because of the important political role that banks play (if people do move their money en masse out of banks, it will have political consequences as well as economic...there would be no option but to bail everyone out).
Basically it's why bother with a money market fund earning 0.5% when your capital up to €100k is guaranteed at 0% interest. 0.5% is simply not worth the risk.
The mmf offering of my bank is covered by the public depositors insurance. It's also more like 1% interest, and other (similarly covered) banks have better rates. Still not a lot, obviously.
>Nobody is stuffing their money in the mattress anymore.
If you have the floor space, getting a high-quality fireproof safe and bolting it into concrete is a very wise investment. Keeping a stash of cash in it is far from stupid.
It's safer in the bank. At least you defer dealing with thieves to someone else.
Indian communities around me were getting hit hard by home invasions and robbery some years ago once it became known that they hold and trade large amounts of gold in their homes.
Money attracts thieves like food attracts bears. Store it somewhere away from yourself.
Besides, no safe is fireproof. At best they are fire-resistant. Good luck getting to your money while your house is burning (lol) or after it collapses.
Don't keep all your money in your home. That is stupid. 1-10% of your take home pay is reasonable for an emergency. Is it safer in your home? No. Is it 24/7 available? Yes. And it will be 100% confidential if you keep your mouth shut.
Using gpt I came been able to recreate some aspects of market research and due diligence which previously took me weeks, in seconds.
And this was with some sample data (meaning history gpt already had)
But I’ve been doing a bunch of tests on combining checks and tables and data from sources and it’s astonishing
The reason they are afraid of AI is because of it had actual access to online data - the world economy would be upended and we would be killing billionaires, companies, politicians in the streets given how blatantly obvious all their actions are and the colluding and corruption which is fingertips away.
All their actions have been blatantly obvious for decades. I'm pretty sure the threat of retaliation is what's stopping people from killing billionaires, not the lack of AI.
I don't think so. We had fire sweep through; I never heard of one safe protecting contents, out of thousands of structures. In every case I'm aware of, the contents were heated to the point of melting most metals, and reducing all papers to ash. Maybe not melting firearms, but definitely rendering them useless. In many cases, the safes failed to the degree you could kick them apart.
Regardless of insulation, when you put a container in a 1,500 degree environment, the stuff inside is going to be wrecked.
Maybe there are some models that would have worked, but I wouldn't trust any of them.
What's a threat scenario where cash in a fireproof safe would be a better choice than an (insured) deposit in an EU bank account or government debt money market funds?
The most practical reason for most people in the US to have some cash on hand are scenarios like:
1. A storm rolls through and a tree fell down in your driveway. The power is still out. A guy with a chainsaw shows up and offers to move it if you can pay on the spot.
2. Same situation, but a blizzard and a guy with a snowblower.
3. Small contractors often offer a significant cash discount for home improvements / repairs.
Well, I decided that having saving accounts that have interest of 1.2%-8% (GBP, EUR, PLN) isn't really worth it with such inflation 11-18%, so decided to fuck up years of savings and put all money into mortgage overpayments.
I did the same. My mortgage rate is low, but putting in £20k just reduced my monthly payment from £910 to £720. I see the benefit straight away on the next payment. I would put in another £20k but I would be charged a fee so I’ll wait until next year.
It will allow me to pay more into my pension and claim 20% higher rate tax relief back on that too.
yeah its not clear but that seems to be the case. Meanwhile in the US I am getting 4.5% of a few high interest savings accounts I have open, I am not sure if these options are available to Europeans but if they are there are banks that are paying really good interest rates. That being said the major US banks are offering absurdly low interest rates and I just use them for a checking account and nothing else.
>Meanwhile in the US I am getting 4.5% of a few high interest savings accounts I have open, I am not sure if these options are available to Europeans
They aren't. In my Euro area the highest interests on savings accounts I can find at banks is 2,5% and that's as a special offer for new customers.
We in Europe are being fleeced from all sides, while banks, energy, real estate, food companies are having their most profitable quarters ever. Something's gotta change.
Not really, my savings converted to EUR gained thanks to the currency movement and then the interest - which is bigger than anywhere in the Eurozone. I am mostly interested in that since I buy property in Eurozone countries. What I spend in CZ is peanuts. Yeah I can buy less bread and butter but I don't really care, it's not like I'm going to buy food for 5M CZK, I spend less than 15k/month on that. And Czech property prices are currently going down anyways.
What actually matters to an Eurozone resident is the currency movement against EUR, not the local consumer price inflation - you don't need to be a local consumer at all. These indicators don't move in lockstep, in case of CZK they actually moved in the opposite direction than expected.
>but inflation is much larger than in the Eurozone
I doubt it. The RON has been stably held to the Euro. It's still 5 RON = 1 Euro like before. So the RON inflation should be tracking exactly the same Euro inflation.
The new trend in Europe is to talk about consumer price inflation (increase) when they say "inflation". What they mean is that usual stuff (food, building materials, etc) costs more. There's no reason the local prices should track EUR "inflation", and it's true that they don't.
How much that matters to you is another thing - it matters a lot to a poor/average wage person, I think it doesn't mean much when you're making a SWE salary.
Sure, but on HN we can only talk about CPI, as that's what every government reports and it's something we can easily compare. We can't compare each other's own inflation because we live in different countries and have different jobs, expenses, lifestyles, etc.
We all know "the real inflation I'm feeling is higher than the one reported by the government" trope but there's nothing we can do about it here and now.
Yeah, RON hasn't moved against EUR - but the price of bread, butter, eggs, ham, cheese etc in RON (as well as EUR) has moved up. That's not pegged to prices anywhere.
> In the end, I think it is just shuffling money between banks.
I don't think so. As I understand it moving into a Money Market Fund means a bank can't loan out your deposit anymore. Think investing in a Vanguard Money Market Mutual Fund like VMFXX. Vanguard can't loan those funds out.
Yes it can, and that's the point of a money market fund. Money market funds invest in short-term debt securities. That's a mechanism for lending money.
I think the point is they aren't loaning it out to random people or companies, they are instead only loaning it out to the government to get something approximating the risk-free rate. You then use your quasi-riskless money market fund as a way to balance the risk of your investment portfolio.
Okay, let's be serious. This matches Keynes' liquidity trap. Unlike time preference theory which predicts that people will simply consume once the interest rate is below their time preference. According to liquidity preference people actually keep cash or short term assets, because interest doesn't compensate for delaying consumption, it compensates for going from a more certain and liquid asset to a less certain and less liquid asset near zero interest. So what happens instead is that there is a crowding out effect at the zero lower bound. You could think of it as if the private economy stops and the only thing left to do is for the government to micromanage things.
The only private market solution would be to get rid of cash and just let interest rates be negative. That way the crowding in effect that e.g. Austrian Economists predict when the government spends less money actually happens.
So yeah we are stuck in this situation where the private sector isn't credit worthy anymore and everything has to be threaded through the government. People rightfully complain but what exactly is supposed to happen? There are no answers left. Economists don't do money so they simply assume this situation never happens or resolves itself automatically.
Yea. The point I was trying to make is the bank is losing that liquidity. It doesn't have your deposits to loan out since you directly loaned them out in the form of things like Treasuries. That is a problem for the banks and why the article says Europeans are "draining billions from banks."
The fund invests at least 99.5% of its total assets in cash, U.S. government securities, and/or repurchase agreements that are collateralized solely by U.S. government securities or cash (collectively, government securities).
Most money market funds will only invest in very safe and short term debt - ie. government debt. So the money ends up again in a bank - but usually that's one of the big commercial banks or the central bank.
There are much higher rates available for brokered deposits via Raisin or Zinspilot. These are also with banks. They're just less well-known banks and not typically in the countries which have the most and richest savers.
Bitcoin is similar to stuffing money in a mattress. It doesn't pay an interest rate and you're funding the multibillion mining industry, so in many ways its worse than a mattress.
Banks are in a tight spot. They have short term liabilities (depositors might want to pull their funds out whenever) and primarily long term assets (loans), except for the cash buffer they get overnight deposit rate for from central banks.
Some of that long term debt interest is fixed at lower rates than current interest rates, so the banks can’t offer the same risk-free return on deposits as money market funds that collect the current rates from short term government bonds.
The longer the high interest rates continue, the more deposits will flow out into money market funds and treasuries in search of higher risk-free yield.
As time goes on, more and more banks are affected by this, potentially needing bail outs if they can’t cover the depositor outflows. They have higher cash reserves than before GFC, but if there are enough outflows, those reserves won’t be enough.
yes in an unusually tight spot due to the rapid, significant increase in interest rates (risk-free yield elsewhere) vs what they can offer to depositors - risking bank runs, which previously have been rare.
If we zoom out, we could say it's a fairly inevitable second order effect of the last ~15-20 years - large deficits, low rate environment and money printing. As debt builds up, the system becomes fragile over time, and events like pandemics or wars (supply shocks, huge fiscal/monetary pump) can surprise, with a sudden spike in inflation.
This has forced central banks to swiftly reverse course and hike rates much faster and comparatively higher (from 0% starting point) than in a long while.
Problem is, when economy participants are hooked to low rates over decades, these hikes will likely break things - starting with banks, then commercial real estate, then who knows what.
Central banks can only hope inflation comes down fast before the dominos start falling - but it's not guaranteed it will, or that it will stay low, especially if central banks are forced to intervene with more easing in the event of some kind of crisis.
^ this is a very thin piece, used to push a narrative. Cherry picking 5 particular banks and their Q4 2022 fiscal results does not tell you what is happening right now. Since that article was posted in February, we've had 3 major U.S. banks fail representing $532 billion in total assets and Credit Suisse collapsed in March, with Swiss government providing $108 billion to back a purchase by UBS. The banking system is in bad shape right now, and we don't really know how many more will fail.
If Berkshire sold out of most of their bank holdings, that should tell you something.
Large banks are broadly fine for now (cough Credit Suisse cough), but there are a lot of small/midsize banks that are more vulnerable, enough to have some contagion effect. If more start failing, spooked depositors with more small/midsize banks start pulling their money out and move it to large banks - possibly collapsing more of the smaller ones.
They nicely provide an anchor point for reference on how much money is held in accounts:
> 9.45 trillion euros held in current, or checking, accounts at banks across the euro zone.
Deutsche Bank, one of the examples, reported higher reductions in deposits, offers 0.4% interest with no daily access. [1, 19th of April]
One of the popular directs banks (DKB) offers 1% [2]
A popular free trading platform (trade republic) offers 2% for uninvested money [3]
So I wonder what the overall change in deposits actually is compared to those 9.45 trillion euros, it doesn't seem that surprising when the big examples in the articles have the lowest interest. Are people also leaving the higher interest banks?
Sorry, I don't understand what you mean by that. Could you explain?
The 1% and 2% examples are not from the article as one of the losing deposit examples, just my comparisons because I am familiar with them. So I wonder if they also report reduced deposits. (I am probably not even using the correct financial instrument to compare, it's just one easy to look up.)
So I wondered if consumers using the low interest banks (like Deutsche Bank with 0.4%) are mostly just switching to higher interest banks (like DKB with 1.0%) and the actual change to those 9.45 trillion euros is not in the tens of billions, as suggested by the article (e.g. Deutsche Bank with nearly 5% in change in deposits), but instead is closer to a few billions. In context of 9.45 trillion, that would be ~0.1%, which does not sound too worrying.
The EU is a single market, with free movement of capital. This means the risk-free rate ought to be the same EU-wise regardless of currency. If interest rates are significantly higher in a particular EU country compared to the rest, it probably means the markets have determined that that particular interest rate isn't risk-free.
These are retail bank savings rates. Risk free except if the bank collapses, and in some countries customer deposits are backed by state guarantee to some upper limit.
Worth noting that policymakers in the EU have long recognised that Europe's small capital markets and over-reliance on banks is a problem and hampers economic recovery/growth. The Capital Markets Union project[0] is largely about trying to build deeper capital markets so that savers have other places to put their money and companies have other ways to raise financing. The rise of MMFs isn't necessarily a bad thing if that money can be effectively channelled back into the real economy.
I'm not sure how keeping your cash under the mattress and paying for groceries with it is an improvement.
That said, there's a pretty clear bifurcation between a lot of retail banks that are happy to make money off all the small accounts and lazy money in checking accounts and the brokerage money market and other accounts paying around 4% or so these days which are actively pursuing deposits.
I'm not sure how keeping your cash under the mattress and paying for groceries with it is an improvement.
Not to mention peoples money would smell like their beds. I prefer using safes for quick access things and deep unmarked holes for longer term storage. One of my methods is to pay extra for services so that I keep a credit on each account such as internet, power, etc... I also keep about 100 gallons of fuel with fuel stabilizer and SeaFoam.
I believe the logic is that if one has enough cash on-hand and their bank gets into trouble, they can still pay for food, fuel and other basic things to get by. It probably won't help for paying large bills like rent and mortgage unless people risk keeping a lot more cash on-hand. One can go into their brick and mortar bank to pay cash for their mortgage. It's good to do this periodically to pay extra towards the principal and shorten the loan duration.
> It probably won't help for paying large bills like rent and mortgage
For what it's worth, where I live (in Germany), it's usually just plain impossible to pay rent or mortgages in cash. The landlord or mortgage provider will instead use SEPA Direct Debit to pull the money out of your bank account directly. When I see a US-made movie where the landlord knocks on someone's door to collect rent in cash, it's rather bewildering. In Germany, any sentence that includes the phrase "paid rent in cash" probably starts or ends with "this is how I got scammed".
> When I see a US-made movie where the landlord knocks on someone's door to collect rent in cash, it's rather bewildering
That might be the result of thinking movies bear any resemblance to reality. Approximately nobody pays rent in cash in the US, either. But movies are about telling stories, not describing how things really are.
It very well may be. Though the last time I had to survive without a bank account, it didn't mean I paid big bills like rent using cash, it meant I got familiar with the local check cashing place and used money orders a lot. My landlords didn't want to deal with me giving them a bunch of cash every month.
>Approximately nobody pays rent in cash in the US, either.
At least above a certain income level if they're not paying someone off the books or maybe splitting a bill with friends/family (and even that is often some digital payment or a check) cash is increasingly uncommon. I don't think I've withdrawn money from an ATM in a couple years. And, certainly rent/mortgage, it would be almost unheard of in most situations. No one wants to be handling thousands of dollars in cash in an urban area.
>When I see a US-made movie where the landlord knocks on someone's door to collect rent in cash, it's rather bewildering.
You do know that not all movies represent reality, right? Iron Man, Bat Man and Spiderman do not exist, even though they're often seen in American movies.
Meanwhile in the real world of Germany, when I see the assistant at my dentist in Germany writing pacient appointments in a giant paper log-book instead of a digital calendar on a PC, it's rather bewildering.
Also bewildering, is the so called digital stuff being done through snail mail, and people paying in cash at restaurants so they can do tax fraud. Try asking them for a real receipt and not a hand written one and look at their faces.
My point is Germany is backwards in enough areas not to afford to take a high horse stance.
The corollary of this is that at least in Berlin you can’t survive without cash as many bars, restaurants and even shops will not accept any other form of payment.
Depends on the community. If you’re dealing with people who themselves are paid in cash, usually under the table, then it’s very common to have your rent paid in cash.
I think you should see this more as people putting their money into different investment platforms rather than people withdrawing massive amounts of cash and keeping it under their mattresses. When you invest a minimum of 100k Euro your options open up significantly in Europe. This is because our consumer protection laws have lower requirements for what is deemed semi-professional investors and up, which makes it easier for companies to be caretakers of your money.
Right now things are slowing down, and have been for a while. Not so much because demands are declining, but because interest rates are increasing. Which means a lot of people are looking to put their money into safer options than what they have been for the past decade or so. Traditionally this would have been (or at least involved) banks, but because many banks have been slow to drop their negative interest rates on in-loans, they are also very unattractive options when you're looking to store your savings. At the same time, banks have been a little slow to react to the fact that there are now a lot of stable options for those €100K+ investments because their primary focus has been on loaning and not in-loaning.
I wouldn't worry too much about the banks unless you have stock options in them or work for one. Especially if you don't have more savings than what is covered by your government. But pulling money out to keep as cash would only really make sense if you're paying a lot of money to keep them in the bank, and if that's the case, I'd probably look for a different bank first. Depending on where you live in the world of course.
I wonder what the actual process is for if your bank fails. Does the government cut you a check or do you have to wait a couple months with no access to your money before seeing any kind of insurance payout?
I suppose it depends on where you live. In Denmark when some of our banks failed in 2007-2008 the government simply assumed ownership of the banking operation until the healthy business (regular people) could be sold and transferred to other banks. I think something similar happened with Silicon Valley bank, didn’t it? It’s typically not too disruptive for regular people.
For investors, institutional loaners and people who have more money than what is covered by your country’s laws or the banks insurance, you will likely have to wait for a lengthy bankruptcy process to see what remains of your money beyond what is covered. Typically in-loans will be quite high on the bankruptcy priority list, but sometimes there won’t be enough money to cover much of it. Often there will also be various lawsuits in the wake of a bank failing, as investors try to get what they can.
Where it can be severely disruptive is if your company has money in the bank exceeding the “regular people” amount. Because that would mean your company would have to wait for the bankruptcy process to obtain access to its funds.
I must admit it looks like I will be proven wrong; I was assuming when the crisis hit cryptocurrencies would collapse immediately. Relative to the more traditional markets though they seem fine. If the ecosystem keeps doing what it does, in a few years people will have settled on a fair price for hash power and then it'll be quite competitive against these unreliable financial institutions.
Someone is going to be subsidising all the largess the regulators are going to have to distribute. That might make the cost of sustaining Bitcoin's energy burn look like the cheap option.
Cryptocurrencies operate as their own universe, which is only loosely tied to the real world's "good news" and "bad news". In either direction. Which makes it risky to bet against. At least Balaji paid out on his ridiculous hyperinflation bet.
> the cost of sustaining Bitcoin's energy burn look like the cheap option
No, this needs to have the plug pulled on it if we're to keep global warming to 2C.
> No, this needs to have the plug pulled on it if we're to keep global warming to 2C.
Bitcoin accounts for <0.1% of global CO2e and has one of the highest shares of renewables in any industry (since it competes globally for the cheapest energy).
It incentivises renewables (by being a location agnostic buyer of first and last resort which buys all excess energy 24/7), reduces CO2e (by making it profitable to combust CH4 instead of venting it), stabilises energy grids (by providing flexible demand response, i.e. can be turned on and off at moment's notice), provides banking services for the global unbanked and financially discriminated, shields from gambling bankers and inflation of the money supply, ...
In comparison to all these use cases and benefits, mere "luxury" energy uses such as air-conditioning, tumble drying, video games, porn, ... all consume more energy and produce more CO2e (e.g. A/C ~100x more). Yet nobody calls to have the plug pulled on them.
Regulate the production of energy, not the consumption.
Computers, data centers and networks consume about 10% of all the world energy. [1] 4 percent of websites are estimated to be porn [2] a single gaming computer costs about up to 1400 kWh annually. [3]
So the porn websites are about 3X bitcoin and BTC represents around 8.7m gaming computers.
I would like the source too. I would be very surprised if Bitcoin energy consumption passed even half of what is consumed for porn and video games. I expect the amount of energy being used to maintain Bitcoin to be a rounding error in comparison.
>No, this needs to have the plug pulled on it if we're to keep global warming to 2C.
Sure thing buddy. One of the ways the "little guy" can push back against big banks and big government needs to have its plug pulled because of some imaginary 2 degrees panic. What the hell happened to "Hacker" in "Hacker News", this place is a cesspool of the mainstream rhetoric. Note: I have $0 invested in crypto, but I don't deny its usefulness in "keeping the bastards honest".
I wonder if all the banks in the world consume more energy vs Bitcoin network? What if we didn't have these big institutions that employ hundreds of thousands of people to basically increment and decrement a counter in a computer. Imagine all costs that we wouldn't have to incur (e.g transport to work, operating buildings, etc). Today's banks seem very archaic.
The banks are also serving several orders of magnitude more people than the bitcoin network. The energy usage per transation isn't even close to being comparable.
Even with all of the inefficiencies of modern banking, by comparison cryptocurrency is like lighting oil wells on fire.
Purpose of any modern bank is to make money for its shareholders. It does so by taking money on one side and lending it on the other. Lending is inherently a risky business and that risk must be managed. It's unfortunate that in this process people who deposit money can lose it. Essentially, those people take risk of losing money for <1%.
There is also another aspect to banks which is to provide ability to exchange money. That part of banking doesn't generate a lot of revenue compared to loans so it receives a lot less attention.
I mean, past 12 months crypto hasn't been very volatile. That is part of why it looks like it is outperforming all these banking institutions who are rather volatile in that the regulators are forced to invent new regulations on the fly otherwise the whole system might collapse. Nobody has any confidence that their money will be safe except, ironically, people like the Silicon Valley Bank depositors.
In crypto, they lost FTX. That seems to have been about it. No rule changes required. I can self-custody if I don't trust the exchanges.
Cryptocurrencies did collapse. All confidence in niche coins evaporated overnight and any money that didn't flee the sector entirely was rerouted into the major coins, making them the beneficiaries of the collapse.
> I was assuming when the crisis hit cryptocurrencies would collapse immediately.
It depends on faith in the system... if the green line stays green, why pull? same argument for any other market like the stock market or housing market.
Good thing Switzerland kept it's CHF 1000 notes while the EU dumped their EUR 500 notes.
Of course it's stupid to keep cash with inflation at the current rate but you should always keep some emergency cash around. Then again some banks have such high fees you might as well keep the money in cash in a safe.
Depends on what the scope is. It's a lot easier to go to the store and buy food with emergency cash if there is a 1 month blackout or internet outage. The grocery store isn't going to accept gold and the conversion rate from gold to cash isn't going to be great in that situation.
For inflation proofing a fortune, sure, keep a large chunk in gold (or something else that is stable and movable). But for "emergencies" I'd try to keep some cash.
If there's a long blackout or internet outage stores would not be able to operate - if you're preparing for that scenario canned food, water canisters, weapons and whatever else prepper handbooks say are probably your best investment.
The bid/ask spread is too wide on precious metals to be useful as a transactional currency. I guess in a true societal collapse-type emergency maybe it'll be useful, but at that point canned food, guns, and ammo might be more valuable.
Right, I think it's helpful to define the most probable types of emergencies where having a non-electronic form of payment is useful. In the US that's likely some sort of natural disaster (hurricane, snow storm, blackout or brownout during the summer). Going to your local grocer and using cash won't raise any eyebrows where I'm not sure how likely anyone is to accept gold or silver in one of those situations.
There are various rules of thumb in the prepper communities but it's something like:
* 2 weeks supply of food, water, heat, and cash
* 2 months supply of similar but in longer-term forms (often precious metals go here; ones that are "well known" are the best, like junk silver)
Beyond that it's up to personal discretion and location, but the two week rule is a good one, in my opinion. 90% of "hiccups" are done in two weeks.
If you are at the level of using precious metals as currency, you are going to need to be part of a powerful tribe that will watch your back so that your precious metals will not get stolen. And I doubt many, if any, “preppers” have that crucial aspect covered.
If I'm in a scenario where the economy has collapsed to the point that trade is happening through barter, I feel like liquor, arms, and ammunition are better value stores than precious metals. They'd be an appreciating asset, because a societal collapse would probably disrupt manufacturing and distribution supply chains, and they're directly useful rather than requiring someone figure they'll be able to exchange them with someone else later, but also shelf stable enough that a buyer could trust they could pass them off later, allowing them to operate as an adequate substitution for currency.
Gold will be hitting all time highs forever when your measuring stick is an inflationary currency.
So long as your investment horizon is on the scale of years and decades, it's never a bad time to buy an asset with constrained supply in exchange for paper that's constantly being debased.
When your ruler is getting shorter every year, you'll never stop growing taller.
Gold is almost at an all-time high when adjusting for inflation. If it lost 2/3 of its current value that wouldn't even be very notable, pretty middling as far as historical value goes.
The problem there is you have to find a buyer to turn that metal into liquid money. The only one you can sell it to is usually the same place you bought from, and they will make sure to make a profit.
The percentage Icelandic banks (by memory) have had on normal deposit accounts, locked somewhere between 3-36 months has been around 2-3% over the last few years, and effectively 0% on checking accounts.
Now, with inflation running rampant, the percentages have reached up to 7+% (Central Bank interest rates are 7.5% and inflation measures at 9.9%).
I am in the privilaged position to be able to gain more in interest on a considerable deposit at a local bank (which is unlocked I might add) then what my total monthly mortage interests now come to (close to 1.8x). In addition since the mortage allows for direct deposits into the principal without incurring any additional cost, each Krona that gets put into it has effectively the same buying power as when the loan was initially taken.
I've always found it rather fitting that two previous European colonizers had a previous colony (though not one of theirs) do a bit of modern day financial pillaging on their shores.
In the end though, they did get paid back all that they were owed. So all ended well.
I wonder if the same can be said about any of their former colonies though...
Regarding 1.8x, what is your tax rate? I have the same situation in Canada but my marginal tax rate is approx 50%. As such, it is better for me to pay down my mortgage (through early payments).
There is some narrative I've seen here and on reddit that inflation is 2-4% because the government says so. People are so confident about it. Meanwhile big brains and small brain meme are saying "no way are these inflation numbers real".
Something something Bitcoin(no not other coins, just bitcoin, no not blockchain, just bitcoin), something something federal reserve/fractional reserve banking, something something we are supposed to believe inflationary currencies are good for me.
Good. It isn't competitive for these big banks to continue to offer 0% interest rates!
In Portugal I landed on "Certificados de aforro" which gets you on the road to 3.5% on EUR, secured, with liquidity. Would love to see more daily savings options beyond risky fintech apps!
Just a 0% interest rate and nothing else would be very competitive for the average EU bank, since the standard is a few cents of interest while being robbed with monthly fees, so the effective rate is negative.
Friendly reminder that you cannot remove money like that from circulation (unless you literally burn it), it just goes into another account or transforms from the digital form to the printed form. Only reducing the overall debt level reduces the amount of money.
Yeah, and at the margin all it does is it incurs a small cost at the bill printing facility. Nothing else changes, since the central banks can and will freely convert base digital money into bills, without limit.
>"Andy Halford, chief financial officer at Standard Chartered, told Reuters he thought people would ultimately prioritise security over interest payouts."
Security my ass when deposits effectively evaporate given inflation rate all while banks rake up the profits.
For those in the UK, checkout rcibank.co.uk: instant access saving accounts, currently offering 3.4% interest. I'd be interested to if there's anything that beats that rate.
Only reason why I use a bank is for the payment of my bills, definitely not for their investment savvy or making my money grow, already getting nickled and dimed for card payments/cash withdrawals and printing statements.
What if our money supply would come not just from bank underwriters guessing how a business will do in 10 years, and risk managers guessing what interests rates will be, etc. Instead, it will come form communities of all kinds. ("But how will we pay for it?" By removing money from circulation via taxes and fees.) Each community can be the source and sink of its own money supply, instead of the banks, who are motivated not by social good but by profit motive.
I know some people will knee-jerk downvote this because it's talking about Web3 again. I'm not talking about ponzi schemes or speculative bubbles. I'm talking about communities issuing their own currency to their own members, whether they're online (e.g. HN Karma) or offline (VegasCoin). Just because Web3 has been overrun by green and the profit motive doesn't mean the idea of communities having their own smart economies with their own monetary and fiscal policy is not good. Don't throw the baby out with the bathwater. (Look at my posts... I'm essentially a libertarian communist going back years, so someone like me might buck the trend of assholes who are just in it for the grift.)
So self-assured. Did you even see the link to the pdf? It explains…
1) Give the tools for any community to release their own coin
2) Communities pay the coin for participation or doing something (eg Hacker News karma). Maybe have a UBI to everyone so they can vote with their wallet. Upvotes are coin transfers etc.
3) Make the coin usable for local advertising or by local vendors. This is the WORK the community has to do (not us) same as VISA and Mastercard network had to do!!
4) Allow people to buy the local coin in a decentralized way. Now each coin becomes exchangeable all for other coins.
5) Intercoin network. Converts any coin to any other coin. Once your local farmer and electric company accepts YOUR city’s local coin, then you pay for food or your electricity bill, using hackernews coin, transparently.
Intercoin is to value what Internet is to communication. We are building an internet of value. It’s completely voluntary. If you don’t want to use it, don’t. If you want to shit on it, at least learn about it first.
As I said, I am willing to make a wager. Happy to take the other side? If I win, you post the printed screenshot with your face next to it, and in giant letters “I supported fascism / authoritarianism / totalitarianism because it was cool”.
> 3) Make the coin usable for local advertising or by local vendors. This is the WORK the community has to do (not us) same as VISA and Mastercard network had to do!!
Is anyone doing that? How far along are they, compared to VISA and Mastercard (or even just other crypto)?
If sufficiently large communities released their own coins, if enough people in each community decided to engage with it - and you know that crypto reputation is not the best - and they decided to put enough work into making it usable locally, if there was a large enough market... GP could use it to pay for their bills.
As it stands, though, this just reads like "draw the rest of the owl".
Are you proud that Big Tech and Big Banks were the only ones able to build the infrastructure and get a large network effect? You like monopolies and cartels?
VISA was simply a project of Bank of America. They did the work. They got the merchants to accept it.
The CCP helped WeChat get all merchants to accept payments with WeChat. Maybe you like all your monetary policy being centrally controlled, by the Fed? Perhaps you’ll be welcome the new CBDC and National ID, that’s coming, knowing that the central planners have your best interests in mind…
HN is irrationally against Web3, thus many knee-jerk hate on decentralized networks. And they have never heard of communities having their own currency and being able to run their own monetary policy.
If our government had the guts to institute Pigovian taxes, then the Fed wouldn’t have to step in and use the only lever they have — interest rates - to squadh inflation. And all these banks wouldn’t be going belly up. This is just one example.
Personally, I see that the world isn’t HN. And with all these banks going belly up, they’ll gladly latch onto something else. Now if we don’t do anything, it’ll be CBDCs and National IDs.
We are at least trying to build a viable alternative that’s by the people. Historically Hackers were anti-establishment and against bootlickers. They very much support cypherpunks like Phil Zimmerman and other “crypto bros” as you call them. Maybe the “Hacker” ethos in Hacker News will shine through in the future, and you’ll realize that squashing self-sovereignty and welcoming more consolidation and centralization is not the way. Stop trying to ride the “cool” bandwagon of VCs that give you money to build a monopoly, and embrace the real hacker ethos of open source alternatives that are BY the people, not just FOR the people by the elites.
Touché. Although, to be a bit pedantic — downvotes don’t actually give currency to the downvoter any more than you can simply slice off a few ether from another account balance
The PDF is a summary/introduction for a whitepaper.
The last page links to the whitepaper for more information. Using the word whitepaper. And you need to either go there or somewhere with the same content for a full understanding.
Come on, work with people. It's very clear what they meant, and their wording is reasonable.
I don't even need to go into how they were using quotes to be inclusive of things similar to whitepapers...
Your bias is that you are against Web3, so unfunny jokes and incorrect information by other Web3 haters is totally cool, but in-depth explanations, or presentations summarizing years of work in Web3 to produce free helpful open source software, are silly and to be criticized without even engaging with the substance.
