> I think we ought to consider a system where the Government or Fed provides the core functionality of “let me put $X in an account so I can use $X in the future” for free and banks compete based on value added
This is simple, straightforward, and disintermediatory, so I imagine everyone involved will fight to the death to prevent it happening.
There is a real trade-off there when the government has direct access to and control of citizens' bank accounts. The idea that the government would know specifically how much we spend, where we spend it, and could deny transactions sounds pretty distopian to me.
With that said, as closely tied our government and the major banks are there might not be much functional difference from power they have today.
> The idea that the government would know specifically how much we spend, where we spend it, and could deny transactions sounds pretty distopian to me.
Non American here.
They already know and/or could trivially find out. There's no more barrier to them finding out now then there would be if there was some new, nominally independent government entity involved. That is to say a very thin wall preventing what you describe.
I sometimes get the feeling we oftentimes allow for market absurdities to supposedly prevent the government from doing something that it regularly already does today, just as long as there's a 'business' somewhere in the chain.
Americans seem willing to pay more to private business and thus actually part with more of their money than they otherwise would, as long as on paper they're not giving the money to 'the government' see i.e. healthcare.
> They already know and/or could trivially find out.
100% agree here. Today the US goverment, I won't attempt to speak towards any other government, has way too much power and ability to collect inflammation in it's citizens. We've allowed the government to assume that powers but we could also take that power away. If the government owns the bank there's literally no way to do that.
Healthcare here is a whole other massively broken system. In general yes I think it's a fair generalization that we would prefer to pay extra to avoid large governments, historically at least since we've done a really poor job keeping our federal government small for the last 80 years. It makes sense given our country's history though, and personally I'd rather pay a little more to a corporation than save a few bucks at the expense of living under a much more powerful centralized authority.
Those corporations are already powerful centralized authorities! The difference is that they don't even have to pretend to be beholden to the public like the government is.
Exactly! If the government starts doing things to you there are legal recourses. If your bank decides you can’t have an account anymore, there’s not much you can do.
As long as they are technically separate we have the chance to separate the two again, removing corruption and capture.
If the industries are moved into the government officially we really have given up that fight and have to accept whatever they give us. I assume it will be cake.
It's hardly "a little more" though. We're spending almost twice as much and get almost half as little back. Objectively speaking the capitalist market has failed in this area. We have to first accept this fact before we can find any solutions. If we keep thinking "government is bad" and "private industry is good" we're only allowing further exploitation and pain; and for what? We need to be data/solution driven.
Ford twice as much I assume you're referencing healthcare specifically. Or healthcare system is horribly broken and in a terrible middle ground of government overreach and corruption while still technically being a private system. That's just about the worst example we could look at at which point twice as much doesn't sound nearly as bad for a worst case.
> Objectively speaking the capitalist market has failed in this area
Objectively speaking the non-capitalist systems have failed in this area too. The UK’s NHS is not capitalist and it is surely isn’t succeeding better than the US healthcare system.
You can find countries where “socialist” healthcare works, but you can also find capitalist healthcare that works.
> Objectively speaking the non-capitalist systems have failed in this area too. The UK’s NHS is not capitalist and it is surely isn’t succeeding better than the US healthcare system.
The NHS has been effectively privatized as much as the Conservatives could get away with. It is constantly underfunded. It is not an example of a system the government wants to make work. In fact making it not work is the goal.
Yet when a family member of mine needed a life saving operation, they got it promptly and it didn't send them into any debt, whereas in contrast there's something like 50k preventable deaths a year in the U.S. due to lack of healthcare and people of poor means actively avoid visiting the hospital, so the NHS still works better for the vast majority.
Yes, for us in the tech industry and for elective procedures it's not so great, but that also perhaps isn't what regular people need.
I love that term. If you prevent death one day, only for them to die the next, is that one preventable death? What if you do that five days in a row? Death is not preventable.
Extra years of quality life, I can get on board with. Especially because it sounds more manipulable, so you are more wary about it’s meaning.
To put 50k/annum in perspective, 3.5 million people died in the USA in 2021.
Don’t poor people get some free healthcare in the US - although relatively how good that care is compared with other countries I don’t know. I thought it was the middle class that lose everything.
the banking industry has been heavily subsidized by FDIC, the Fed, and bailouts. This corporate socialization is certainly worse than either fully capitalist or fully centralized.
The healthcare marketplace is hardly capitalist. It's deeply influenced by government policy and spending, as most healthcare expenditure is for the old, and it goes through Medicare.
If the US healthcare market isn't capitalist, then no country's healthcare system is.
It's rare to find a way to "no true Scotsman" as hard as communists, but you've managed it.
But to address your point: contrary to what you're implying, Medicare spending is actually lower on average relative to spending on 65+'s in other countries; in e.g. the NHS, they're 18% of the population and 40% of the spending[1]. i.e. per-person spending is much higher in retirees. Contrast this with the US where per-medicare-enrollee spending (13k) is almost the same as the average spending (12.5k), because the non-socialized (capitalist) part of the market pays so much more than in other developed countries, that it doesn't bring down the average despite the younger cohorts having many fewer health problems.
> If the US healthcare market isn't capitalist, then no country's healthcare system is.
Yes.
That said, developing countries are most likely to have one. If the government caps the number of doctors and hospitals in the country, like the US does with residencies and certificate of need laws, it's not very market-driven.
The government does not cap the number of doctors. There's no law that you can only have X doctors. What it caps is the amount of social help it's willing to subsidize. This is like complaining that the government is not "socialist" enough and therefore socialism is bad.
No, the US government caps the number of doctors because Medicare funds residency slots, and you have to get through one of those to get a license to be a doctor.
> There's no law that you can only have X doctors.
We have tons of these laws. All occupational licensing requirements are this law; that's the whole point of them.
The US government caps the number of residencies it is paying/subsidizing. Yes, you have to go through residency, but there's nothing stopping the private sector from taking on this cost (well, other than greed)
> Point me to one law that says you are not allowed to have more than X doctors.
Why can't we have doctors that other countries have agreed are qualified to be doctors?
Also, do you know how certificate of need laws work? It literally says you can't have a hospital unless the other nearby hospitals agree you can have it.
Taxi medallions are truly a "there can only be X many people doing this" system, but even if they're not written that way, these other laws are still intended to restrict the supply of healthcare.
nb my issue isn't whether the healthcare system is "socialist" or not, it's that it's bad. I don't think "just make the government pay for everything" is a solution to things costing too much though; if an ambulance ride costs $9000 the solution is to make it not cost that, not to share paying for it.
Your original argument was the government caps the number of doctors (not taxi drivers). I am not finding anything that would show this. There is a cap on the total amount the gov is subsidizing (should be increased, but that's a different topic).
If an individual is willing/able to pay for the cost of residency that the gov covers there's nothing to prevent one to do so. Of course, this is not a practical solution for most, but that's another story.
> nb my issue isn't whether the healthcare system is "socialist" or not, it's that it's bad.
Agree, no argument there
> I don't think "just make the government pay for everything" is a solution to things costing too much though
Of course not, but if the capitalistic / private market has failed, I'd rather try a more gov-focused approach (or something else) than let it fester and cause more and more pain.
> if an ambulance ride costs $9000 the solution is to make it not cost that, not to share paying for it.
Agree, but how do you do that when the "ambulance lobby" owns the politicians and media who then try to convince the population that this is "the best system in the world"? You can't find a better system when you already think you have the best one (not saying you do) or that the "other" system is worse because it starts with an "s".
No. There is a big difference to "they already know" and/or they "could trivially find out". Even if the latter may be true, the former is not. The government does not have direct access to personal bank account ledgers.
"They already know" is a red herring; there is no "they". "Government" as a single entity has no brain, so the best you can do is ask about individual actors. So let's talk instead about a person: Merrick Garland.[1]
Pretend for a moment that Merrick receives a piece of memo from a subordinate that incriminates you in some form of bank fraud. Of course Merrick personally doesn't know anything about your bank account. Nobody has both the information and a brain big enough to store it. Hell, I have to check my own bank account regularly because I keep forgetting exactly how much is in there and it's my own money!
If something came across Merrick's desk and it convinced _him_ that it was worthwhile to investigate, do you really expect other than delays waiting for signed papers before he got the information he wanted? Do you really think there's a difference to Merrick whether he gets that information in 60 seconds by logging into your bank "as you" and looking at it, or whether he waits a few days and gets hand delivered a piece of paper by a bank's legal team?
[1] U.S. Attorney General and current chief law enforcement officer for the nation
Yes it matters, because there will be a court involved in this process as opposed to if the government “owned” your bank account nothing would stop it from knowing exactly what was in there at all times.
I'm sorry, but courts have lost most of their credibility in recent years. There was an HN thread recently[1] about a person arrested and extradited from one state to another without what appears to be any oversight. Pretending the courts are magic isn't actually very helpful here. If any single person in power wanted this information, they could have it. If any single person not in power wanted this information, they would have to work really hard to get it.
No one is pretending anything. It's still an extra step that adds transparency even if it is not a huge barrier. But in reality, that is a lot larger barrier than just direct access 24/7.
> because there will be a court involved in this process as opposed to if the government “owned” your bank account nothing would stop it from knowing exactly what was in there at all times
There's some decentralization within the government also, if one branch wants something from another it (ideally) has to go the courts route too, it's not that every federal employee can just access any government records on a person, (at least in theory). If there's someone powerful enough taking interest in you to override that, I doubt a private bank is going to be a major obstacle.
I mean courts themselves are technically part of that system too. I am as cynical as the next person regarding government overreach, but I see little protection from a multi-national banking entity entangled with the government for decades in all sorts of ways.
If it was as 'easy' to start a bank as an ISP in the 90s, I could see it.
> "Government" as a single entity has no brain, so the best you can do is ask about individual actors.
I don't think the Fed is "government" in the 4th amendment sense that it can just get information about you without a warrant, is it?
In an unrelated law, this is the reason child abuse reports from ISPs go to a private company called NCMEC. It's so law enforcement won't have automatically have access to private data in the reports without legal process.
Anyone who has worked in data knows this difference instinctively.
There’s a massive difference between the data being theoretically available somewhere in your organization and “trivially” accessible vs actually being able to run a query (let alone the work to actually run the query).
With that said the unbanked crisis is severe and there are big societal benefits to insuring everyone has a checking and savings account. There’s no reason robust safeguards can’t be built into the law establishing the Bank of the United States (Third time is the charm!).
You don't need a federal bank to solve that problem. A simple regulation would suffice requiring private banks to service these customers in some fashion.
That's the entire purpose of a bank. The point of a bank is that the customers think they're putting their money in a box, but it's actually loaned out to businesses.
If you don't do this, the money supply gets a lot smaller.
>Americans seem willing to pay more to private business and thus actually part with more of their money than they otherwise would, as long as on paper they're not giving the money to 'the government' see i.e. healthcare.
Americans reject public healthcare because your average American has incredibly narrow view of the world, and many people buy lies about public health care in other places.
They simply buy the lie that propagandist are paid to spread that public health care includes 'death panels' or insanely long ER waits, or that you can't pick your doctor (can you now?).
The larger problem is that the government deals with things that are sufficiently complicated that they require dedicated time to understanding them and Americans aren't willing to do that on a scale that impacts government policy.
As a Canadian, right next door, I'm continually amazed that we can have two polar takes on healthcare and both get it so wrong. In Canada it is an incredibly expensive way to pay for a universal public system in case you personally need it, at which point it's pretty poor quality, especially for new approaches or preventative, non-emergent care. Then in the States you have so many with absolutely zero safety net or primary care, at which we do a better (but still bad IMO) job of, while the well-insured or very wealthy have the most amazing health options in the world. We should both be able to come up with a solution that prevents rural mothers from dying related to childbirth AND gets someone a hip replacement in less than a year so they don't irreversibly deteriorate. Governments on both sides of the border just dig in their heels for political motivations, actual health outcomes not a consideration.
Canadian health care is relatively inexpensive though. Canadians spent $8,563 Canadian Dollars per capita on health care in 2022, which is currently equivalent to $6,320 US dollars per capita.
Americans spent $12,914 American dollars per capita in 2021 for health care costs. We pay over double per capita what Canadians pay.
Canada could increase the quality of the health care system by buying more services and paying more for services to increase quality.
And as the poster above you mentioned American health care is the most advanced in the world. So even if it is “double” the types of treatments available here are much better.
>And as the poster above you mentioned American health care is the most advanced in the world. So even if it is “double” the types of treatments available here are much better.
Most medical services are routine treatments that are the same wherever you go.People travel for special services, but special services don't represent most of that cost difference.
IMO more interstate competition on services is the right way forward. We should make it cheaper for competitive providers to expand to neighboring states.
People with money are basically cutting the line. This is acceptable because generally nobody really cares about the poor- they don't vote or influence society very much. Don't have lawyers and they rarely call a senator.
You will see a backlash against public healthcare because it would mean a rich man is treated according to his medical needs.
You're on the waiting list BECAUSE SOMEBODY ELSE NEEDED IT MORE.
But I'm a Google developer I'm worth more to society!
Who decides that? A death panel.
The stupidest thing about this argument is that WE DON'T GET INSTANT ACCESS NOW! Even with the literally twice as expensive healthcare we have, and personally having good insurance, if I call my doctor to get an appointment for something non-emergency, it takes at least a month.
This is already happening. Banks report all transactions above a very low threshold under various justifications and laws, plus the government is always going to be the front-of-the-line creditor and can trivially find out your entire net worth at will. We could at least look to cut out rent seekers on the baseline services and make banks compete on performance and value-add. As a customer and shareholder of banks I feel like I'm getting ripped off on both ends.
"The government" already has this level of access. Not only that, but its control extends beyond the country's borders too; the government can seize, freeze or otherwise access the accounts of Americans (and non-Americans) in almost any bank across the globe. The only bank accounts that it can't do this to would be under the control of an even more repressive government (Russia, China, Iran).
> The idea that the government would know specifically how much we spend, where we spend it, and could deny transactions sounds pretty distopian to me.
That boat has sailed. Private enterprises collect spending information[0], associate it with your identity and sell the aggregated data to anyone willing to pay. The FBI is on the record as willing to be pay for this data. This dystopia has the "free market/small government" seal of approval.
0. Which is why every retailer badgers you into joining their rewards program based or your phone number and/or email.
I’m not certain it’s being done for 100% of bills, but it would be easy to track any single bill between being withdrawn from an atm/bank and re-entering one by noting the serial number and account number as it comes and goes. Exchanges will certainly happen between withdrawals and deposits, but still your privacy is only preserved when neither of your counterparties withdraw/deposit the bill
I always just assumed that somewhere in the banknotes lifecycle those serial numbers are all getting written into a database… I kind of assumed that based on examples where the government was able to trace where large amounts of cash had come from and what it got spent on when doing major crime investigations or things like DB Cooper and how confidently they proclaim that none of the cash (that wasn’t “lost” and then found by various searches or the public over the years) was ever spent. I assumed it was probably part of obligatory regulations to do with money laundering or something equivalent and thus they all had to do it.
For cash transactions, I believe anything over $600 is supposed to be reported now. The limit used to be $10k but was raised recently.
With credit cards, the government shouldn't know as they shouldn't be involved, but they almost certainly do because overreach. Congress could always pass a law to block that or an individual could sue and claim something similar to illegal search. As soon as the government is the bank there's no way to bifricate the two, the deal is done.
Government knows your credit card transactions not necessarily just due to generic overreach but also specifically "Third party doctrine". Various companies sell your near-realtime transaction data and it's generally available to data brokers and it's not clear why the government shouldn't be able to buy your data from data brokers.
>Congress could always pass a law to block that or an individual could sue and claim something similar to illegal search.
Nah, we'd see any lawsuits over violations of such a law get blocked due to standing issues or state secrets privilege, much like the lawsuits over the illegal and unconstitutional surveillance performed by the NSA.
Whether the system would allow a new law to protect our rights is a bit of a different issue. Structurally such a law could only exist if the government doesn't already own the bank.
At least in the US, a state-owned bank is a very different animal from a federally owned bank.
States don't have the power to control the currency itself, don't control the collection of three-letter agencies, and in general are meant to have more leeway to try new things than the federal government.
There's also the very one-sided action to kill the post office entirely. Even with zero bribes, republicans want public services gutted and turned into private profits.
It requires re-working the financial system from the ground up, and commitment to that new vision, because there isn't a graceful way to ease from fractional reserve to narrow banking or public accounts at the Fed, and there isn't a simple way back to our status quo from it.
For money storage that existed in some large countries up until the end of the GFC (e.g., German Bundesbank offered some deposits to retail). I don't think that would need much retooling rather than a change in risks for banks to manage.
Edit: I think technically the deposits where with the federal finance agency, i.e., lending to the federal republic. Don't think that matters for the discussion here.
> don't think that would need much retooling rather than a change in risks for banks to manage
In a crisis, it would make the narrow/public bank the natural place to drain deposits. (Similar to our SIFIs today.) As such, narrow banking would mean the end of commercial checking. That means we need to find non-bank providers of all the asset-side services, from lending to trade finance, banks currently provide. That's the re-tooling.
It didn't work like that in 2007/8 in Germany. Deposits didn't just all go to the Bundesbank/Finanzagentur. Maybe you need different banks in the mix, e.g., more coops. For lending, some alternatives exist already, same for trade finance. I think the delta to the current state would be surprisingly small.
I didn't say checking accounts, but money storage with the respective sovereign (and daily liquidity).
Was actually the German finance agency (same thing for our purposes really, as only daily risk is sovereign Germany). There were claims that lobbying by banks killed it, but it was also not very attractive in a low yield environment. Ostensibly, it was created to broaden the funding base of the Federal Republic, I think.
We once had postal banking in America [1]. I could see a bridge to narrow banking working if it’s restricted to natural person depositors and prohibited from paying interest or something. (And by extension, their reserves wouldn’t earn as much as their risk-taking peers.)
> money storage with the respective sovereign (and daily liquidity)
> Wouldn't the graceful way be to... simply allow narrow banks to have fed accounts?
No. As the Fed details, in a crisis, deposits would drain into the narrow bank. Permitting a narrow bank by itself is de-stabilising. (There are a myriad of solutions to the issues introduced. From paying a lower return on non-risk taking reserves to limiting accounts to natural persons. But the point is the systemic effects have to be thought out in advance.)
It's not that simple for The Fed or the Federal Government, as they have to take over all the tedious affairs in banking (like KYC, among many smaller tasks), so I suspect they'll be reluctant. But that doesn't mean it would be a bad thing to talk them into it.
There have been attempts to start a bank that would just do this. The FED refused to give those banks a banking license.
If they would give that license, then the 'narrow bank' gets the job of KYC, customer service, and everything else. But the funds remain safe at the FED.
Problem is, this takes a lot of money out of the economy if it catches on. That likely will reduce investment, and damage the economy. So regulators dislike narrow banking.
This sounds to me pretty close to a treasury money market fund, doesn't it? Money market funds are not insured for some nominal amount, but among the most common in practice have significant repurchase agreements with The Fed and hold short-dated treasury debt, but this plus your brokerage it's pretty close to the narrow bank idea.
I suppose the Fed could try to make the circle slightly rounder here, but they may look at the hundreds of billions of dollars in such funds, which are by nature extremely "narrow" quasi-banking devices (because they only support a tiny form of maturity transformation, in asset type and term length), and decide "good enough, economic needs of this kind met"
The Fed and Gov already have stuff like this (TreasuryDirect), and like some fintech are just thin UX wrappers around ugly consumer bank interfaces or even I-bonds, you could have the same with these accounts.
There is no profit motive and it’s a very technically simple offering that the Fed already supports or will soon support with FedNow: I have a table of people and balances, and I only support transactions between the two.
If a bank can’t figure out how to compete with 0% interest with no value add to attract deposits, IMO they shouldn’t exist.
The important social function that modern banks perform isn’t attracting depositors, it’s creating deposits AKA originating loans.
Regional and local banks are far more likely to originate loans to local residents, especially for unique purposes. If somebody in flyover country wants a loan to start a business, it basically has to be a cookie cutter franchise or a large existing customer for a big coastal syndicate bank to even look at it. This is one reason, although not the only one, why outfits like Dollar General are eating the downscale retail market when it used to be local general stores.
Yes, I know that, but why should I as an individual risk my deposits in a bank? Before digital payments took off it was entirely feasible for a regular person to be what we’d now call unbanked or underbanked. I’m pretty sure my grandfather was greatly underbanked well into the 90s and aughts. I’m sure many banked because they didn’t want to keep track of all their cash physically hanging around, but banks had to actually compete against “stuff it under your mattress” by passing on rates and other ways of providing value.
The advent of online banking and digital payments added enough value that there was really no reason to continue to be unbanked or underbanked for most people. But IMO banks have begun to take depositors for granted by offering poor interest rates and exposing us to more risk than necessary (certainly more than justifies checking or savings rates). With the recent spat of bank failures roughly coinciding with crypto, which also provides online banking and digital payment functionality, the Fed/banks need to recognize that there is a real risk that depositors will opt back out of traditional banking.
I think a shift off the dollar and onto crypto would be much worse (personally, but also for banking) than the Fed offering a path to digital mattress stuffing of the USD, because at least with that they can still influence monetary policy and keep people on the dollar. I also suspect, but have no data, that our shift towards structurally low rates and high asset prices over the last half century was partially influenced by banks’ relative share of the monetary supply increasing so much that too many deposits are stuck chasing yield/credit is too accessible for activities perceived as low risk: so if some deposits shift onto a Fed narrow bank, banks will at least find it easier to loan and offer interest at higher rates. But even beside that, I as an individual should not be obligated to deposit my money into a banking system that gives me poor risk:reward - and when better options exist, I might not. So the banks and Fed better figure out something better than crypto or a fireproof safe.
This is simple, straightforward, and disintermediatory, so I imagine everyone involved will fight to the death to prevent it happening.