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Comment by tdhoot | Hacker News Reader

I think the answer to both your questions is because there are costs to securely storing cash. That also makes cash risky compared to bonds, where you are not responsible for the security.

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Why is everyone responding to the question under the same misinterpretation, that it means "cash" as in "physical banknotes" rather than "electronic Euros"? I know the principle of charity is hard sometimes, but come on.

Because a bank can go under, and you can lose your money in excess of the insured amount.

Not if it's a bank that specifically caters to this crowd and doesn't take any of the normal risks associated with lending.

They would have two options:

A) keep the euro notes in their vault, which only works if you deposit paper bills in the first place

B) keep electronic deposits in the ECB and pay interests to do so

In either case if they give back the money to the clients when they ask for it how do you expect them to cover their operating costs (plus the interest they are charged by the central bank in case b)?

This imaginary bank would still have costs. What would be their income?

Excellent question. There is a company, The Narrow Bank, that has the same idea, but they didn’t get a banking license from the Fed. Matt Levine, whose newsletter you should clearly start reading, has the details: https://www.bloomberg.com/opinion/articles/2018-09-06/fed-re...

This is the first responsive answer I've gotten to that question.

You mean like... a German bank? They will happily do what you ask. For a small fee. In the form of a negative interest rate.

And your deposit won't be insured past like 100k euro.

Why would you expect that a bank would hold your electronic euros for less money than a negative yield bond would cost?

Probably because the alternative interpretation makes the answer so trivial that it's not worth assuming?

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