The local branch of my bank changed to having no tellers, ATM-only. There's a couple people inside to talk loans and such, but they have no cash. I wonder if this is one of the reasons (besides cost savings having less employees).
With electronic databases keeping track of funds and movement of funds, the banks’ purpose is reduced to being a lender, which requires much, much less infrastructure.
If we had a constitutional right to an electronic funds account with an inalienable right to receive and send money, there would be zero need for banks. Their remaining purpose would be to be an underwriter or lender, at which point you would just describe them as an underwriter or lender instead of a bank.
Technically, there is no reason why the Fed has to give the banks 5.25% interest, and then the bank gives the general public 20 basis points less. They could just give it directly to the public.
It's also a policy that has buy-in from private banks, given that they are literally bought in to the Federal Reserve.
Although, I would argue the federal government and the federal reserve have the same mandate, which is maintaining a steady increase in asset prices. They might say they have other priorities, but their first will always be maintaining the social order, and politically, that requires sacrificing the currency’s purchasing power to maintain a minimum ROI.
And the federal government is explicitly the one guaranteeing that the numbers in your account at a private bank mean something, so how could the federal government be undermined? Surely my money being at Chase account # x or US government account # y is the same thing for me, except with Chase, there's a middleman in play who is taking a cut of interest from the Federal Reserve.
The Federal Reserve Board of Governors, the things that sets the policy in question, is an executive branch agency, situated similarly to ones like the FCC.
Fed policy is not "very different from government policy", it is government policy.
See the recent bank failures of SVB and the couple others. How did having the money at a bank help, rather than say an electronic money account in a ledger operated by the federal government?
If you can deposit your money directly with the FED then that IS safer than government debt.
During a financial crisis such as 2008 money would go straight to the FED for safety forgoing everything else. This causes interest rates to spike everywhere including gov debt at precisely the time the government needs to borrow heavily to fix whatever went wrong.
That is why there will never ever be direct deposit with the FED because it circumvents one of the most important safety features in the modern economy, which is in the event of a crisis the government can borrow cheaply to fix things.
If people want to invest their money in US federal government debt, then the government has to pay interest. I do not see where thesafety” factor comes from, surely that is ensured by a functioning court system that ensures the numbers in the database cannot be altered.
The government can default on its debt, that's why the debt has a credit rating. As unlikely as it is to ever happen it could happen with enough political dysfunction because political opponents are playing chicken with each other.
A direct deposit with the FED can't, the FED does nothing with that money and can literally just print it back into existence, which the government cannot do.
Also, why does money in an account have to be debt? For a physical bank dealing with lots of staff and physical cash, they have expenses they need to recoup. But with instant communications and electronic database, why can the government simply not operate a database where the money (a number that someone had the legal power to spend) simple exists?
There are advantages, like increased employee & customer safety and lower costs. But I like to use uncirculated bills as gifts and now there is no one there to get them for me.
I once made a calculation of whether it is possible to track all banknotes by serial number. There are only 20bn EU banknotes! Fits snuggly in a Postgres DB.
With that, you could detect patterns: Does these guys always withdraws from this ATM and the money is cashed in that other neighborhood? Drug deal. A banknotes suddenly reappears after years? Black money stored in bulk, let’s see who withdrew it. Etc.
The challenge here would be keeping the transaction costs as low as possible and using a stable coin. It would cost everyone a couple bucks to send messages, which is a nuisance, and some people might be tempted to steal nickels for various reasons. The crypto would be there to prove there is no way the recipient can possibly receive your message without putting up cash. Perhaps some very popular people could set their threshold higher to reduce noise. But even $0.01 would be highly effective.
There's this run by volunteers, but there's not mich going on.
If you get a lot of checks, deposit one at a time methods can be a bit slow and tedious--but that's less and less common.
I remember depositing banknotes in ATMs in Britain in the early 2000s. It was only a single ATM at the bank branch. You had to put the notes in an envelope and feed that into the machine. They would check the amount later in the day.
At some point the machine would take the notes one at a time, and I've seen these in Britain and Denmark, but I deposit cash less than once a year in any case.
Here's a weird ebay auction of receipts from 1997 showing deposits: https://www.ebay.com/itm/334119399422 and a pretty good deal on long distance!