I would use a bank lockbox instead of a mattress. But that situation does indicate that the markets have more invested funds than they have investment opportunities, and people should take enough money out of the market that only investment opportunities offering reasonable risk-adjusted returns get funded.
It also implies that a lot of retirement plans that assume constant ~8 percent returns are delusional, and that most people will have to work longer than they wish. Such is life.
Bank lockboxes have fees, which typically work out to more negative interest than the most negative actually-observed government-debt interest rates. (Indeed the operating & insurance costs of bank lockboxes at scale are basically a lower bound on how low government-debt interest rates can go in the market; this article from the European interest rate lows in 2016 suggest insurance costs of 0.5-1%.)
FDIC doesn’t insure safe deposit boxes. It does insure your checking account balance, but your bank still has to figure out somewhere with a nonnegative interest rate to put your money (since the FDIC insurance triggers only after the bank itself is wiped out). Or find a way to charge you enough fees to make your effective interest rate negative.
Sure, but they’re a bank. Hopefully they have a competitive advantage in finding profitable places to lend money; that’s supposedly their whole job. I don’t, so I’m probably better off leaving it to them (as long as I have sufficient insurance in case they’re bad at their job, which historically they often are).
I would use a bank lockbox instead of a mattress. But that situation does indicate that the markets have more invested funds than they have investment opportunities, and people should take enough money out of the market that only investment opportunities offering reasonable risk-adjusted returns get funded.
It also implies that a lot of retirement plans that assume constant ~8 percent returns are delusional, and that most people will have to work longer than they wish. Such is life.
Bank lockboxes have fees, which typically work out to more negative interest than the most negative actually-observed government-debt interest rates. (Indeed the operating & insurance costs of bank lockboxes at scale are basically a lower bound on how low government-debt interest rates can go in the market; this article from the European interest rate lows in 2016 suggest insurance costs of 0.5-1%.)
For small amounts of money, FDIC insured bank accounts are suitably secure. Which is what I and most people actually use.
If the FDIC fails, we’re probably beyond a financial fix. Time to go loot a Hot Topic and start calling myself Doctor Humongous.
FDIC doesn’t insure safe deposit boxes. It does insure your checking account balance, but your bank still has to figure out somewhere with a nonnegative interest rate to put your money (since the FDIC insurance triggers only after the bank itself is wiped out). Or find a way to charge you enough fees to make your effective interest rate negative.
Sure, but they’re a bank. Hopefully they have a competitive advantage in finding profitable places to lend money; that’s supposedly their whole job. I don’t, so I’m probably better off leaving it to them (as long as I have sufficient insurance in case they’re bad at their job, which historically they often are).