Thread by @gbponz

Richard...sorry but I disagree on that. Deposit insurance is the most worthy and LESS costly of banking supervisory features, but it needs to have a maximum, and I will tell you why. (/) @INArteCarloDoss @Banqkys @MarketElf @GrayConnolly @jeuasommenulle @AlessandroPonz4

https://twitter.com/tyillc/status/1634735435455897600

Deposit insurance is there to avoid runs on banks, where depositors all want to cash in all at once. But the key word is "cash", i.e. the number each of us sees at the #ATM machine or on the bank site as his own cash balance. However that's not cash. (/)

I have seen grandiose public plans about financial education, and deposit insurance is an ex post measure.. non one vaccinated citizens by telling them the truth: "when you deposit cash at a bank, you are LENDING them the money (which ceases to be yours). The bank invests it."(/)

That has advantages even when there is no interest: safety (better than under the mattress), convenience of payments, fast opportunity to transfer/invest the money, etc. Oh, you lose all privacy of course, and banking is a prime target for hacking. Single point of failure.(/)

Yet, you don't NEED any more transparency than now to know what banks do with the money you lent it: invest it, of course. Thst doesn't mean you cannot. The trouble is explaining to Joe Soap that his bank is both his provider AND HIS COMPETITOR.(/)

Why? Because if Joe Soap buys Treasuries, those get booked in HIS name separate from the bank balance sheet. If ALL those "poor" VC entrepreneurs had had the SAME long duration Treasuries that sunk #SVG, they'd be mildly annoyed that it will be a while before they transfer(/)

To another bank in their name and that bank won't be of their own choosing , as it happens here...a bit more slowly. You know why that public information campaign is not first priority, don't you?😈
Now, the vast majority of citizens don't HAVE cash balances exceeding 250k.(/)

So, for the avoidance of doubt, a full deposit bailout is not saving elderly grannies who need to pinch pennies to see the end of the week on a full belly. It saves people who didn't do their homework on cash management risk, and central banks who CHOSE this calculated risk:(/)

"We won't tell people that over treshold they shoud buy a financial instrument, preferably not something risqué, a T-bill would do, because that would reduce money available TO the banking system, and their profitability.(/)

But we will have to twist and change rules on the fly if we don't. Remove the treshold now, a pandora's box of malinvestment is unleashed on citizens as taxpayer, potentially leading to our heads on the block. So we will render law meaningless, with help from lawmakers.(/)

We'll build a system in which NO single bank crisis will be treated the same way as any previous one, and above all, NEVER as the book said we should or would."
(Welcome to #Europe)
@bondstrategist @Halsrethink @eshow1969 @moutet @petunianelsole @BaldingsWorld @ResearchRonin

@GrayConnolly @GemmaTognini @CaroDiRusso @AvidCommentator @PauloMacro @steventduffy @BlacklionCTA @DavidBCollum @LorenaLuVi @Colombatto @MarcoCantamessa

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