Nick Szabo  🔑

Dollars aren't bitcoin. It's not just bits on a bank's ledger. It's money the bank owes you, and the ability of the bank to pay you that money is constrained by the loans it can profitably make. If there's a limit to its profitable lending, there's a limit to what it can pay out.

In other words it is as I said, it doesn't have anything to do with the costs of storage, except that, to try to make deeper or longer NIRP work without squeezing banks, central banks need unprecedented laws to try to make the costs of holding physical alternatives higher.

I'm skeptical that it's laws which stand in the way to holding physical alternatives, as opposed to the fact that there's a limit to how much cash you'd be willing to hold in your home due to security and convenience,

People's attitudes & security measures about paper money vary widely & can change dramatically depending on trust in banks. They will also have stronger incentives to switch to cryptocurrency, which with multisig is far more secure to hold than paper money.

Sure, I get that, but what I'm saying is that it's not the law that's the major impediment. It's cost of security. Knowledge, training convenience and so forth.

People have been using coins & paper money for thousands of years, despite the robbers, highwaymen, and pirates. Effective weapons and big lawns help, one of the reasons deep or long NIRP would require much more draconian laws in the U.S. than they do at least so far in Europe.

Sure, and people still use that stuff, but I also think you can think of robbers, highwaymen and pirates as a form of negative rates. And if people started holding more cash, there would be more robbers, highwaymen and pirates, meaning deeper implied negative rates on cash.

So negative interest rates are a form of theft. Thank you for that admission.

Reading on negative yields, it's easy to distinguish the real jurnos from the jackals trying to benefit from robbing the orphans & widows. The real jurnos will mention the coercion against pension funds, etc.; whereas the jackals will try to convince that negative yields are OK.

Yes, okay for the big boys who do cross-currency basis swaps, but murderous for, say, pension funds with rules forcing them into these instruments. Negative rates exploit "rule inertia" - the fact that rule makers never imagined such rates would exist.

This is the better line from that Bloomberg piece: 'And since UBS doesn’t have unlimited capacity to pay you interest on your holdings, well, you’ve got to pay UBS for the privilege of holding your money there. Sorry about that. But then, what other choice do you have?'

it may not be a good metaphor but it seems possible that it imposes a bit of a floor on rates. At some point it will make economic sense to store paper currency in a warehouse rather than face persistently negative rates of great enough magnitude

Right, see comment above. NIRP isn't justifiable or caused by higher storage costs. It has to coercively *impose* high storage costs in order to try to succeed.

At this point doesn’t Bitcoin just become a much better bank? Less risk of a bank run. Money actually there. Privacy moving globally “interbank”. Outstanding “interest” rate. No account fees.

Yes, as long as you don’t mind the short-term volatility.

I believe there is the cost to store. It's not the physical cost, it's the inventory cost of having them.

Those cost are small and haven't changed. They aren't the reason for negative interest rates.