Monday, June 11, 2018

Morgan Ricks, John Crawford, and Lev Menand — Central Banking for All: A Public Option for Bank Accounts

Currently, banks are allowed to have accounts with the Federal Reserve that come with a lot of privileges: higher interest rates, instant clearing, and the security provided by being nondefaultable. Authors Morgan Ricks, John Crawford, and Lev Menand argue for ending these exclusive privileges by offering “FedAccounts” to everyone. FedAccounts would be a public option for the unbanked and underbanked while also providing substantial benefits to businesses and our economy as a whole.
FedAccounts would provide the following features to all Americans, as well as American businesses: no fees or minimum balances; the same interest rate that commercial banks get; and no interchange fees for debit card payments. Also, payments between FedAccounts would clear in real time, and there would be no need for federal deposit insurance, as FedAccount balances would be sovereign and nondefaultable. The lack of fees and minimum balances would remove obstacles that exclude millions of Americans from our financial system, and the perks of central banking would greatly increase the cost and efficiency of transactions for businesses.
This report details the FedAccounts proposal and its benefits. It also discusses the merits of FedAccounts over other reform proposals like narrow banking, postal banking, and cryptocurrencies....
The Great Democracy Initiative
Central Banking for All: A Public Option for Bank Accounts
Morgan Ricks, John Crawford, and Lev Menand

18 comments:

Unknown said...

In that case, could there also be a few at large elected members of the Fed Board?

Andrew Anderson said...

When I suggested the same idea and would not back down, Yves Smith called the idea "balmy", said that Central Banks would always be only for banks, and banned me.

Why do I mention this? It's because I've found that Progressives and the MMT crowd OPPOSE equal protection under the law wrt fiat and/or credit creation. They are NOT a friend of justice, I've found, but elitism.

GLH said...

Andrew: It is no big deal to be banned by Smith, she banned me many years ago and I have never missed wasting my time at her site.

Ralph Musgrave said...

Andrew: Academics and academic types are very much into "banning" and censoring free speech. I've been banned by a few blogs for the heinous sin of disagreeing the relevant authors.

It's a pity that Yves Smith bans people, because her articles aren't that bad (not that I follow her).

Ralph Musgrave said...

I’m all for central bank accounts for who want them, but I can’t for the life of me see why individual people should be entitled to the same interest rates and fees as commercial banks which deposit billions at CBs (as suggested by Ricks, Crawford, etc). There are inevitable overhead costs involved in running bank accounts, and account holders should have to pay for these.

The UK has had what amounts to “CB accounts for all” for ages. That’s in the form of a government run savings bank, “National Savings and Investments”, which invests just in base money and government debt. NSI does not offer quite the flexibility of normal bank accounts: i.e. no cheque books or debit cards are issued, but people can get their money out in about 24 hours. NSI is run on a commercial basis, far as I know.

Noah Way said...

The "inevitable costs" of running bank accounts is called bank profit and the inevitable result is Goldman Sachs and hedge funds.

Ralph Musgrave said...

Noah, Are you suggesting that what banks CLAIM to be the costs involved in running bank accounts (e.g. staff costs, costs of renting, insuring and heating their offices etc) are entirely fictitious costs?

Andrew Anderson said...

NSI does not offer quite the flexibility of normal bank accounts: i.e. no cheque books or debit cards are issued, but people can get their money out in about 24 hours. Ralph Musgrave

That is not being able to USE fiat effectively but only to SAVE it. The citizens deserve to be able to USE fiat with the same safety and convenience as banks.

Andrew Anderson said...

Noah, Are you suggesting that what banks CLAIM to be the costs involved in running bank accounts (e.g. staff costs, costs of renting, insuring and heating their offices etc) are entirely fictitious costs? Ralph Musgrave

Being able to safely and conveniently USE their Nation's fiat up to reasonable limits on account size and number of transactions should be considered a FUNDAMENTAL RIGHT of citizens and a FUNDAMENTAL DUTY of a Central Bank to provide. Let other users, including banks, bear the overhead.

Andrew Anderson said...

Also, an ethical case can be made that private sector demand account balances at the central bank (aka "reserves" in the case of banks) should have negative interest applied to them since:
1) Even the longest maturity debt of a monetary sovereign, being risk-free, should yield no more than 0% to avoid welfare proportional to account balance.
2) Private sector demand account balances at the central bank have ZER0 maturity wait and thus should cost the most (i.e. most negative interest).

So negative interest on private sector demand account balances (except for individual citizen accounts up to, say $250,000) is only fair and could generate quite a bit of revenue for the cb.

Noah Way said...

@AA: I'm not suggesting that there is no overhead involved with processing financial transactions, I'm stating as fact that banks are more interested in profit than anything else and use every opportunity to generate it, always at the expense of depositors and borrowers. Scale this up to political power and you get the U.S. Dept. of Goldman Sachs and massive damage to society.

One of the reasons for eliminating cash is that it is the only financial transaction that is free of services fees. If I pay you $100 the bank doesn't get a cut. Cash is king, fuck the banks. Bring back $1,000 and $10,000 bills.

Andrew Anderson said...

One of the reasons for eliminating cash is that it is the only financial transaction that is free of services fees. Noah Way

The same would be true of transactions from one's individual citizen checking/debit account at the cb up to some reasonable limit on number of transactions IF citizens were allowed to have such accounts.

Cash (physical fiat) is a poor means to avoid the usury cartel and besides it (especially large denominations) allows the banks to escape negative interest at the cb when we should be charging them to use the Nation's fiat.

Andrew Anderson said...

I'm stating as fact that banks are more interested in profit than anything else and use every opportunity to generate it, always at the expense of depositors and borrowers. Noah Way

Every citizen should have a checking/debit account at the central bank itself and NEVER have to use a bank for anything other than getting a loan or earning interest off a (non-risk-free, of course) bank deposit.

Andrew Anderson said...

I’m all for central bank accounts for who want them, but I can’t for the life of me see why individual people should be entitled to the same interest rates and fees as commercial banks which deposit billions at CBs Ralph Ralph Musgrave

1) Being risk-free, NO account at the Central Bank should earn over 0% to avoid welfare proportional to account balance.
2) Individual citizens have an inherent right to USE their Nation's fiat and should not have to pay for doing so up to reasonable limits on account size and number of transactions.
3) Non-individual-citizen accounts have no such right and should be charged negative interest if the account is on-demand (0 maturity wait).

Andrew Anderson said...

I’m all for central bank accounts for who want them, Ralph Musgrave

Who won't want one once government-provided deposit insurance and other privileges for the banks are abolished?

Andrew Anderson said...

Scale this up to political power and you get the U.S. Dept. of Goldman Sachs and massive damage to society. Noah Way

I don't see any Progressive or MMT advocates suggesting we should deprivilege the banks such that they no longer hold the economy hostage via a single payment system that must work through them.

So whose side are they on if not the banks?

And how sad that when they could be advocating for justice and sanity that they instead help defend, like so many others before them, privileges for the usury cartel.

Noah Way said...

Those who support popular causes (those that would actually benefit the majority of citizens [health care, elimination of poverty, etc.] or the planet [end wars, defang the military, environmental action, global health, etc.]) are targeted as threats and dealt with accordingly.

Andrew Anderson said...

The fear of man brings a snare, But he who trusts in the LORD will be exalted. Proverbs 29:25