A lie it's getting harder to tell normies

It’s hard to explain why everyone can’t earn the same yield as the banks.

“Financially literate” people, whatever that means, have known for years there’s an almost risk-free way to earn around 4%. And according to possibly Albert Einstein, there’s no stronger force in the universe than compounding interest.

Person A, with $100,000 50 years ago earning 4%, would have about $710,600 today. Adjusted for inflation, roughly $164,000. They multiplied purchasing power while taking nearly zero risk.

Person B, with $100,000 earning 0% in a normal bank account, would still have $100,000. Adjusted for inflation, that becomes about $22,800. That’s not standing still. It’s confiscation through inflation.

Now let’s talk about the banks. If your checking account pays 0.5% and US T-bills pay the bank 4.5%, the bank captures the 4% spread. Multiply that across billions in deposits invested safely in Treasury bills and it becomes enormous. Federal Reserve Bank data shows net interest income accounts for roughly 60% of total U.S. bank income, making it the primary source of bank profits.

I moved to New York during Occupy Wall Street. If you walked through the tent village, none of the protestors’ banners were about yield. They should have been. It’s shocking that people accepted 0 to 0.5% from banks when the alternative existed and was often materially higher than current rates for much of the past half-century, except roughly one decade.

• Early 1980s: 10 to 15% • 1990s: 3 to 8% • Mid 2000s: 4 to 5% • 2009 to 2015: about 0 to 0.5% • 2016 to 2019: about 1 to 2.5% • 2020 to 2021: about 0% • 2023 to 2024: about 4 to 5%

During Occupy, it seemed to me the chief complaint was that banks were misaligned with real people. It was framed as a culture clash, and the proposed solution was moral outrage. Historically, moral scolding rarely produces structural change. Technology does.

You don’t need crypto to earn more than 0.5%. But it doesn’t hurt.

Between DeFi and CeFi, there’s been a Cambrian explosion of platforms where you can fairly safely earn over 3% on stablecoins. Yield can come from Ethereum staking, tokenized T-bills, rewards harvesting, or more fragile mechanisms. (Do your own research.) Platforms still take a spread, but it’s far smaller than banks.

DeFi and CeFi can operate with tighter spreads than banks because they don’t have baggage overhead from the past. Staff is the heaviest baggage. As banks transitioned from paper certificates to digitization and now to onchain systems, each phase required workforce reduction and restructuring. It takes time and money to unwind the costs of supporting old systems. Too much of the roughly 4% spread they’re making on billions of dollars still goes to those vestigial costs.

New entrants enter the market with a clean slate, free from baggage. Stablecoins run on crypto rails and operate like technology companies. They scale without proportionally scaling overhead.

Observe the extraordinary earnings per employee at leading stablecoin companies. For example, Tether reported net profits exceeding $13 billion in 2024 with an estimated 200 employees. That means roughly $65 million of profit per employee, one of the highest profit-per-employee figures in history.

The person who’s emotional about this is Jamie Dimon, who told Brian Armstrong he was “full of shit.” If a 4% spread is 60% of your business, built on the fact that roughly half of Americans who are evidently not financially literate sit in 0.5% accounts, you’d be emotional too.

But thanks to LLMs, financial literacy is spreading.

Tell an LLM where your money sits and how it’s invested. It will tell you about T-bills and give you instructions, onchain or offchain. A population on Ozempic stops gorging on ice cream. A population on LLMs stops accepting friction that disguises 0.5% as the only option.

There will be winners and losers from health breakthroughs. There will be winners and losers from open access to information. The winners will offer the consumer the best product. The losers will depend on illiteracy, friction, and lock-in that are much more easily surmountable with LLMs and agents.

The banks will eventually lose, unless they lower their rates. But will they choose to compete on rates, or try to keep up the jig as long as possible, using regulatory capture to obfuscate that anyone can access yield? Building blockchain infrastructure while meddling with the CLARITY Act, they are trying both at once.

What we’re seeing with stablecoins replacing traditional banking is really the automation of an industry. Automation allows thinner spreads. Thinner spreads win in a world of informed users who resist lock-in.

It’s a race not to zero, but to the actual right-sized price for yield provision.

It starts with the truth. The truth is around 4%.