The millionaire next door is still next door
A decade and a half ago, my friend Simon told me about this amazing bank that he’d moved all his savings into. It was called Icesave, was from Iceland and was paying an interest rate way higher than anything he’d been able to get in the U.K. I should look into it, he said. I didn’t look into it, purely because my philosophy is: if someone’s offering a deal that sounds really good, it’s because you haven’t worked out how they’re ripping you off yet.
The joke was on Simon, because the bank collapsed, and all his money evaporated. Sucks to be you, I said, when I next saw him. It turned out that banks having assets worth more than 10 times a country’s economy on their balance sheets was a bad idea.
Except actually, the joke wasn’t on Simon at all because, after public outcry, the British government promised to extend its deposit guarantee scheme to deposits in the Icelandic banks, even though they hadn’t been insured, and taxpayers ended up 4.5 billion pounds in the hole, propping up people who’d rushed to grab that interest rate. So, Simon got the great interest rate, and he got all his money back, all at the cost of those of us who were stupid enough to be suspicious of a deal that was too good to be true. I was the one being ripped off all along, and the joke was actually on me.
Why is this relevant? Because of this article about the wobbly crypto-firm Celsius.