Prediction: the ubiquity of the electronic infrastructure will make most of the functions of the modern bank obsolete. Simple transactions can be handled electronically for very little cost. Lending and saving transactions are more complicated, but in the right framework could probably be automated or even distributed to a high degree.
There's no technological reason why you can't have a single card serving multiple functions - from Cash to ATM to Credit to ID to License to Portfolio - and while there's an obvious efficiency advantage there are big questions about counterfeiting, privacy, theft, reliability, and infrastructure-independent person-to-person transactions.
The big question is how this would affect processes in place that control the creation and destruction of money, and whether newer systems could improve upon the existing one (money exists as a form of debt to a bank, which can create it through processes such as fractional lending). The big caveat is that banks are too rich to ever let anyone take over their business or take it in a direction they don't want. Make no mistake, they're in this for the money.
You have a misunderstanding of how modern banks work. Almost none of their business involves holding physical cash. Their business is based on fractional reserve lending. They take your paycheck and loan 80% of it out to prospective borrowers. A prospective borrower may be another bank, and they may loan 80% of that out again. Now your local drug dealer or loan shark can do this too, but they are not insured by the FDIC. A subtle differenc most depositors are probably interested in, particularly small account holders. At no time do trucks filled with cash go from borrower to borrower.
The system of fractional reserve lending extends to the top of the food chain - the Fed - who may redeem treasury notes (the currency of high level banking) with fictional accounts at their whim (a capacity granted in 1982 by act of Congress).
So of course banks will be at the conference - they have more interest in reducing paper cash than anyone else. It is a drag on their business.
Uh, yeah. I believe I alluded to most of that. I'm not sure how you're contradicting me with this comment. I certainly didn't say anything about trucks.
What I was talking about is how anytime you make any transaction involving money you're probably dealing directly with a bank, unless it's in cash, which is still a deal with the Fed. The only way to be totally bank free (banks being almost universally private for-profit entities in the US) is to work via alternative systems, which are spotty at the moment. Generally you have no choice but to work with a bank of some kind, whether you want to or not. And because of the lending trees, you're working with whole mess of them.
There are many reasons for this not the least of which is most of these institutions evolved in an environment where necessary transactions were not and could not be instantaneous, which required the establishment of complex networks of trust and dependency. In the modern world, such systems are antiquated, unreliable, inefficient, and to a large part unnecessary. Every node the money goes through takes its cut, and those cuts are big. There's also the chance any of those nodes may be corrupt. The system could be realigned to work directly with its most fundamental elements - In this case, the Fed. Why not eliminate the middlemen and save all of us a lot of trouble.
In other words, I was talking about streamlining the banking system by simplifying and centralizing it's methods. Not currency theory or the fact that our money is ultimately controlled by a private entity with private interests.
Why would you want to be bank free? If you have capital, you might as well have a bank lending it out to people and making a cut of the interest on the loans. I'd rather have my paycheck deposited into a money-market account earning until I decide what to do with it, than sitting as a number somewhere in a federal computer doing nothing.
Like I said, Savings and Loans type arrangments are more complicated could probably be managed directly on your account, either via an independent agent or theoretically automatically based on more creative methods that have yet to be designed. Every person in america probably has at least four accounts managing some amount of money for them - savings, checkings, a credit card, and their wallet. Most have much more than that. They could all be reduced to one smart account on a federal computer preserving all the functions of the separate accounts based on your total balance, credit history/rating, and standard rates/rules direct from the fed, with the option for 3rd parties (loan companies for things like cars and houses) to deduct and others (investment offices) to manage.
What I was talking about is how anytime you make any transaction involving money you're probably dealing directly with a bank, unless it's in cash, which is still a deal with the Fed.
That is incorrect. You cannot redeem your dollars for anything at the Fed. The US dollar is a fiat currency. The "deal" you speak of is still a transaction of trust between you and your other parties, both of whom implicitly trust the power issuing (not backing, issuing) the currency. The US only puts its mark on those bills as a representative of fiat power.
What I was talking about is how anytime you make any transaction involving money you're probably dealing directly with a bank, unless it's in cash, which is still a deal with the Fed.
No! You still don't understand. The Fed has no relationship with the cash once it is issued. Once we left the gold standard we dropped any notion of cash relating to any physical store of value.
The fed issues the cash. If they wanted to they could actually restrict it to the point where people were forced not to use it. Or they could revoke it, particularly when they convert to new cash (did it in Europe - had major implications [bbc.co.uk]). And although (US) cash is not backed or valued by a commodity, it does have a relative worth which changes over time with the economy, both US and World. And it is the Fed's job to manage the US economy as best it can (or as it sees fit). Ergo, you're dealing with the Fed, however indirectly it may be at most times.
They are they control the fundamentals of the money system. You use that system, you are intereacting with them. It may be indirect, impersonal, and unwelcome, but the relationship is there.
Prediction: the ubiquity of the electronic infrastructure will make most of the functions of the modern bank obsolete. Simple transactions can be handled electronically for very little cost. Lending and saving transactions are more complicated, but in the right framework could probably be automated or even distributed to a high degree.
The financial institution is not the form of the transaction. The financial institution represents the trust behind the transaction, whether that be paper or plastic. The reason $$$/Visa/MC/Amex are acceptable forms of transactions is that vendors have faith they will receive the money that the bearer of the card promises. The function of a financial institution is to establish trust between lenders, borrowers, vendors and customers. That will always need to exist.
As for the "big" question: Not all money is debt to a bank. Money is an abstract representation of value. As for banks creating money: Of course banks are in it for the money. But the nice thing is they make money in nice stable economies filled with some people who save money and some people who borrow money and where everyone is responsible in their financial transactions. Banks want to pay you x% interest on your money and loan it to someone else for x+y% interest. The value the financial institutions provide again is trust that I'll get my x% and due diligence that the person paying x+y% will probably be good for it. Banks that don't do that properly go away. Lather, rinse, repeat a few million times and I think you've got a great way to create value for yourself AND the economy as a whole.
I said they CAN be handled cheaply. Not that they are now. Why should changing a few bits of information on a couple of accounts cost so much money, when the same can be done with nicely manufactured pieces of paper and metal for nothing? Answer: the electronic transactions have to go through a mess of for-profit banks who charge whatever they can get away with at every exchange, because the Fed does not provide for electronic Federal Reserve Notes or any other electronic alternative.
"Be there. Aloha."
-- Steve McGarret, _Hawaii Five-Oh_
So many possibilities. (Score:5, Insightful)
There's no technological reason why you can't have a single card serving multiple functions - from Cash to ATM to Credit to ID to License to Portfolio - and while there's an obvious efficiency advantage there are big questions about counterfeiting, privacy, theft, reliability, and infrastructure-independent person-to-person transactions.
The big question is how this would affect processes in place that control the creation and destruction of money, and whether newer systems could improve upon the existing one (money exists as a form of debt to a bank, which can create it through processes such as fractional lending). The big caveat is that banks are too rich to ever let anyone take over their business or take it in a direction they don't want. Make no mistake, they're in this for the money.
Wonder who'll be at that conference?
Banks don't hold money! They (re)LEND it (Score:2)
The system of fractional reserve lending extends to the top of the food chain - the Fed - who may redeem treasury notes (the currency of high level banking) with fictional accounts at their whim (a capacity granted in 1982 by act of Congress).
So of course banks will be at the conference - they have more interest in reducing paper cash than anyone else. It is a drag on their business.
Re:Banks don't hold money! They (re)LEND it (Score:2)
What I was talking about is how anytime you make any transaction involving money you're probably dealing directly with a bank, unless it's in cash, which is still a deal with the Fed. The only way to be totally bank free (banks being almost universally private for-profit entities in the US) is to work via alternative systems, which are spotty at the moment. Generally you have no choice but to work with a bank of some kind, whether you want to or not. And because of the lending trees, you're working with whole mess of them.
There are many reasons for this not the least of which is most of these institutions evolved in an environment where necessary transactions were not and could not be instantaneous, which required the establishment of complex networks of trust and dependency. In the modern world, such systems are antiquated, unreliable, inefficient, and to a large part unnecessary. Every node the money goes through takes its cut, and those cuts are big. There's also the chance any of those nodes may be corrupt. The system could be realigned to work directly with its most fundamental elements - In this case, the Fed. Why not eliminate the middlemen and save all of us a lot of trouble.
In other words, I was talking about streamlining the banking system by simplifying and centralizing it's methods. Not currency theory or the fact that our money is ultimately controlled by a private entity with private interests.
Re:Banks don't hold money! They (re)LEND it (Score:2)
Re:Banks don't hold money! They (re)LEND it (Score:2)
Re:Banks don't hold money! They (re)LEND it (Score:2)
That is incorrect. You cannot redeem your dollars for anything at the Fed. The US dollar is a fiat currency. The "deal" you speak of is still a transaction of trust between you and your other parties, both of whom implicitly trust the power issuing (not backing, issuing) the currency. The US only puts its mark on those bills as a representative of fiat power.
What I was talking about is how anytime you make any transaction involving money you're probably dealing directly with a bank, unless it's in cash, which is still a deal with the Fed.
No! You still don't understand. The Fed has no relationship with the cash once it is issued. Once we left the gold standard we dropped any notion of cash relating to any physical store of value.
Re:Banks don't hold money! They (re)LEND it (Score:2)
They are they control the fundamentals of the money system. You use that system, you are intereacting with them. It may be indirect, impersonal, and unwelcome, but the relationship is there.
Re:So many possibilities. (Score:1)
The financial institution is not the form of the transaction. The financial institution represents the trust behind the transaction, whether that be paper or plastic. The reason $$$/Visa/MC/Amex are acceptable forms of transactions is that vendors have faith they will receive the money that the bearer of the card promises. The function of a financial institution is to establish trust between lenders, borrowers, vendors and customers. That will always need to exist.
As for the "big" question: Not all money is debt to a bank. Money is an abstract representation of value. As for banks creating money: Of course banks are in it for the money. But the nice thing is they make money in nice stable economies filled with some people who save money and some people who borrow money and where everyone is responsible in their financial transactions. Banks want to pay you x% interest on your money and loan it to someone else for x+y% interest. The value the financial institutions provide again is trust that I'll get my x% and due diligence that the person paying x+y% will probably be good for it. Banks that don't do that properly go away. Lather, rinse, repeat a few million times and I think you've got a great way to create value for yourself AND the economy as a whole.
"little cost??" (Score:2)
You obviously don't have a merchant account. Retail stores often pay $0.25 per transaction, plus upwards fo 3%. That's not cheap.
Re:"little cost??" (Score:2)