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You outline the problem very well. The banking sector has an ENORMOUS amount of power over the economy/society in a way that no other industry does because it l

You outline the problem very well. The banking sector has an ENORMOUS amount of power over the economy/society in a way that no other industry does because it literally has the ability to create money out of thin air (by loaning it into existence). The banking industry is the arbiter and credit in our society and decides where money get allocated. This would be fine if it were their own money, but it's not - it's our bank accounts (ie. fractional reserve banking). Unfortunately individuals can't opt out of this because unlike private banks, individuals aren't allowed to open a bank account directly with the government (though these replies show that this is possible in countries like France). The finance industry does not generate real wealth, it is a wealth extracting industry that profits off the spread between the interest rate decided by the central bank and the interest rates and fees it charges consumers. Banks do not create goods or services, they just decide who gets the money to do so, with money that's not theirs. 80% of bank credit goes to mortgage loans (driving up housing prices and saddling homeowners in debt). Banks have gone from 2% of the U.S. economy in the 1950s to 8% by 2008, and 1.5% of the British economy in 1978 to 15% by 2008. The first step to fixing this is to give citizens the ability to opt out of private banks and bank directly with the central bank. Private banks should not be the only ones with this privilege.

humaniania 6y ago
There are tons of different banks and credit unions as perfectly good options. There is a healthy and competitive market. The current system is a great way to create jobs and keep product offerings competitive, which means efficiency for the consumer. Banking is an extremely important industry to society, so it makes sense that they would have a lot of power, and a lot of oversight.
bo1024 6y ago
This and the parent comment seem like pretty strong arguments. If the main differentiator is supposed to be whom banks decide to lend to, this doesn't seem to be working. They are extremely risk-averse about innovating lending or using criteria beyond credit score (to preempt accusations of discrimination, I was told, which is ironic since credit score is a hugely discriminatory system). Anyway, I think I like the idea of a government-centralized deposit and monetary transfer system. This is the direct electronic equivalent of cash. A single national interest rate seems reasonable since current saving account rates are essentially set by the reserve rate today anyway. But I feel there must be a better privatized lending system than the current one though.
- thulecitizen 6y ago
  There are many calls for public banking by people such as Ellen Brown [1], as well organizations such as the MetaCurrency Project [2] and Positive Money [3]. [1] https://ellenbrown.com/what-are-public-banks-and-how-do-they-operate-an-introduction/ https://ellenbrown.com/what-are-public-banks-and-how-do-they... [2] http://eric.harris-braun.com/blog/2007/05/14/id-53 http://eric.harris-braun.com/blog/2007/05/14/id-53 [3] https://www.youtube.com/watch?v=ZzCegQVljdY https://www.youtube.com/watch?v=ZzCegQVljdY
- listenallyall 6y ago
  What is actually ironic here is commenters on a technology-driven site dismissing the OG of algorithms used to optimize a real-world, complex business problem -- the FICO credit score. Long before PageRank or Netflix's $1 million prize or any HFT firms, Fair, Isaac & Co. designed a revolutionary, data-driven product that massively reduced banks' lending risk while saving them enormous amounts of time. It also removed bankers' personal biases out of the equation. While it may not be perfect, nobody has come up with a better system and adoption is near-universal, with many more applications than it was originally designed for.
thulecitizen 6y ago
> The banking industry is the arbiter and credit in our society and decides where money get allocated. Thanks for your comment. In my experience this is the most misunderstood aspect about money. Your comment explained it really well. I wish this was more widely understood and talked about. I do not think the original commenter understands the monopolistic as well as parasitical nature of today's money, as they write: > - Part of it is deciding who to lend money to. Makes sense for the bank to decide this with its own money. ...which is wrong. Banks do not have their 'own money'. They create money out of nothing. They get a license to create debt out of nothing (fiat). Many times today they do not even have to have the fractional reserves for any of it. If anyone has any doubts please check out Anthropologist David Graeber's book 'Debt: The First 5,000 Years' as well as his explanation of the money system in this article: "In other words, everything we know is not just wrong – it's backwards. When banks make loans, they create money. This is because money is really just an IOU. The role of the central bank is to preside over a legal order that effectively grants banks the exclusive right to create IOUs of a certain kind, ones that the government will recognise as legal tender by its willingness to accept them in payment of taxes. There's really no limit on how much banks could create, provided they can find someone willing to borrow it. They will never get caught short, for the simple reason that borrowers do not, generally speaking, take the cash and put it under their mattresses; ultimately, any money a bank loans out will just end up back in some bank again. So for the banking system as a whole, every loan just becomes another deposit. What's more, insofar as banks do need to acquire funds from the central bank, they can borrow as much as they like; all the latter really does is set the rate of interest, the cost of money, not its quantity. What this means is that the real limit on the amount of money in circulation is not how much the central bank is willing to lend, but how much government, firms, and ordinary citizens, are willing to borrow. Government spending is the main driver in all this (and the paper does admit, if you read it carefully, that the central bank does fund the government after all). So there's no question of public spending "crowding out" private investment. It's exactly the opposite."[1] [1] https://www.theguardian.com/commentisfree/2014/mar/18/truth-money-iou-bank-of-england-austerity https://www.theguardian.com/commentisfree/2014/mar/18/truth-...
LatteLazy 6y ago
Finance is a very important industry that adds a lot of value. If you get a student loan, you can go to university tomorrow and earn more in a few years, that's much more valuable than spending 20yrs at McDonald's earning nothing and saving very slowly to pay for your degree upfront as you would have to otherwise. Ditto mortgages. Ditto getting a car or starting a business or basically anything finance permits. The great recession after 2008 and the great depression both show what happens when finance stops working. The rest of the economy collapses without it. You can all the way back to medieval Kings to see how important it is. I don't know where people get this idea finance is not "real". If it wasn't useful, people wouldn't be paying for the services it provides, they're all optional.
- thulecitizen 6y ago
  > If it wasn't useful, people wouldn't be paying for the services it provides, they're all optional. Honestly, in my opinion this could not be a more misinformed take on the reality of banking. Today there exist no alternatives to commercial money (private bank debt), because our governments' demand taxes in it. Finance and banking are also different, yet you seem to use the words interchangeably. Banking = creation of credit. Finance (today) is about creating overly complex financial products to take part in the game of high volume automated trading, such as with the use of BlackRock's Aladdin - where the same financial products are sold and resold hundreds of times in an hour. Pure speculation/extraction/Rentierism. As the comment you replied to wrote: > The first step to fixing this is to give citizens the ability to opt out of private banks and bank directly with the central bank. Private banks should not be the only ones with this privilege. "The problem is largely in the system of exchange we call “money,” and in the banks that store and distribute it. Rather than allowing the free exchange of labor and materials for production, our system of banking and credit has acted as a tourniquet on production and a parasite draining resources away. Genuine economic freedom requires that credit flow freely for productive use. But today, a handful of giant banks diverts that flow into an exponentially-growing self-feeding pool of digital profits for themselves. In the wake of the 2008 financial crisis, much of the global economy has been battling economic downturn, with rampant unemployment, government funding problems, and harsh austerity measures imposed on the people. Meanwhile, the banks that caused this devastation have been bailed out at government expense and continue to thrive at the public trough. All this has caused irate citizens to rise up against the banks, particularly the large international banks. But for better or worse, we cannot do without the functions they perform; and one of these is the creation of “money” in the form of credit when banks make loans. This advance of bank credit has taken the form of “fractional reserve” lending, which has been heavily criticized. Yet historically, it is this sort of credit created out of nothing on the books of banks that has allowed the wheels of industry to turn. Employers need credit at each stage of production before they have finished products that can be sold on the market, and banks need to be able to create credit as needed to respond to this demand. Without the advance of credit, there will be no products or services to sell; and without products to sell, workers and suppliers cannot get paid. If banks have an unfair edge in this game, it is because they have managed to get private control of the credit spigots. They use this control not to serve business, industry, and society’s needs but for their private advantage. They can turn credit on and off at will, direct it to their cronies, or use it for their own speculative ventures; and they collect the interest as middlemen. This is not just a modest service fee. Interest has been calculated to compose a third of everything we buy."[1] The strongest alternative I am seeing emerge at this point is a new distributed peer to peer cryptographically secured accounting framework/pattern called Holochain. It allows us to rapidly prototype, and start using, new types of mutually sovereign asset backed Mutual Credit 'currencies' [2] (wealth-acknowledgement systems), based on productive capacity and measuring this wealth in new ways that isn't possible to integrate with today's money system. This includes the use of reputation currencies (think FairTrade labels, Organic veggie labels etc.). Building on this are projects like http://valueflo.ws http://valueflo.ws. [1] https://ellenbrown.com/what-are-public-banks-and-how-do-they-operate-an-introduction/ https://ellenbrown.com/what-are-public-banks-and-how-do-they... [2] https://medium.com/holochain/beyond-blockchain-simple-scalable-cryptocurrencies-1eb7aebac6ae https://medium.com/holochain/beyond-blockchain-simple-scalab...

humaniania 6y ago

There are tons of different banks and credit unions as perfectly good options. There is a healthy and competitive market. The current system is a great way to create jobs and keep product offerings competitive, which means efficiency for the consumer. Banking is an extremely important industry to society, so it makes sense that they would have a lot of power, and a lot of oversight.

bo1024 6y ago

This and the parent comment seem like pretty strong arguments. If the main differentiator is supposed to be whom banks decide to lend to, this doesn't seem to be working. They are extremely risk-averse about innovating lending or using criteria beyond credit score (to preempt accusations of discrimination, I was told, which is ironic since credit score is a hugely discriminatory system). Anyway, I think I like the idea of a government-centralized deposit and monetary transfer system. This is the direct electronic equivalent of cash. A single national interest rate seems reasonable since current saving account rates are essentially set by the reserve rate today anyway. But I feel there must be a better privatized lending system than the current one though.

thulecitizen 6y ago
There are many calls for public banking by people such as Ellen Brown [1], as well organizations such as the MetaCurrency Project [2] and Positive Money [3]. [1] https://ellenbrown.com/what-are-public-banks-and-how-do-they-operate-an-introduction/ https://ellenbrown.com/what-are-public-banks-and-how-do-they... [2] http://eric.harris-braun.com/blog/2007/05/14/id-53 http://eric.harris-braun.com/blog/2007/05/14/id-53 [3] https://www.youtube.com/watch?v=ZzCegQVljdY https://www.youtube.com/watch?v=ZzCegQVljdY
listenallyall 6y ago
What is actually ironic here is commenters on a technology-driven site dismissing the OG of algorithms used to optimize a real-world, complex business problem -- the FICO credit score. Long before PageRank or Netflix's $1 million prize or any HFT firms, Fair, Isaac & Co. designed a revolutionary, data-driven product that massively reduced banks' lending risk while saving them enormous amounts of time. It also removed bankers' personal biases out of the equation. While it may not be perfect, nobody has come up with a better system and adoption is near-universal, with many more applications than it was originally designed for.

thulecitizen 6y ago

> The banking industry is the arbiter and credit in our society and decides where money get allocated. Thanks for your comment. In my experience this is the most misunderstood aspect about money. Your comment explained it really well. I wish this was more widely understood and talked about. I do not think the original commenter understands the monopolistic as well as parasitical nature of today's money, as they write: > - Part of it is deciding who to lend money to. Makes sense for the bank to decide this with its own money. ...which is wrong. Banks do not have their 'own money'. They create money out of nothing. They get a license to create debt out of nothing (fiat). Many times today they do not even have to have the fractional reserves for any of it. If anyone has any doubts please check out Anthropologist David Graeber's book 'Debt: The First 5,000 Years' as well as his explanation of the money system in this article: "In other words, everything we know is not just wrong – it's backwards. When banks make loans, they create money. This is because money is really just an IOU. The role of the central bank is to preside over a legal order that effectively grants banks the exclusive right to create IOUs of a certain kind, ones that the government will recognise as legal tender by its willingness to accept them in payment of taxes. There's really no limit on how much banks could create, provided they can find someone willing to borrow it. They will never get caught short, for the simple reason that borrowers do not, generally speaking, take the cash and put it under their mattresses; ultimately, any money a bank loans out will just end up back in some bank again. So for the banking system as a whole, every loan just becomes another deposit. What's more, insofar as banks do need to acquire funds from the central bank, they can borrow as much as they like; all the latter really does is set the rate of interest, the cost of money, not its quantity. What this means is that the real limit on the amount of money in circulation is not how much the central bank is willing to lend, but how much government, firms, and ordinary citizens, are willing to borrow. Government spending is the main driver in all this (and the paper does admit, if you read it carefully, that the central bank does fund the government after all). So there's no question of public spending "crowding out" private investment. It's exactly the opposite."[1] [1] https://www.theguardian.com/commentisfree/2014/mar/18/truth-money-iou-bank-of-england-austerity https://www.theguardian.com/commentisfree/2014/mar/18/truth-...

LatteLazy 6y ago

Finance is a very important industry that adds a lot of value. If you get a student loan, you can go to university tomorrow and earn more in a few years, that's much more valuable than spending 20yrs at McDonald's earning nothing and saving very slowly to pay for your degree upfront as you would have to otherwise. Ditto mortgages. Ditto getting a car or starting a business or basically anything finance permits. The great recession after 2008 and the great depression both show what happens when finance stops working. The rest of the economy collapses without it. You can all the way back to medieval Kings to see how important it is. I don't know where people get this idea finance is not "real". If it wasn't useful, people wouldn't be paying for the services it provides, they're all optional.

thulecitizen 6y ago
> If it wasn't useful, people wouldn't be paying for the services it provides, they're all optional. Honestly, in my opinion this could not be a more misinformed take on the reality of banking. Today there exist no alternatives to commercial money (private bank debt), because our governments' demand taxes in it. Finance and banking are also different, yet you seem to use the words interchangeably. Banking = creation of credit. Finance (today) is about creating overly complex financial products to take part in the game of high volume automated trading, such as with the use of BlackRock's Aladdin - where the same financial products are sold and resold hundreds of times in an hour. Pure speculation/extraction/Rentierism. As the comment you replied to wrote: > The first step to fixing this is to give citizens the ability to opt out of private banks and bank directly with the central bank. Private banks should not be the only ones with this privilege. "The problem is largely in the system of exchange we call “money,” and in the banks that store and distribute it. Rather than allowing the free exchange of labor and materials for production, our system of banking and credit has acted as a tourniquet on production and a parasite draining resources away. Genuine economic freedom requires that credit flow freely for productive use. But today, a handful of giant banks diverts that flow into an exponentially-growing self-feeding pool of digital profits for themselves. In the wake of the 2008 financial crisis, much of the global economy has been battling economic downturn, with rampant unemployment, government funding problems, and harsh austerity measures imposed on the people. Meanwhile, the banks that caused this devastation have been bailed out at government expense and continue to thrive at the public trough. All this has caused irate citizens to rise up against the banks, particularly the large international banks. But for better or worse, we cannot do without the functions they perform; and one of these is the creation of “money” in the form of credit when banks make loans. This advance of bank credit has taken the form of “fractional reserve” lending, which has been heavily criticized. Yet historically, it is this sort of credit created out of nothing on the books of banks that has allowed the wheels of industry to turn. Employers need credit at each stage of production before they have finished products that can be sold on the market, and banks need to be able to create credit as needed to respond to this demand. Without the advance of credit, there will be no products or services to sell; and without products to sell, workers and suppliers cannot get paid. If banks have an unfair edge in this game, it is because they have managed to get private control of the credit spigots. They use this control not to serve business, industry, and society’s needs but for their private advantage. They can turn credit on and off at will, direct it to their cronies, or use it for their own speculative ventures; and they collect the interest as middlemen. This is not just a modest service fee. Interest has been calculated to compose a third of everything we buy."[1] The strongest alternative I am seeing emerge at this point is a new distributed peer to peer cryptographically secured accounting framework/pattern called Holochain. It allows us to rapidly prototype, and start using, new types of mutually sovereign asset backed Mutual Credit 'currencies' [2] (wealth-acknowledgement systems), based on productive capacity and measuring this wealth in new ways that isn't possible to integrate with today's money system. This includes the use of reputation currencies (think FairTrade labels, Organic veggie labels etc.). Building on this are projects like http://valueflo.ws http://valueflo.ws. [1] https://ellenbrown.com/what-are-public-banks-and-how-do-they-operate-an-introduction/ https://ellenbrown.com/what-are-public-banks-and-how-do-they... [2] https://medium.com/holochain/beyond-blockchain-simple-scalable-cryptocurrencies-1eb7aebac6ae https://medium.com/holochain/beyond-blockchain-simple-scalab...