politics for the 99%

What else can we do with the $1.25 trillion we’ll save by eliminating these obsolete financial middleman parasites? A lot – Published on Washington’s Blog, by Charles Hush Smith, Feb 21, 2014.

… This entire parasitic middleman sector could be replaced with automated digital clearing houses and crowdfunded or non-bank loans. Why do we need banks to pay bills online? We don’t; any clearing house could charge a small fee for the transaction.

Why do we need banks when loans can be crowdfunded? If we can invest money in start-ups via Kickstarter, Indiegogo, RocketHub, AngelList, etc., why can’t we own a piece of someone’s auto loan or home mortgage?  

The web and software now enable the elimination of the entire middleman skimming operation of banking. Those with capital can invest that capital directly in loans that the investors choose. Risk is distributed throughout the system, and the process of verifying credit scores, income, valuations, assets, and so on–the building blocks of risk assessment and a market for debt and cash–can also be automated.

The entire notion that 100 savers put their money in a bank which then buys a mortgage with their savings and sells it as a security that supports a pyramid of derivatives is obsolete. Each saver can directly own (and sell on a transparent market) a piece of a mortgage, auto loan, business loan, etc. There is no need for a middleman banking sector at all–no skim, no concentration of risk, no opportunities for selling derivatives to unwary investors. All that goes away with the banking sector.

But what about holding deposits? We already have two institutions that could serve this role: credit unions and the post office. If those holding depositors’ cash do not issue loans, they have no source of income to defray operating expenses. The solution is obvious: charge fees for holding deposits and payor-payee transactions.

If the fee structures are transparent, those who charge too much will disappear as customers go elsewhere. That’s the purpose of transparent competition in an open marketplace.

Many other advanced nations have long combined postal and simple banking services: France and Japan come to mind. Here we have a postal service that is struggling to fund its operations in the era of email, and here we have millions of people who prefer to (or have to) do simple banking in person. There is no technical or administrative reason that the post office could not operate as it does in Japan, as a place to deposit funds (including auto-deposit of Social Security checks), take out cash, etc.

US Post Office Could Rack Up Billions By Offering Money Services–NPR (via Joel M.)

Please note that what I am suggesting is a transparent open market for these services provided by a range of enterprises and institutions. Assemble a marketplace of local credit unions, the post office, enterprises that handle payor-payee transactions such as Dwolla and PayPal, and you have a wide spectrum of choices to suit every need.

As for business loans: you can get small-business loans on PayPal right now. It’s called Working Capital, and the borrower is given the total amount due right up front.

As for the commercial paper market: there is no technical reason why a transparent exchange couldn’t enable borrowers and owners of capital to set short-term loan rates via transparent bidding with automated software.

The obsolescence of banking includes the Federal Reserve–the ultimate middleman skimming operation. But what about providing liquidity in credit panics? Well, to start with, once the banking sector is gone then the concentrations of risk and the obscuring of risk that go hand in hand with banking also disappear– the forces that generate panics will have been dispersed. Those forces will have vanished along with the middleman financial sector that created all the risks, speculative excesses and panics. If there were a liquidity crisis, the Treasury could create and lend whatever funds were needed.

But what about manipulating interest rates and other forms of financial repression? Interest rates would be set by millions of borrowers and owners of capital in transparent transactions.

What about all those great investing services offered by big banks and Wall Street? As many have observed, automated index funds outperform 99% of fund managers over 10 year time frames. So Wall Street is also obsolete … //

… (full text and a graph: Financial Profits vs Debt/GDP … and comments).

Links:

‘Six Californias’ plan to split up most populous US state gets green light, on Russia Today RT, Feb 22, 2014: A wealthy US investor got the go-ahead for his campaign to carve up California into six separate states, according to the Secretary of State’s Office. Critics call the plan just another scheme for the wealthy to hoard tax dollars. While initiatives to split up America’s most populated state have been floated since at least around the time of the Civil War, Silicon Valley venture capitalist, Tim Draper, may just have the clout and connections to pull it off …;

Digital Dairy: Robotic Milk Production Takes Over, on Spiegel Online International, by Jonathan Stock and Takis Würger, Feb 21, 2014 (Photo Gallery): Smaller dairy farms in Germany are rapidly disappearing, and with EU quotas on milk production set to expire next year, the process is likely to accelerate. The only way to survive is to turn cows into machines and keep them away from the meadow …;

HEUTE SHOW 21.02.14 – Folge 140, 32.54 min, von heute show am 21. Februar 2014 hochgeladen;

The Banksters Are Setting Up the Crash of 2016, 58.00 min, uploaded by The Big Picture RT: Dec 2, 2013: Thom discusses the upcoming fast food strike with McDonald’s worker Marielle Crowley, “free” trade with Public Citizen’s Lori Wallach and veterans issues with Actress and Activist Melissa Fitzgerald. In tonight’s “Daily Take” Thom discusses how the banksters have already set up the crash of 2016.