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mrbluze writes:
"An interesting blog post by Charles Hugh Smith on Why Banks Are Doomed: Technology and Risk.:
The funny thing about technology is that those threatened by fundamental improvements in technology attempt to harness it to save their industry from extinction. For example, overpriced colleges now charge thousands of dollars for nearly costless massively open online courses (MOOCs) because they retain a monopoly on accreditation (diplomas). Once students are accredited directly--an advancement enabled by technology--colleges' monopoly disappears and so does their raison d'etre.
The same is true of banks. Now that accounting and risk assessment are automated, and borrowers and owners of capital can exchange funds in transparent digital marketplaces, there is no need for banks. But according to banks, only they have the expertise to create riskless debt.
...
One last happy thought: technology cannot be put back in the bottle. The financial/banking sector wants to use technology to increase its middleman skim, but the technology that is already out of the bottle will dismantle the sector as a function of what technology enables: faster, better, cheaper, with greater transparency, fairness and the proper distribution of risk.
There may well be a place for credit unions and community banks in the spectrum of exchanges, but these localized, decentralized enterprises would be unable to amass dangerous concentrations of risk and political influence in a truly transparent and decentralized system of exchanges.
It's still early days, but can new electronic currencies such as Bitcoin become mainstream without the assent of governments?"
(Score: 1) by migz on Monday February 24 2014, @03:28PM
I think I'm starting to see your sticking points.
With regard to regulation. You initially claim that you are unable to follow his claims since you are not an economist, yet you state that everyone (except you ;-P) understands how regulation can manage the inherent risks of the banking system.
Without the endorsement of Big Brother ^H^H government, the public cannot rely on faith in authority to give them a false sense of security. The risks are, as you state, not eliminated by regulation, I hold that they are not even mitigated. They risks are just waved away. This is indeed pixie dust.
I don't believe transparency is either necessary nor sufficient, though personally I would prefer it. The public doesn't need to understand the intricacies. They just need to know:
1. There is no guarantee, buyer beware
2. Accountability is those issuers who are fibbers go bust, and everyone holding that currency lose everything.
How is this for an intuitive explanation:
If you don't like the food at burger king, you can eat at mcdonalds, or the dodgey taco wagon that parks next to the dumpster, or anywhere else, heck you can even start your own gluten-free organic paleo-vegan restaurant. This is like private money. You choose. You take the risk.
If you don't like the food for inmates at Guantanamo bay extraordinary rendition facility. This is like government money. You don't have a choice.
(Score: 2) by Sir Garlon on Monday February 24 2014, @04:14PM
Sure. My point, to continue that analogy, is that most Americans like the Guantanamo food, so they don't see the problem. I am not claiming it's the best of all possible systems; there may be better out there, but I have little motivation to change. I am sure you would be quick to point out that just because most people like the Guantanamo food today does not mean they should trust it will be good tomorrow. To most Americans, that seems like a hypothetical risk. To Zimbabweans, I am sure, it's not just hypothetical.
[Sir Garlon] is the marvellest knight who is now living, for he destroyeth many good knights, for he goeth invisible.