To understand the problem of the banking system, let ’s look at an example.
This is a Rube Goldberg machine.
It is a ridiculously complicated machine that does something really simple like cracking an egg. Well, kinda reminds me of the financial industry.
The current banking system slows things down. It can take a second for an email to go around the world but it can take days to weeks for the money to moves through the banking system across the city. They take a big piece of the action.
Today, if you want to send money to a friend or family member in another country, making an international wire transfer via an existing global interbank payment network (SWIFT) could take anywhere from 2 to 10 days, with average total fees of up to $50. Believe it or not, wiring money internationally can be slower and more costly than sending that same amount as cash in a physical package.
In case you or the recipient don’t have a bank account – which is still the case for more than 2 billion adults worldwide – you would have to use a company like Western Union which can charge as much as $95 in fees to send $1000. What’s worse, it’s generally poorer working-class people who are more likely to be unbanked and have to pay these fees to send their earnings to family members overseas.
Banks are growing problems. To begin, they are centralized so they can be hacked and increasingly are. Governments and banks, cannot be trusted to not debase our money because they have done in the past and will continue to do that. The 1997 Asian Financial Crisis, the 2001 Dot-com Bubble, and most recently, as mentioned above, the 2008 Subprime Mortgage Crisis which directly led to the 2010 European Sovereign Debt Crisis. Each time caused by banks and the financial industry abusing the trust we place in them.
They exclude billions of people from the global economy. For example, people who do not have enough money to open a bank account. There are currently 7.7 billion people in the world. The number of adult people is around 5.5 billion. Currently, roughly 2 billion adults don’t have access to bank services which is enormously 36% or more than one-third of the entire adult population.
It is an astonishing number. All these people are using cash for their everyday needs. These people pay school fees, trash, water, and electric bills in cash.
Do you think their money is safe? Do you think the paper could last for years without damaging itself?
On top of all this, when banks end up in trouble, they try to solve it by printing more money. It works to some extent but when you do it all the time, you come to the point where your currency is so inflated and debased that new printing doesn’t help at all.
Then the entire economy goes into bankruptcy and we’re seeing scenes similar to Venezuela and other countries worldwide where national currency lost its worth and their monthly wages are just a few dollars due to hyperinflation.