Alternative and “safe” way of getting a loan.
That banks are vulnerable organizations, has become clear to all of us. Frankly, banks are by definition unstable. The system has never been “perfect” and everybody, really everybody who was paying attention saw this crash coming. The post-Bretton Woods system in which debt (future prosperity) was going to serve as cover was doomed to fail from day one. Banks have always been insecure and now the monetary is jammed it will never really be safe to put your money on a bank account.
At this moment the situation is so that if a large bank falls, no ‘rescue plan’ will be good enough to save that bank. Each ‘rescue plan’ could lead to hyperinflation. Fortunately, it is also quite possible to bank without banks!
The Basic banks were a kind of market that mediated between borrowers and savers and we need to go back to that principle. A modern bank with its FRACTIONAL reserve principle, is unnecessary and dangerous. Ultimately, the fractional reserve principle was created so that banks could issue more loans and thus make more profit. Our banks can and are receiving interest on money they don’t have or own because they switched to this fractional reserve principle. A central bank is completely unnecessary, such institution solely exist in the grace of inflation and deflation.
Anyway, eventually, if you look trough all misleading constructions of modern banking its quite simple. Is it not high time for something new?
With the advent of modern means of online communication and collaboration, Web 2.0, it is very easy to continue without banks.
An alternative way of getting a loan: Social Banking.
Characteristic of Web 2.0 communication and collaboration means is that the facilities allow users themselves to produce results. Think of Wikipedia, Youtube, Digg, and so on. They are all so-called crowd-sourced systems with user-generated content, which means that visitors will do all the work. The concept I’m trying to get to is called Peer-to-Peer banking. At this time quite a number of successful Peer-to-Peer social banking systems have already been set up and and the conditions are better than normal banks. A peer-to-peer banking system is a market place where people directly borrow and lend money to each other. People can operate on mutually desired conditions. The best-known peer-to-peer bank is Zopa which already claims their safer than banks.
“There’s no smoke and no mirrors – unlike at a bank. Because banks use your money to make even more money for themselves. They lend some of it out, some gamble on the price of tin or the depreciating yen, and invested the rest in any other money-making schemes they can think of.“
Starting with social banking is simple. Its not harder than selling or buying stuff on Ebay. When you sign up for social banking your reliability and identity will be checked carefully and you can only lend or borrow money when you have passed these tests perfectly. There are mechanisms to indicate how long you want to lend money and at what rates, in order to estimate reliability and to spread risks. When you don’t pay back lenders, just like any other defaulter, will get you an angry-looking team Yugoslavia’s in front of your door.
The benefits are enormous. Everyone knows exactly where his money goes and where it comes from. The return on savings is higher, partly because there are no expensive banks involved.
At this moment, Peer-to-Peer banks have the disadvantage users will not be protected from the massive devaluation of the currencies, but In principle, the concept itself is very suitable for on the basis of a new currency to replace traditional banks.
With its own currency and a smart implementation of the peer-to-peer banking concept, we could now do without banks. Think about it people and spread the word.
Post Details
Posted on December 15, 2008
at 8:20 pm
Written / posted by: John
Filed under: Credit Crisis, Sharp Observations