Banks Are Obsolete: The Entire Parasitic Sector Can Be Eliminated

Tyler Durden's picture

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

What else can we do with the $1.25 trillion we'll save by eliminating these obsolete financial middleman parasites? A lot.

Technology has leapfrogged the banking sector, rendering it as obsolete as buggy whips. So why are we devoting 9% of our economy to an obsolete parasite? Financial sector profits now total a staggering 4.5% of GDP (gross domestic product), while the expenses generated by financial churning account for another 4.5% of the economy.

chart courtesy of Market Daily Briefing

Software and existing non-Wall Street/too-big-to-fail institutions could replace the entire Wall Street/banking sector and drop costs to .5% of GDP, saving us 8+% of our GDP ($1.25 trillion) that is currently siphoned off by parasitic middlemen. The banking sector is Exhibit A in the Middleman-Skimming Economy (February 11, 2014).

The pull of habit and propaganda is so strong that most people haven't even recognized that software and the Web can replace the entire financial/banking sector for a fraction of the cost of the current parasitic system, a system that (as we all know) has captured the regulatory and governance machinery of the central state, making a mockery of democracy.

The benefits of eliminating the financial/banking sector are immense and far-reaching.

What exactly do banks do? Banks perform these basic functions:

1. They hold depositors' money.

2. They act as a clearing house for payments, transferring funds from payor to payee.

3. They issue loans on a fractional reserve basis, i.e. a few dollars in cash deposits supports $100 in loans.

4. They originate and trade derivatives, run high-speed trading desks, operate various money-laundering and embezzlement schemes, influence elected officials with lobbying and campaign contributions and subvert both free market capitalism and democracy at every turn.

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.

Once we get rid of these obsolete middleman parasites--Wall Street, the banking sector and the Federal Reserve--we have a delightful question to answer: what else can we do with the $1.25 trillion we'll save every year by eliminating these obsolete financial middleman parasites? A lot.

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Soul Glow's picture

Eliminate the middle man, buy silver.

fijisailor's picture

If you need to relocate in a hurry silver is a bit heavy.  Gold is a better option in that case.

Divided States of America's picture

Wow, that means there will be a lot of unemployed Jews out on the street if that happens.

LawsofPhysics's picture

Yes, can I interest you in a financial "product" of mass destruction?

redpill's picture

Pfft this would be like bankers committing suicide with a nail gun.

economics9698's picture

The cock roach class would migrate to other food sources, like the federal government, which is already roach infested. 

max2205's picture

I want whatever Charles is smoking

jbvtme's picture

A Glasgow smile (also known as a Glasgow, Chelsea, or Cheshire grin) is a wound caused by making small cuts on the corners of a victim's mouth, then beating or stabbing him or her until the muscles in the face contract, causing the cuts to extend up the cheeks to the victim's ears. This leaves a scar in the shape of a smile, hence the name.

jbvtme's picture

with respect to CHS, this is strictly a transitional strategy

balolalo's picture

"Banks Are Obsolete" - they always have been.   Even Jesus hated the money changers. 

Tall Tom's picture

Jesus hated nobody. Jesus hates the sin. Jesus loves the sinner.


Jesus sat down and ate with the prostitutes and the Tax Collectors. The Self Righteous Scribes and Pharisees attempted to slander Jesus for that.


I do not know where you get your idea of the Jewish Carpenter's attitude toward man. The Disciples were Jewish. Even the Apostle Paul was a Jew who persecuted Christians. He was a Tent Maker.


Peter was a Fisherman.


Even Jesus supported earning Interest from Bankers. All you have to do is read the Parable of the Talents.


The master chastised the wicked servant because he had hid the Talent in the Ground. The Master said at least you could have given it to a Banker and earned INTEREST.


Where do you get your ideas about Jesus??? Certainly you did not get them from the Gospels.


(The synagouge is not supposed to be a profit driven machine. That was corrupt. That is what He was irritated with. They were in the Temple.)

fonestar's picture

Satoshi is eliminating the cockroaches right before your eyes!



mister33's picture

"O People! Just as you regard this month, this day, and this city as sacred, so regard the life and property of every[one] as a sacred trust. Return the goods entrusted to you to their rightful owners. Treat others justly so that no one would be unjust to you. Remember that you will indeed meet your Lord, and that He will indeed question you about your deeds. GOD AS FORBIDDEN YOU TO TAKE INTEREST/USURY (RIBA), THEREFORE ALL INTEREST OBLIGATION SHALL HENCEFORTH BE WAIVED. Your capital, however, is yours to keep. You will neither inflict nor suffer inequity. IT HAS BEEN ORDAINED BY GOD THAT ALL USURY IS FORBIDDEN. To start with I give up the usury that is due to my relations." - Muhammad's Last Sermon

"In you are people who ACCEPT BRIBES TO SHED BLOOD; YOU TAKE INTEREST AND MAKE A PROFIT FROM THE POOR. You extort unjust gain from your neighbors. And you have forgotten me, declares the Sovereign Lord." -Ezekiel 22:12

"Lord, who may dwell in your sacred tent? Who may live on your holy mountain? The one whose walk is blameless, who does what is righteous, who speaks the truth from their heart, whose tongue utters no slander, who does no wrong to a neighbor, and casts no slur on others, who despises a vile person, but honors those who fear the Lord, who keeps an oath even when it hurts, and does not change their mind, WHO LENDS MONEY TO THE POOR WITHOUT INTEREST, who does not accept a bribe against the innocent. Whoever does these things will never be shaken." -A psalm of David, Psalms 15, 1-5

holgerdanske's picture

Yes, shooting eight EIGHT times. Guess the seven were for interest due.?


Whatever, it would be so nice without banking! and I don't really care, except I know there is an unholy alliance between the state and the banks. The one rats on the citizen, and the other sucks the blood. That is enough that the state will protect and shield the banking sector.

So the solution is to get rid of the bank AND the state, and return the state to what it should be. A popular supported entity to further the common good, like build roads, sanitation, run the civil administration and maintain law and order.

IOW to be a service to the people, and not a master.

So, where do we start, to rid ourselves of these parasites??


optimator's picture

Evidently he wasn't a marksman.

BTCTalks's picture

Disappointed with the lack of Bitcoin acknowledgement.  It seems to fit perfectly with the narrative.

optimator's picture

Unemployed?  Why they could simply find a job doing, er, something akin to real work.  Construction, farmining, there must be something they could do that doesn't involve money changing.

Divided States of America's picture

Dude, most Jews only work in industries where they can maximize payout and minimize effort. Have you ever seen a Jewish construction worker or farmer?? I haven't.

Pseudo Anonym's picture

i have

...ever seen a Jewish construction worker or farmer??

many.  those are the schmucks like me - getting ripped off by the criminals running central banks and governments.  but what is astonishing, is that they (the jews i know) have no idea, nor do they care, that they are getting ripped off, same as goyim, by their own tribe.

Rafferty's picture

This is true, there are lots of hard-working honest Jews out there.  But that doesn't gainsay that the whole financial criminal racket is largely -   not exclusively - but largey run by and for Jews.

holgerdanske's picture

Yes, there is, and many actually do!

The problem is, almost anything can be turned into modern banking. Which is largely gambling! plus the mundane non exciting stuff like lending money etc.

The problem is when the banking starts in farming, we will all go hungry one moment, only to have food thrown away the next, while being preached to that this is the "free market".

Free market, my ass.! It is only free to the guys being allowed to gamble and play with other peoples money, only to be bailed out when things go sour.


flacon's picture

> "silver is a bit heavy
The more silver is worth, the "lighter" (less cumbersome)  it becomes. Imagine if one silver ounce was worth the same as one gold ounce. They would weigh the same and be worth the same. What I am saying is that the "heaviness" (or cumbersomeness)  of silver depends on the gold:silver ratio. 

mayhem_korner's picture



If you can imagine the gold:silver ratio going to 1:1, I'd like to get some of what you are ingesting.

ChanceIs's picture

Steven Leeb - often submitting op-eds to King World News - has mentioned a gold;silver ratio at 1:1.  I like Steve.  I think that he is a bright man.  I think he does drugs.  I put a "10th order" filter on what he says.  Maybe a 1:10 ratio is what we will see.  But.....if we are trading pricewise against the physics/natural supply at 1:60 we might drop down to 1:10.  That would be a "six bagger."  What is not to like???

Now if you listen to the likes of Jim Sinclair and buy into $10K gold, then we would see an eight bagger there.  Coupled onto the six bagger for silver, we would have a 48 bagger.  If you want to get in the back of the Choom Wagon with Leeb, then we have a 480 bagger.

The sanest (think emotional stability/wise) head in that crowd - no disrespect to Jim Sinclair - seems to me o be James Turk.  He instructs to think of the PMs as only a wealth preservation mechanism.  This is almost a spiritual stance.  Having said that, I will take the stance of "holding ground" with Turk but recognize a potential 10 bagger upside.

Stack that silver baby.

OBTW: Via Trayvon, we were reminded that paranoia can come with weed.  I don't smoke weed - never have.  But I don't need to do that to feel paranoid about Uncle Sugar coming for me with the...what was it....MyIRA/forced Treasury buying.  Not after seeing Poland and Greece/Crete.  Face it.  The IMF is the US, and the US didn't object to that confiscation.

irishlink's picture

Mike Moloney . Jim Sinclair. Jim Rorgers. etc have been banging this gold drum for ever so long. Maybe our children will benefit. But I always wonder and worry that the elite have some sneaky solution up their sleeve that will undermine all these gold bugs. Any ideas?

ChanceIs's picture

What you say about Moloney et al is quite true.  (You forgot Marc Faber.)  I bought into this 4-5 years ago, and have been sore in the purse for it.  It made sense then, and at all times since then.  The ChairSatan has been at his presses.

I am convinced that the physical gold is flowing to the east.  There is a plethora of paper shorts.  Have I heard 100:1 in terms of paper gold vice real gold available for delivery?  What if the Chinese in addition to purchasing and taking deliver of massive amounts of physical, bought say - two of every ten naked short contracts and then sttod for delivery?  (They wouldn't know if they were naked shorts - it doesn't matter.)  The paper price would have to go to the moon and/or the exchange would close and some arbitrary settlement price would be forced upon the futures participants.  There could be nothing left but a physical market based purely on fundamentals - supply/demand.

The elites can't print gold.  They can't pull an FDR because it is a global market.  The safest might be "junk silver" coins.  It has already been declared legal tender.  The government would have a real hard time undoing that.

I don't know enough about bitcoins. 

holgerdanske's picture

weigh the same??? I think it is back to school for you. This instant!;-) For the same volume, gold is almost twice as heavy as silver. IOW the gold coin will take half the space of a similar weight silver coin. This is one of the reasons gold is the superior store of wealth.

BLOTTO's picture

The banking system is the smaller bubble within the larger. We, the masses, need to bust the largest bubble 1st.


Nothing changes until you get rid of the Queen's Empire, the Vatican, Rothschilds, and Rockefellers and any of the other ancient ruling royal bloodlines...

We need to cut off the 'beasts head' once and for all.

THEN we can talk about what we are going to do...otherwise, they'll just do it for us all over again.


'Nothing new under the sun'...'Same as it ever was'...'Meet the new boss; same as the old boss'...etc...etc...

nasdaq99's picture

i can't believe anybody in their right mind would put the post office in charge of anything..........


the post office needs to be shut down immediatley and save us $25b/year minimum if we just wind it down gently.

Rafferty's picture

That's because it's a place where otherwise unemployable blacks are given sinecures.

doctor10's picture

Hmmm-it would appear the principle bottleneck to all progress can be found in DC

sgt_doom's picture

What exactly do banks do?

Oh, wow, you're missing the most important stuff:  they (along with their oil company subsidiaries) own ALL the financial exchanges and ALL the clearinghouses, which allows them (utilizing HFT) to completely rig not simply the individual markets, but in such a manner that the markets work off of one another to the optimal degree, plus the top banks and their top hedge funds, have turned the public stock retail market into a "dark pool" by the internalization business, furthering their command and control of the marketplace.

There ain't no such thing as a free market!


madbraz's picture

If only all the idiots that have money "deposited" at JP Morgan Chase would grow half a braincell and close their accounts...that would be a good day

Divided States of America's picture

honestly it wont take that much to crush JPM...if the bank is levered 33 to 1, all it will take is over 3% of deposits taken out to crap it...I dont have an account with JPM but honestly, anyone that doesnt close their JPM account is like constantly having Jamie's cock in your mouth while he pats your head and say "Thats why I am richer than you".

Duc888's picture



I agree.


Not a symbiotic relationship at all.  Purely parasitic at this point and basically holding mankind hostage.


It's all about the skim, scams, two or more sets of books, obfuscation, lying, extortion and murder.  Same as it always was.

LawsofPhysics's picture

Why? Simple, because the moneychangers bought the government!!

RSloane's picture

Exactly, Laws. This article is wishful thinking regardless of how poignant it is. Banks/bankers are major contributors to political campaigns. Recently Obama referred to J. Dimon as "the bankers' banker' and thinks other bankers should emulate him. I'm happy with my little credit union.

grekko's picture

Is that Dimon, or Damien?

BLOTTO's picture lets go even further. Who exactly is the 'money changers'? Who owns them?


Its like peeling layers off of 200lb onion and at its core, we find the root (evil) of it all.



madbraz's picture

I'd go a step further...the mastermind of the bankster mafia, Robert Rubin, created Barry O when he was still a senator.

BLOTTO's picture

Imo, we are ruled by ancient occult royal bloodlines from the very beginning, that have throughout the generations passed along its secrets within its tiny group to destort truth and knowledge from the masses while at the same time - enslaving us.


It all starts at the top of the Mother of All Family Trees...that where the rub is at (and truth is really distorted/mainpulated/omitted). And this is also where it probably starts to get really fuckin trippy and the truth of it all would make us puke and shit at the same time.


'Their is something behind the throne more powerful then the King'

Rafferty's picture

"the mastermind of the bankster mafia, Robert Rubin"



Dollarmedes's picture

The same thing was said about entrenched interests in the past. In the long run (and sometimes the short run!), the superior technology won because it was simply more efficient.

Gains from efficiency, especially if large, are too important to ignore. All you need is one locality adopting the new technology to illustrate the flaws in the old technology. And with states still largely independent of the federal government in many respects, we have at least 50 different laboratories.


Think of fracking as an example. There are all sorts of vested interests that oppose it, but it has worked miracles for the economy of North Dakota...that is easily provable. Now, even "blue" states like California and New York that are violently opposed to it are being forced to consider allowing it. That is a direct result of the inefficiency of the old model vis-a-vis government, and the piles of money they stand to gain from allowing fracking.


In the end, NY and CA will adopt fracking whether they wish to or not because it will be the only way to keep their ridiculously inefficient governments afloat.


Dollarmedes's picture

Another example: steam-powered ferries.

There was an entrenched interest of mule-pulled barges that used to ply the rivers of the east/northeast US. They fought the introduction of steam-powered ships, and people that couldn't imagine another way of business denigrated efforts ("Fulton's Folly").

In the end, steam ships were much faster.

That by itself would've justified their adoption, but the situation was even better (or worse, for the entrenched interests): faster shipping times enabled other technologies. Now, ice blocks could be transported over long distances before they could melt. That was a business in itself, as ice from the northeast could be shipped to the southeast for refrigeration in homes and indoor climate control (evaporative "swamp" coolers). But the ability to ship ice enabled another industry: long-distance shipping of produce.

Citrus from Florida could be moved to northeast markets. California produce could be shipped overland via refrigerated railcars (a logical extension of the steam ships).


The synergy of these technologies was so much more efficient than the previous system, that in hindsight people couldn't imagine it ever being any other way!


I wonder what synergies could be achieved from eliminating the parasite financial sector.

donsluck's picture

They already frack in CA (where I live). What we are trying to do is require publication of the chemicals used. We have no idea what they are injecting into the ground water.