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Revolt Against The Banks: Everyone loves to hate banks. And now, it seems, the market is delivering up possible alternatives. Banking is a strange business - something that most people cannot do without, and yet have very little understanding of. It started simple enough - when goldsmiths issued receipts for gold they held on deposit. They soon found that they could issue loans also - based on the fact that not everyone came to collect their gold at once. And the result was the birth of fractional reserve banking - the idea that you can lend out more than you actually have. Of course, there were a few bank collapses in the early days - as depositors got shaky, and rushed to the bank to make withdrawals. But this problem was overcome when central banks were established. Central banks were able to advance credit to banks who had a sudden rush of withdrawals - allowing such banks to satisfy their customers, and avoid panic. Today we accept the role of central banks as a natural part of the financial "scenery". In fact, we accept that banking is a different type of business - and not like an ordinary company, which can make profits, losses and even fail. No, in our desire for fail-proof banking, we allowed the whole industry to be virtually taken over by the state. Sure, banks may be private - but their business is 100% state controlled (i.e. a good definition of fascism). It is this state control of banking that has driven a wedge between the banks themselves, and their customers - you and me. Since the advent of the perpetual war for perpetual peace (the war on terrorism), the state has decided that banking needs to be controlled even more rigidly - by the enactment of such things as KYC (know your customer) and the Patriot Act, which have given birth to a myriad of obstructive regulations. The banks have no choice but to kow-tow to their masters and put into practice the measures so dictated. The result is more and more intrusion into the lives and business activities of their customers. Just a few examples should illustrate the point: Regulations may vary all over the world, but there is an uncanny similarity between the measures that have been introduced in recent years - no matter where you live. If you want to wire funds overseas (over a certain amount), the bank is required to file a report. If you walk into a bank and deposit a fistful of cash, the bank may be required to file a report. If you have a bank account in another country, you may be required to report it. And that same overseas bank may ask you to verify the source of every deposit, and the reason for every withdrawal. If you have a brokerage account, they will not accept funds from a bank account that is not in the same name. And so on, and so on. More and more red tape, more and more frustration for honest people just wanting to get on with life and business. In fact, I hear reports of the most intrusive practices. Just one example, as related by someone in Canada. Apparently, this person wanted to wire out a modest amount of money - to an overseas bank account. The sending bank wanted to know all the details of the person who was to receive such funds (the beneficiary). This may not strike some of you as "unusual", but I can assure you it is. This practice of not only "knowing your customer", but knowing WHO your customer is dealing with - is just one more creeping intrusion into your financial affairs. And the ongoing erosion of financial privacy is a direct attack on freedom itself. Enter the internet. The internet is a breath of freedom. It is a self-organised, non state-run, anarchic gathering of people from all over the world, who desire to interact in whatever ways they please - without Big Brother being in control. As a result, the internet thrives in all the areas normally circumscribed by the state - like free trade, sex, gambling and all manner of human activities that most states would rather have stopped. The internet is THE free market. Most states allow a partial free market - just free enough to encourage the sheep to work and produce (so they can be financially fleeced). But on the internet you have a perfect example of a REAL free market - not strangled by regulations, not rubber stamped by bureaucrats, and not taxed. Of course, states everywhere would love to control the internet, as they hate such an expression of freedom - but so far, they have not succeeded. Because the internet represents a true free market - it provides the means for various entrepreneurial types to provide solutions to market-driven desires and demands. One such demand is for a more private, informal and flexible means of exchanging value. In other words, there is a crying need for a new type of financial service - one that treats its customers with respect, doesn't act like the secret service, and provides an efficient, secure and private means of facilitating financial transactions. And over the last couple of years, the market has delivered - with the arrival of non-traditional banking services that fill the "gap" in customer satisfaction left by state-controlled banking. These new services fall into three general categories: 1) Digital precious metals. 2) e-Currencies 3) Financial Intermediaries My personal favourite is the digital precious metals - gold and silver - as represented by such services as e-Gold, e-Bullion and GoldMoney (to name a few). These services offer a very convenient way to open an account, fund it, transact with other account holders and withdraw funds. And a whole subsidiary market has grown up around them - offering in and out exchange and debit card services. The added advantage, in my view, is that you are in fact purchasing a commodity with a market value (gold or silver in most cases), not just a title to some state's paper (or fiat) money. Unfortunately, state money has a stranglehold, making it very difficult for a true market money to gain a foothold. This means all such alternative "banking" services, must overcome one big hurdle - how to interact with state money. Theoretically, a service like e-gold could stand almost alone - IF enough people and businesses could be persuaded to accept it. But the task of moving people from one "money" to another is an enormously difficult undertaking - one which is only likely to succeed in a situation where the existing "money" was failing in some way. Of course, it IS failing - but the process is slow and hard to detect. Finally, one big advantage is that the major players in this e-metal market have their metal holdings documented and verified by third parties - ensuring the viability and integrity of their systems. E-Currencies offer the same simplicity and efficiency as the digital metal services, but denominate their unit of transaction as something arbitrary - like the EVO, in EvoCash. Superficially, they appear to work the same way - but unlike gold or silver, the backing for such a service is just paper money - most often without any safeguards or third party verification. The Financial Intermediaries are presently the most successful - like PayPal. What they offer is primarily a convenient way to make internet-based payments, which are underpinned by one's credit card. With a service like PayPal - you can quickly complete an online transaction (like an auction payment) and reduce the amount of time it normally takes you. None of these services are perfect - in that none of them offers a complete alternative to having to deal with banks and state money. At every point where such a service must interface with the traditional banking system, then you, as a customer, are back dealing with banks and all their intrusive requirements. However, the fact they are not perfect does not negate their usefulness. There is also a very valuable educational function in this - in the way more and more people are prepared, for example, to deal in e-gold. By doing so, one is able to compare the features and benefits - and "vote with one's pocket" on the type of service that one wants. The success of e-gold can be measured in their dramatic account growth - and that at least one offshore bank is now accepting deposits via e-gold, something unheard of even a year ago. Ultimately, competition in the means of exchange can only benefit the end user. The rise of alternative banking services is one of the success stories on the internet - and is a direct result of the overly repressive and regulated traditional banking sector. However, the real revolution will come when the money itself is market-driven and market-created - as it should be. Yours in freedom David MacGregor | ||||
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