[Spooky23]

The horse is out of the barn there.

Many forms of credit are basically government lons anyway. The current model of thousands of retail and commercial banks isn’t sustainable. Most bank business could be done at a post office or gas station counter. They exist as a sales funnel.

[Qasaur]

It is not sustainable when we have an unsustainable and quite frankly insane monetary policy which is being pushed by central bankers. In a sane world credit provision would be decentralised and provided by local banks who are close to the borrower rather than people sitting 1,000 kilometres away. Remember: the most important role of banking is not the provision of payment services (although that is important too), it is to intermediate between savers and borrowers (which is almost always done better in a decentralised system).

Indeed the current centralised banking model is quite recent and only started to creep in after the enactment of the Federal Reserve (and the consequent central planning of money and credit) and dramatically accelerated after the end of the gold standard in 1971 and the decoupling of money from sane fundamentals. It's not a coincidence that what followed was extreme consolidation of banks and the quasi-neofeudalism that we see today with large corporates who are able to get credit from large multinational banks which they are close to and then with that money price out small businesses and drive them to bankruptcy.

What has been happening for the past 40 years is not natural, and what banks are doing now is almost entirely driven by central banks and not some natural order resulting from the free market (which throughout history has always selected a decentralised banking system with thousands of small local banks). In my opinion we need to protect what little we have left instead of just yielding to the central planners at the Fed, the ECB etc.

[rvense]

> which throughout history has always selected a decentralised banking system with thousands of small local banks

The free market in my country has produced two banks that provide banking to 80% of the population (6M people). It has also more or less killed off cash in favour of credit cards and more recently a single, 100% privatized smartphone app. Accepting cash is still a legal requirement, ie. it is being kept alive by our government and central bank, but it is mostly old people and a few privacy/conspiracy kooks who use it.

Almost all of the private banks also have negative interest rates, at least for deposits over a certain amount. And they are all pushing investment (stocks) as an alternative for savings.

I really do hope our central bank wakes up and starts providing a way to store my savings without gambling them on the stock market soon, as well as a way to transfer money to other people without going through a privatized middle man. There is obviously a need for financial services like loans and mortgages, and even investment for people who want that, but storage and transfer of money should not rely on private businesses who then get to charge money for the use of money - the original definition of the word usury! - but be a publicly owned, publicly accessible infrastructure just like central bank cash was.

[Qasaur]

>The free market in my country has produced two banks that provide banking to 80% of the population (6M people).

I don't want to assume where you are from, but almost every developed country has incredibly complex, expensive, and insurmountable bank licensing procedures which make it impossible for startups to compete. That is not a free market, it is a crony capitalist market which shields incumbents.

[rvense]

That's probably true but we also have like two major supermarket chains, so I think it's hard to make the case that government regulation is the only cause of monopolies.

[nickff]

The USA actually has a history of disallowing large, centralized private banks. So-called unit-banking, driven by a powerful small-bank lobby created a great deal of instability in the 19th and 20th centuries. Canada and Scotland have a history of much freer banking than the USA. This is a very interesting subject, and I highly recommend reading a bit about it.

[pm90]

> What has been happening for the past 40 years is not natural, and what banks are doing now is almost entirely driven by central banks and not some natural order resulting from the free market (which throughout history has always selected a decentralised banking system with thousands of small local banks). In my opinion we need to protect what little we have left instead of just yielding to the central planners at the Fed, the ECB etc.

Yes, we've had sustained economic growth and wealth generation to a magnitude never seen before in the history of the world (although not equitable, but that's a different policy problem).

What does it mean that its not "natural"? There is nothing "natural" about the "free market"; its a way we decide to organize resource allocation. There are other ways to do so. Central banks have prevented catastrophic economic failures in the past few decades. I think I like this system better than one which results in "natural" destruction of economy and livelihoods like what happened in the Great Depression.

[Qasaur]

>Yes, we've had sustained economic growth and wealth generation to a magnitude never seen before in the history of the world (although not equitable, but that's a different policy problem).

There are many ways I'd like to rebut this, but instead I'll just ask for who and how? Technology has improved that is for sure as it is a incredibly deflationary, but what else has improved in your eyes? The vast majority in the U.S. and some parts of Europe while nominally earning more than what they did in the 1960's are in my opinion worse off than before. Minimum wage used to be 40-50 dollars inflation adjusted, and one lower middle-class salary could support an entire family and provide material comforts. I don't see much of that happening now as I and many others believe inflation has completely ravaged the middle-class in the West and is making it increasingly difficult to get ahead.

>What does it mean that its not "natural"? There is nothing "natural" about the "free market"; its a way we decide to organize resource allocation. There are other ways to do so. Central banks have prevented catastrophic economic failures in the past few decades. I think I like this system better than one which results in "natural" destruction of economy and livelihoods like what happened in the Great Depression.

We didn't "choose" to have a free market. A free market is simply the voluntary and spontaneous interaction between free individuals, nothing more, and is entirely natural. Central planning and using coercion to force market outcomes, on the other hand, is definitely not natural.

It is often taught that we have avoided a scenario like the Great Depression almost exclusively due to the enactment of a central bank, but this is outright false and is borderline malicious historical revisionism (in fact many economists, including some at the Fed, believe that the Fed was actually the cause of the credit bubble during the 1920's which eventually burst in 1929). We had periodic recessions before the Fed, but they almost always resolved themselves quite quickly and wasn't near the impact that recessions have today.

Ask yourself this, why is it that recessions seem to get worse and worse and more importantly affect everyone and not just localised sectors in an economy? 2008 was definitely worse than 2001, and the current covid recession is arguably worse than 2008 due to how overleveraged everyone is (a direct consequence of Fed monetary policy).

[pm90]

> We didn't "choose" to have a free market. A free market is simply the voluntary and spontaneous interaction between free individuals, nothing more, and is entirely natural. Central planning and using coercion to force market outcomes, on the other hand, is definitely not natural.

So what? A free market was the only possible market when society did not have the tools to organize and control resource allocation on the scale its possible today, due to advances in technology and expansion in education. We have better tools today, and we as a society can choose other methods for resource allocation that are now accessible.

This kind of thinking baffles me: horses are the only "natural" way of transportation, by your definition. But we discovered automobiles, trains and all that shebang.

[Qasaur]

> A free market was the only possible market when society did not have the tools to organize and control resource allocation on the scale its possible today, due to advances in technology and expansion in education. We have better tools today, and we as a society can choose other methods for resource allocation that are now accessible.

Many have thought like you, some have even tried to architect society into something like you are describing, and fortunately those that did failed so spectacularly that they are remembered in the history books with names like the Soviet Union, Venezuela, Cuba, and maoist China. They all failed because centrally planned societies, either done through envisioned high-tech computerised/AI systems or through at-the-time high-tech 5-year plans like the Soviet Union, all suffer from the knowledge problem. It is simply impossible for someone to know everything about an economy to be able to plan it efficiently.

Perhaps a more tangible argument for the tech-crowd on HN is the lack of understanding that non-engineer managers in some companies have for the software development process and the disastrous results that follow. Now imagine having a Politburo dictating what every little work group in a country should do from software engineers to janitorial staff and you can see where this leads.

>But we discovered automobiles, trains and all that shebang.

Ironically things that were discovered and developed in the 1800s, the times of almost unrestricted capitalism and market price discovery.

[hammock]

>Yes, we've had sustained economic growth and wealth generation to a magnitude never seen before in the history of the world

Citation needed. I'm pretty sure the growth of real GDP in the US was higher in the 50 years prior to the end of the gold standard, than in these ~50 years since.