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Alternatives to Big, "Black Hole" Banks.
Dear Fellow Futurists, Internationalists, Collaborators, and Friends:
They are giant institutions with vast powers -- apparently too big to regulate, yet too big to fail. They are like drug cartels, but their planting fields and their clientele are the entire populations of industrialized economies addicted to consumer credit which supports demand and artificially increased prices (the underlying behavioral theory is that if a bank offers me a line of credit, I'll be less sensitive to pricing because I'm using someone else's money to make my purchases...and I'll purchase well beyond my present means because I can pay over a long period of time).
Somewhere along the way, the question stopped being "what does it cost?" and started to become "what's my monthly payment?" A leverage-based economy is one where an ever-increasing percentage of current and future personal income must be allocated toward paying past debts; where we no longer "own" but we rent, lease or merely have the "use" of things, the most important of which are pledged to the lending institutions (I refer to banks, consumer credit providers and investment banking firms all categorically as "banks" because of the absence of any true defining differences among them); where most of our money goes toward interest payments and where the paydown of principal (the actual cost of the financed object) is only a small percentage of the total payments that we'll make during the life of any given loan; where credit privileges are prestigious and savings become irrelevant; where people are not as interested in earning as in merely getting and having...and the list goes on.
These funny-money goliaths have been fraud-ridden for many years, using our limited savings and demand deposit accounts to engage in speculative trading and irresponsible lending and charging us growing fees for accessing our own money. In brief, they make their fortunes helping us to "buy" things which we never get to own (the banks have a superior claim of right to ours), and they charge us interest, fees, penalties and other principal-eroders which push us deeper and deeper into debt. And when they gamble away all of this income, and complain of losses (some clever accounting at work), the governments which gave them their license to plunder and gamble use our money to bail them out. If I borrow $50,000.00 from the neighborhood loan shark and lose it in a casino in Las Vegas or Bangkok, does any government bail me out? Nope. They call me "irresponsible." Later, they pronounce me dead.
People are looking for alternatives to continually being mauled by these rapacious, untamed beasts in order to feel a bit safer, and a bit more secure. They would also like to stop pressing numbers on the telephone in order to get non-answers and atrocious, impersonal service.
Here's a gem from today's New York Times:
Breaking News Alert
The New York Times
Mon, June 07, 2010 -- 11:58 AM ET
-----
Bank of America to Pay $108 Million in Mortgage Abuse Case
Bank of America has agreed to pay $108 million to settle
charges by the Federal Trade Commission that the bank's
Countrywide Financial mortgage subsidiary collected excessive
fees from struggling homeowners and engaged in other abusive
practices in the years before the bank acquired Countrywide
in July 2008. In announcing the settlement on Monday, the
commission said the payment would be used to reimburse
homeowners.
####
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One alternative which is gaining popularity worldwide is "
Time Banking." These "time banks" are small groups of people (communities, without any special licenses) who allow members to borrow money in exchange for services rendered over time instead of in cash. This is a bit easier than the barter system because services are exchanged for money and not for other services.
It also has the advantage that when you use your time and efforts to repay, you are repaying with services actually rendered at your cost, but you are being credited for the retail or market value of your services. In the simplest sense, you are actually
paying back at a discount, instead of with interest. This approach fosters productivity, responsibility, and a healthier economy. You might want to read an
AP article about this interesting twist on banking, which has actually been around for many, many years but is experiencing a resurgence because of its many benefits over traditional banking. Click on
http://news.yahoo.com/s/ap/20100603/ap_on_re_us/us_banking_time.
The other more traditional alternative is the
credit union. While credit unions don't have all of the power of commercial banks, they have become increasingly resourceful in the services which they do provide; to make things look even better, many credit unions are broadening and liberalizing their parameters for membership. They are member-owned, far more personable in every aspect than the goliaths, and they do not get involved in the speculative behavior or rogue trading activity that has caused such cataclysmic instability in the giant banks. Historically, their interest pricing has been significantly lower than that of their "banking" peers. It is also easier to charter a credit union than a commercial bank or brokerage firm, and the depositors, borrowers and owners are all the same group of people without any inherent conflict of interest or objectives. You can read a bit more about credit unions and the ways in which they differ from commercial banks by clicking on the hyperlink which follows:
http://articles.moneycentral.msn.com/Banking/BetterBanking/DitchYourBankForACreditUnion.aspx.
Facing facts, large banks are quasi-governmental entities. They may be privately-held, but they are used by their respective goverments to implement monetary policy, to enforce collections, to report all sorts of "suspicious" consumer activity. These goliaths and the wastrels are, in essence, attached at the hip.
Time Banks and credit unions have the advantage of serving the needs of their members first, without ethical or financial conflict and with a modicum of common sense. It's that "by the people, of the people and for the people" kind of thing. I believe that it still can work.
I would expect to see a rise in the number and volume of transactional activity of Time Banks and credit unions, and their international equivalents in the coming years.
It's probably impolite to even think about this, let alone say it aloud, but can you imagine if the money (i.e., the deposits and all of the loan business) started leaving the Black Holes and was instead lodged with credit unions, or utilized to facilitate exchanges in Time Banking? Do you think that any of these alternative lenders would make a loan to Citigroup or Bank Of America? Nope. You see, in the case of all of these alternative lenders it's not scrip or play money...it's members' money -- and that makes all of the difference.
Faithfully,
Douglas Castle
Douglas Castle
