If it ain’t broke, don’t fix it. That’s not a thought likely to occur to anyone thinking about the banking system these days. It’s broke alright. Insolvency is the word of the day, along with that other word, nationalization. Funny how so many people who think the nation state has effectively ceased to exist when it comes to borders and immigration suddenly rediscover its powers when it’s time to take over the banks.
“But Alan,” you protest “we badly need a solution.” Which, I reply, is not a good reason to accept a bad one. In fact , if things have gotten as bad as they say, maybe we should step back so as to let our thinking leap forward.
True, If it ain’t broke, you don’t fix it. But if it’s really broke, you don’t fix it either, you throw it away and replace it with something that works better. Instead of taking the bad logic of a failed centralized banking system to its logical conclusion (total centralization), replace the logic with something more suited to the twenty-first century. The twentieth century was all about bigger, more regulated and extensive organization. The hallmark of the twenty-first is the network, the model work-in-progress of which is the internet. It depends on decentralized, individual units, that reach out and form communities based on direct interaction and mutual assessment, rather than a centrally determined distribution of information (like a central bank’s fixing the interest rate.)
If the present banking system is failing- let it fail. That’s the first step in preparing the way for the emergence of twenty-first century financial networks. Instead of pretending that bankrupt governments can magically save a bankrupt system, accept the fact that the financial Titanic is sinking. Get people out of it, and use what resources we have to construct and launch the fleet of lifeboats in which they can distance themselves from the vortex it causes as it goes down. What I think we’ll discover is that the new system we need will emerge from the resulting fleet, as we use twenty-first century tools to turn it into a floating net that won’t be susceptible to the cascading disasters of the obsolete vessel. This deserves longer thought, which I give it in the essay Real Change Step Two: Replacing the Federal Reserve.