I've been meaning to make a post about these guys since reading this thread last year.
http://www.rationalskepticism.org/news- ... 31210.html

Positive Money believe commercial banks create money from thin air and as a result force the whole world into some kind of inescapable debt-slavery.



http://www.positivemoney.org/

Does anyone here understand (central) banking enough to explain if this is accurate or not? My crank detector is bleeping, but I don't really know enough about this to say for sure.

The main guy here, Ben Dyson, made it onto BBC Radio 4 late last year.

Note: The internet is full of people who claim to understand just how banking works. If anyone here is going to make such a claim, at least give me a reason to believe you.

I know a guy who buys this nonsense. Banks engage in a process known as fractional reserve lending whereby they take in deposits and lend it out to other people. Those individuals who borrow the money typically put it in a bank while they wait to use it, and the bank they give it to then proceeds to lend that money out, and on and on it goes.

This results in there being a greater supply of money, technically, if you view the fact that people who put their money in a bank and people who borrow that money both consider themselves to have that money, thus, at least perceptively, making more people think there is more money.

In fact, there are simplified equations to show just how fast money grows when you lend it to a bank. If reserve requirements at 10%, meaning that banks have to keep at least 10% of all deposits in reserve in order to pay out anyone who wants to withdraw their money and thus prevent a run on the bank, and someone deposits $100, the bank will then lend out $90, the debtor will put the $90 in the bank, the bank will lend out $81, etc., and therefore the money supply proceeds to increase by:

$90/.1=$900

Now, it strikes me as utterly bizarre that anyone freaks out over this. No actually currency is being produced, and lending money dramatically improves economic efficiency and growth as money is diverted from savers with no use for it at the time to borrowers who may have profitable investments or need for consumption at the time. Obviously bank runs can ensue, but our federal deposit insurance system insures deposits of up to like $250k now, and few reasonable people actually fear a run.

There are almost too many points I want to make / questions to ask etc to know where to go with this. I'm going to just feel free to use this thread to say whatever I want in order to try to understand how it works so I can eventually either

a) Start persuading people there is something terribly wrong with the way modern banking works or
b) Relax and laugh at people who think there is something terribly wrong with how modern banking works.

My problem is I see what I think are flaws in what people on 'both sides' of this say and thus find it hard to learn from anyone as I cannot be sure they really understand things.

As to fractional reserve banking, all that is really going on there is I lend to person A, person A lends to person B, person B lends to person C etc etc (with some of the persons being banks). That does increase the effective money supply and hence inflation but that's not what this thread is about and I don't see it as a problem. That is, I don't see unearned wealth being gained via this mechanism. As to whether the government should be insuring against bank runs, that's another matter. Interesting discussion sure but some way down the list of my concerns here.

What that video says is that this bit

UtilityMonster wrote:..whereby [banks] take in deposits and lend it out to other people...

Is not right - that they aren't lending out parts of deposits, but lending out of thin air. Personally I suspect the video is wrong and the banks have to borrow from the Central Bank in order to do this. But this still raises the question, if banks can borrow from a central bank why do they need depositors?

I hate this shit but at the same time my lack of understanding really bugs me..

I think there's two separate issues here: The fractional reserve lending (which is pretty innocuous, I think), and the actual creation of money from the reserve bank. The creation of new money by the reserves is created out of debt, i.e. it is given to the government/banks with interest applied. The potential problem with that is that economies have to continually grow (above population growth) to service that debt. But I'm not sure what the alternative is. Free money, as some people say? Well that would be ridiculous, as then there would be no disincentive for governments/banks to borrow money. Money would literally grow on trees. And accompanying that would be insane levels of inflation. So essentially, the interest charged is necessary to give money a "cost". Not sure what other way it could be done.

Panderos wrote:
What that video says is that this bit

UtilityMonster wrote:..whereby [banks] take in deposits and lend it out to other people...

Is not right - that they aren't lending out parts of deposits, but lending out of thin air. Personally I suspect the video is wrong and the banks have to borrow from the Central Bank in order to do this. But this still raises the question, if banks can borrow from a central bank why do they need depositors?

I hate this shit but at the same time my lack of understanding really bugs me..

Cheaper?

GT2211 wrote:Cheaper?

I hoped you'd be a long at some point. By the way I hate that avatar, please please change it.

Ok yes, cheaper fair enough. Except why do I see accounts offering, say 5% interest when the current Bank Base Rate is only 0.5%?

Panderos wrote:

GT2211 wrote:Cheaper?

I hoped you'd be a long at some point.

lol when I saw the board open I planned on starting a thread called 'A Thread for Panderos' focused on money as I figured this would come up. Unfortunately I've been a bit busy the last week and haven't been around to post much.

By the way I hate that avatar, please please change it.

Ok yes, cheaper fair enough. Except why do I see accounts offering, say 5% interest when the current Bank Base Rate is only 0.5%?

No clue. If I get around to it I may ask, but a lot of checking accounts pay no interest. I suspect it may be a way of luring in potential borrowers for Nationwide.

GT2211 wrote:lol when I saw the board open I planned on starting a thread called 'A Thread for Panderos' focused on money as I figured this would come up.

Yeah it was inevitable.

GT2211 wrote:No clue. If I get around to it I may ask, but a lot of checking accounts pay no interest. I suspect it may be a way of luring in potential borrowers for Nationwide.

Hmm that doesn't seem like a great strategy. That account requires people put in a certain amount a month. Probably not going to get much borrowing from those people. And it's not the only a/c I've see like that. I mean why are there any accounts offering more than 0.5%? You say you don't know, ok fair enough. Does it even seem a tiny bit odd to you, based on your understandings of these things?

Oh dear. Where to begin?

Let's start with the creation of money. Money has several commonly used definitions, helpfully explained in the is Wikipedia article:

http://en.wikipedia.org/wiki/Money_supply

Just to simplify, commercial banks cannot really create new money our of thin air. In a fractional reserve banking system, such as the one that the US has, banks can only lend up to the amount of their excess reserves, i.e. the amount in excess of the reserves they have to keep with the central bank. The central bank reserves are expressed as a fraction of their deposit base. So as has been explained by an earlier post, if a bank has to keep 10% of every deposit as a reserve at the central bank, it can lend 90% to borrowers, who in turn create another bank deposit with it and so on. So there is what is called a deposit multiplier effect. But the key point is that the amount of lending a bank can do is a function of its deposit base. No deposits, no lending. This is a slight oversimplification but it is the principle of fractional reserve lending.

OK. So how can the money supply be changed? How does it grow or shrink? This is something that central banks do all the time. They have three levers they can use. These are:

1. Open market operations
2. Reserve requirements
3. Discount rate

1. Very simply put, in the open market, the central bank can purchase government debt. By doing so, it puts money into the account of whoever it bought the debt from and this crates a bank deposit and the multiplier effect takes over and money supply goes up. This is a common tactic used by central banks.

2. The central bank can change the multiplier by changing the reserve requirement. This is done very infrequently as it is disruptive to banks operations if the reserve ratio changes overnight.

3. The discount rate (i.e. the interest rate at which the central bank will lend money) can be used to influence how much banks are willing to borrow from the central bank. A borrowing from a central bank operates much like a deposit. Both are liabilities of the bank and can be used to fund loans. The discount rate can therefore influence the amount of money in the system but is a blunter instrument than open market operations so again is less frequently used.

OK. That's a very simple run through money supply. What the video in the OP does is confuse money supply with liquidity and with credit. The three terms mean different things and it would require a text book to explain this in detail. Suffice to say that the debt crisis was caused primarily by excessive liquidity and poor credit risk analysis, not necessarily by commercial banks creating money out of nothing. The idea that a central bank disintermediating the commercial banks would solve the problem is naive. A state bank monopoly is unlikely to be any more efficient at measuring and pricing credit risk than the banks. In fact it was not the banks that messed up credit risk measurement and pricing. It was the rating agencies and the derivatives markets. The banks were stupid enough to let them and then bought in to this stupidity with large amounts of money that they should have been lending directly to borrowers. Neither the rating agencies nor the derivatives traders have been held to account properly for their part in the meltdown. But that is a topic for another day.

Blackadder, thanks for replying. I know the video referred to it but this thread isn't intended to be about the financial crisis, and I don't disagree about what you said there. Here I'm really interested in how banking / central banking works (and I'm not, at least not yet, interested in their new post-crisis 'innovations'. Just the 'normal stuff').

Anyway, couple of questions (for now )

First, do you know why banks are offering accounts with interest rates higher than the Central Bank Base rate? I mean if they can borrow at 0.5% from the Bank of England, why set up a 5% current account?

Second, is it your understanding that accounts with a central bank are separate from accounts within commercial banks? That is, a bank cannot just type a number into one of their current accounts and then transfer that into their account with the central bank?

Blackadder wrote:
1. Very simply put, in the open market, the central bank can purchase government debt. By doing so, it puts money into the account of whoever it bought the debt from and this crates a bank deposit and the multiplier effect takes over and money supply goes up. This is a common tactic used by central banks.


2. The central bank can change the multiplier by changing the reserve requirement. This is done very infrequently as it is disruptive to banks operations if the reserve ratio changes overnight.

I don't think this is quite right.

The role of reserves and money in macroeconomics has a long history. Simple textbook treatments of the money multiplier give the quantity of bank reserves a causal role in determining the quantity of money and bank lending and thus the transmission mechanism of monetary policy. This role results from the assumptions that reserve requirements generate a
direct and tight linkage between money and reserves and that the central bank controls the money supply by adjusting the quantity of reserves through open market operations. Using data from recent decades, we have demonstrated that this simple textbook link is implausible in the United States for a number of reasons. First, when money is measured as M2, only a small
portion of it is reservable and thus only a small portion is linked to the level of reserve balances the Fed provides through open market operations. Second, except for a brief period in the early 1980s, the Fed has traditionally aimed to control the federal funds rate rather than the quantity of reserves. Third, reserve balances are not identical to required reserves, and the federal funds rate is the interest rate in the market for all reserve balances, not just required reserves. Reserve balances are supplied elastically at the target funds rate. Finally, reservable liabilities fund only a small fraction of bank lending and the evidence suggests that they are not the marginal source of funding, either. All of these points are a reflection of the institutional structure of the U.S. banking system and suggest that the textbook role of money is not operative.

While the institutional facts alone provide compelling support for our view, we also demonstrate empirically that the relationships implied by the money multiplier do not exist in the data for the most liquid and well-capitalized banks.Changes in reserves are unrelated to changes in lending, and open market operations do not have a direct impact on lending. We conclude that the textbook treatment of money in the transmission mechanism can be rejected. Specifically, our results indicate that bank loan supply does not respond to changes in monetary policy through a bank lending channel, no matter how we group the banks.

http://www.federalreserve.gov/pubs/feds ... 041pap.pdf

I thought I'd already answered this thread. What else is there to discuss?

Panderos wrote:Blackadder, thanks for replying. I know the video referred to it but this thread isn't intended to be about the financial crisis, and I don't disagree about what you said there. Here I'm really interested in how banking / central banking works (and I'm not, at least not yet, interested in their new post-crisis 'innovations'. Just the 'normal stuff').

Anyway, couple of questions (for now )

First, do you know why banks are offering accounts with interest rates higher than the Central Bank Base rate? I mean if they can borrow at 0.5% from the Bank of England, why set up a 5% current account?

They pay interest of say 5%, but they rake in interest of say 8% from loans.

Second, is it your understanding that accounts with a central bank are separate from accounts within commercial banks? That is, a bank cannot just type a number into one of their current accounts and then transfer that into their account with the central bank?

I'm not sure on the answer to this, but as I said earlier, there are two separate issues here: 1. fractional lending; and 2. creation of new money. Number 1 isn't really a problem as all transactions are accounted for. Even though an initial deposit $X can supposedly work through the system fractionally, as described in an equation by someone above, there is no new creation of money. Nothing magical is happening. The only fear with this approach is a bank run. Highly unlikely, and in the event it happened, can be backstopped by the government/central reserve. The second point is the real issue. How is money created and how is it paid for? This is what gets some people's panties in a twist. But as I said, if money wasn't created out of debt, there would be no disincentive to just borrow squillions (other than inflation, that is).

Panderos wrote:Blackadder, thanks for replying. I know the video referred to it but this thread isn't intended to be about the financial crisis, and I don't disagree about what you said there. Here I'm really interested in how banking / central banking works (and I'm not, at least not yet, interested in their new post-crisis 'innovations'. Just the 'normal stuff').

Anyway, couple of questions (for now )

First, do you know why banks are offering accounts with interest rates higher than the Central Bank Base rate? I mean if they can borrow at 0.5% from the Bank of England, why set up a 5% current account?

Generally (and as always I am simplifying) there are two reasons why a bank may be offering a rate of interest that is significantly higher than the base rate.

First, note that the BofE base rate is a rate for overnight deposits. It is therefore the rate for the shortest possible deposit. Most of the time (although there are exceptions), rates for longer term deposits are higher than for shorter terms, for numerous reasons that I will skip over for now. This is referred to as a "positive yield curve". The yield curve plots the interest rates that apply in a market at each point in the time scale from overnight out to 25 years. A bank offering a "high" interest rate will probably require you to lock up your funds for 3 to 5 years, I would expect. It can offer a higher rate since it can invest your deposit at a higher rate than the overnight headline rate. Here's a graph of a current UK yield curve.



The second reason, (and the two reasons can sometime both apply) is that the bank is trying to build its depositor base
and is willing to offer an off-market rate just to get you in. This is no different to a supermarket loss-leader product. It is usually temporary and lasts only until the bank has achieved its target for new deposits.

Panderos wrote:
Second, is it your understanding that accounts with a central bank are separate from accounts within commercial banks? That is, a bank cannot just type a number into one of their current accounts and then transfer that into their account with the central bank?

I'm not sure whose accounts you mean. I assume you mean a commercial bank's account with a central bank as opposed to a commercial bank's account with another commercial bank? They are certainly separate. They are not different, so a bank cannot simply "type a number" into its system and claim that it has created money. There clearing and settlement systems in every country that the banks use to process transfers between each other. A bank cannot simply initiate a transfer to another bank without showing which account the money is leaving. Otherwise the transfer will fail to settle and be voided.

GT2211 wrote:

Blackadder wrote:
1. Very simply put, in the open market, the central bank can purchase government debt. By doing so, it puts money into the account of whoever it bought the debt from and this crates a bank deposit and the multiplier effect takes over and money supply goes up. This is a common tactic used by central banks.


2. The central bank can change the multiplier by changing the reserve requirement. This is done very infrequently as it is disruptive to banks operations if the reserve ratio changes overnight.

I don't think this is quite right.

The role of reserves and money in macroeconomics has a long history. Simple textbook treatments of the money multiplier give the quantity of bank reserves a causal role in determining the quantity of money and bank lending and thus the transmission mechanism of monetary policy. This role results from the assumptions that reserve requirements generate a
direct and tight linkage between money and reserves and that the central bank controls the money supply by adjusting the quantity of reserves through open market operations. Using data from recent decades, we have demonstrated that this simple textbook link is implausible in the United States for a number of reasons. First, when money is measured as M2, only a small
portion of it is reservable and thus only a small portion is linked to the level of reserve balances the Fed provides through open market operations. Second, except for a brief period in the early 1980s, the Fed has traditionally aimed to control the federal funds rate rather than the quantity of reserves. Third, reserve balances are not identical to required reserves, and the federal funds rate is the interest rate in the market for all reserve balances, not just required reserves. Reserve balances are supplied elastically at the target funds rate. Finally, reservable liabilities fund only a small fraction of bank lending and the evidence suggests that they are not the marginal source of funding, either. All of these points are a reflection of the institutional structure of the U.S. banking system and suggest that the textbook role of money is not operative.

While the institutional facts alone provide compelling support for our view, we also demonstrate empirically that the relationships implied by the money multiplier do not exist in the data for the most liquid and well-capitalized banks.Changes in reserves are unrelated to changes in lending, and open market operations do not have a direct impact on lending. We conclude that the textbook treatment of money in the transmission mechanism can be rejected. Specifically, our results indicate that bank loan supply does not respond to changes in monetary policy through a bank lending channel, no matter how we group the banks.

http://www.federalreserve.gov/pubs/feds ... 041pap.pdf

This is an interesting piece of research. Thanks for sharing. Please bear in mind I was trying to explain the textbook definition of money creation. This research shows that the multiplier effect is not as pronounced as most economics textbooks state. I agree and that has a lot to do with the concept of bank liquidity and alternative liabilities that banks can create. Excessive liquidity and stupid credit decisions were in large part what drove the banking system to the edge of oblivion. The central banks had essentially lost control. For the same reasons that their attempts to curb the excesses of the boom years failed, their attempts to inject life back into the economy has largely failed. The answer is liquidity and that is something that central banks have limited ability to control.

Blackadder wrote:Generally (and as always I am simplifying) there are two reasons why a bank may be offering a rate of interest that is significantly higher than the base rate.

First, note that the BofE base rate is a rate for overnight deposits. It is therefore the rate for the shortest possible deposit. Most of the time (although there are exceptions), rates for longer term deposits are higher than for shorter terms, for numerous reasons that I will skip over for now. This is referred to as a "positive yield curve". The yield curve plots the interest rates that apply in a market at each point in the time scale from overnight out to 25 years. A bank offering a "high" interest rate will probably require you to lock up your funds for 3 to 5 years, I would expect. It can offer a higher rate since it can invest your deposit at a higher rate than the overnight headline rate.

So you're saying the bank has to pay back the central bank come the morning? Can they not just renew the loan indefinitely?

Blackadder wrote:The second reason, (and the two reasons can sometime both apply) is that the bank is trying to build its depositor base
and is willing to offer an off-market rate just to get you in. This is no different to a supermarket loss-leader product. It is usually temporary and lasts only until the bank has achieved its target for new deposits.

Ok. On it's own I'd say this is not a good answer, since why even bother with depositors when you can borrow from the central bank cheaper. But if you're saying they can't continuously borrow from the central bank, then that would make sense.

Blackadder wrote:I'm not sure whose accounts you mean. I assume you mean a commercial bank's account with a central bank as opposed to a commercial bank's account with another commercial bank? They are certainly separate. They are not different, so a bank cannot simply "type a number" into its system and claim that it has created money. There clearing and settlement systems in every country that the banks use to process transfers between each other. A bank cannot simply initiate a transfer to another bank without showing which account the money is leaving. Otherwise the transfer will fail to settle and be voided.

But couldn't you just create one account, type some numbers in, transfer the money to another account (still at your bank) and then transfer from there to another commercial bank?

With regard to the central bank, how do you 'put money in' to an account with a central bank? Can that only be done by transferring money into that account from another person's account at the central bank? So that the total money in central bank accounts is fixed (ignoring QE)?

I guess what I'm after here is an understanding of how all the different 'accounts' work and how people are prevented from just typing in zeros. Because if you just created a simple bank that wasn't connected to other banks, there'd be absolutely nothing stopping you from doing this.

I'm not ignoring you epete by the way, I'm just not very satisfied with your answers

Do you know how the various accounts with central banks etc are related? Or what stops banks just creating new money?

No worries. Regular banks can't create new money. Only the central banks can, as far as I know. I don't know about the various accounts. I only know broad details, not the specifics.

You've asked a couple of times about why bother with depositors if they can just get the money off the central banks, I assume that it's part of the rules regarding fractional reserve lending. That is, you must have x% reserves of depositor money before you can loan the rest out. Hence why they pay interest of say 5%, but they charge interest of say 8%+ on loans.

Now, it strikes me as utterly bizarre that anyone freaks out over this. No actually currency is being produced, and lending money dramatically improves economic efficiency and growth as money is diverted from savers with no use for it at the time to borrowers who may have profitable investments or need for consumption at the time. Obviously bank runs can ensue, but our federal deposit insurance system insures deposits of up to like $250k now, and few reasonable people actually fear a run

Your fractional lending description is a little sketchy but the basic premise is correct.

This way the money supply matches the growth demand in theory.

Where it goes wrong is when it gets multiplied again by the banks and the speculative borrowers so the leverage gets up around 100:1 ( buying stocks or property on margin with borrowed money which is also leveraged 30:1 )

The trouble with fractional lending is that just as with buying on margin, if there is a loss or a margin call it's frightful.
So if a bank has a million dollars in capital reserve it can lend 10-30 million out.

However - a loss unwinds by the same ratio.....which puts banks rapidly underwater as we are seeing around the world.
Building societies and small community credit generally don't get into these issues as lending is to locals and the assets are sound to 75% of the value of asset. Then it works, and bankers don't make much.

When the leveraging and falsification of asset values ( I see the US is suing one of the credit agencies over fraudulent evaluations ) then it's to hell and gone.
That is what happened in the lead up to 2008 ( the Economist called it in 2005 ) and the bubble is still deflating and will be for a good while.
The conditions that led to that have not really changed much and one of the guys that called the meltdown accurately says another is inevitable. ( don't have the link ).

Fractional lending resolves the money supply issue when there is growth but when there is a decline and when there is fraudulent asset evaluation plus speculative leveraging it is just a licence for predation.

Because the right to fractional lending is a charter by the government - there is a strong need for the government to get it back under control.

To put it simply.
If you own one house you can rent it once.

If a bank owns one house ...it can rent it out 10 times up to 30 times....and that is a government chartered right.

No other business can magnify it's capital that way.

That the financial community fucked up so badly given the gov chartered privilege is just a lesson in what happens when predation goes unchecked.....that they don't see anything wrong with what they did is simply astounding.

They don't want transaction taxes, they don't want to give up their ridiculous bonuses and salaries and they seem not to see that the privilege of their position is societally granted and CAN and SHOULD be taken away or strictly controlled far more than it is at present.

The symbols of this abuse are all around us. Banks, realtors, financial houses all occupy the prime real estate in almost every town - even the small ones ( oddly Ottawa with it's controls is an exception ) and they use not only other people's money to accumulate that but then use the fractional reserve system to magnify their ability to rent out money and accumulate prime property.

That hardly ever happens with credit unions as they are directly responsible to their depositors for both income on deposits and their lending practices.

Regular banks can't create new money.

They do create new money in the money supply via fractional lending.
That cannot "print" money the way a central bank can.....that aspect.... QE etc is a can of worms beyond my ken.

In theory with fractional lending....as you pay down your mortgage the money goes out of the money supply....that's what is supposed to work.

When millions of homes are underwater and in foreclosure - the underlying capital of the banks is gone a couple times over and the gov has to prop them up.

When that happened in Sweden in the 90s the gov took over the bank, told the shareholders to piss off, fired the entire management, protected depositors and after a few years of oversight management sold the bank off.
That should be the gov backstop to protect the public weal and depositors.

The headache is the banks are so big now and so intertwined with mortgage, investment banks etc that taking them down when the bubble bursts hurts the underlying sound economy that needs short term financing to function and longer term financing to expand. If the bank's capital reserves are gone...they cannot lend anymore....and that's what almost happened in 2008 - the whole thing just about froze up.

Every 10 million in subprime mortage losses took out 100-300 million in new lending capacity..the scale of the problem was unprecedented as the bubble in housing was the equivalent of the entire annual GDP of the Big 8. Trillions of dollars of froth.

And the world economies are smothered in it still and facing an aging population issue as well ( Japan in particular ).

There simply is no easy way out and trying to "grow out" quickly sets the stage for another bubble.

•••

epete....deposits and bank capital are not the same....banks are publicly traded so have shareholder capital, retained earnings and deposits in the mix.

The banking act in Canada is a book about about a foot thick or more covering numerous aspects.

Not long ago banks could NOT deal in insurance or mortgages....there was a reason for that separation....and that it eroded did not benefit society as a whole......but it did create a privileged class with far too much economic leverage and far too little control on predation.

Iceland, Cyprus, just the edges of the meltdown.

Growth economies in the far east and resources economies like Australia and Canada dodge the worst of the bubble collapse but both Australia and Canada have a levitated housing bubble that is subject to the same meltdown factor unless wages rise to meet affordable ratios.
Even China is struggling with rampant housing speculation despite it's central control.

When housing speculation gets controlled as it is in some nations - there might be a bit of stability - but we are a long way globally from getting to a point where the froth is out. Many haircuts to come and the banks and financial houses that fueled the bubble with speculative lending allowed by the fractional reserve system are very reluctant to be trimmed.

Banks are supposed to lend to create real wealth at a conservative evaluation of that real wealth ( a house is real wealth and a bank should be lending to 75% or so of the current market value and these days in reality should be at 50% ).
The reality in the world??? every day of the trillions of dollars of transactions....99% are speculative, 1% is to create real wealth.

It's fucked big time.
Want security? - buy a wheat farm in the northern part of the growing range.

also epete.

The return on $100,000 deposit is about one third of a percent - not 3% and the banks lend to companies higher than 8% and make outrageous returns on credit cards. Despite all of the favours society granted them....it's been and is abused big time.
A transaction tax would at least provide a reserve fund.

One note....the pressure is growing for PtoP lending to short circuit the financial institutions entirely.

http://en.wikipedia.org/wiki/Peer-to-peer_lending

Like AirBnB taking a chunk out of the hotels and motels.....there is strong pressure for this and a lot of resistance from gov and banking.
It has always occurred in every society....with the internet tho.....it's gonna boom.

•••

Got the prediction link

http://www.abc.net.au/news/2013-03-14/b ... ar/4573260