What's wrong with the current banking system?

You have to consider economy, energy and environment in conjunction, otherwise you're going to come to bad conclusions about what will be a net positive change. This might help: http://bit.ly/1m19reG

@amandavickers - listening to your talk, you list major issues, but omit the net affordable energy available to society issue that is driving the stagnation of the economy and the 'end of growth' http://bit.ly/1qhWoXB. Can I suggest you brush up on the changing economics of energy supply, and how that's changing what's possible: http://bit.ly/1qDeFgB . Note that I don't disagree with Positive Money's call for monetary reform - they're right.

However, a picture of the future based on maths and thermodynamic limits is necessary to make good policy going forwards. It's why I support the Wise Response call http://bit.ly/wiseresponse for a national risk assessment, so we can make good policy decisions going forwards.

@nathansurendran Thanks for that. You are absolutely and completely right. We need to address Energy, Resources and the Economy (money). However, I have decided to address money because I think it is most urgent. I think the others are difficult to address until we tackle money. Lastly, reactions to stressors, are quickly reflected financially.

Please be assured I am very aware of the peak oil and resource predicaments we face. I have read book you suggested and many more. I started my journey with Chris Martenson's crash course at www.peakprosperity.com. Indeed, exponential economic growth can only proceed with cheap accessible energy and resources. You are also right that we cannot just approach economics on it's own to address societies woes.

I have chosen to address the monetary system. If we did not operate on a debt based monetary system requiring exponential growth, we would not be so dependent on endless need for cheap energy and resource extraction to keep the ponzi scheme going. There would be more hope for 55 Maui dolphins as we would not be so desperate to turn more resources in to GDP. Freeing up 10 million dollars a day we spend in interest - could be spent on developing a strategy for our energy predicament. I think fixing money would better enable us to change our short-termist view of the world, which includes energy and resources.

Economy and government together are the foundations of the society. Things like environment, energy production, societal automation, education, waste disposal and human development are all specific societal project and service areas. All projects and services are governed by principles and policies, which is part of what government is supposed to organise and develop.

In my blog at http://type1world.org/wordpress I actually start with the issue of energy harnessing, discussing the Kardashev Scale of civilisation types. The blog is called "Type 1 World" precisely because I am in favour of a type 1 civilisation and society. To get there, we will need governmental and economic systems that are compatible with such high and lofty goals. That is where it begins in my mind. We want to be able to harness ALL the energy the earth provides, for all kinds of amazing projects, services, and activities. To do this, we will need a very different economy from what we have now. Also, we will have to harness this energy in an environmentally sustainable way, otherwise we will destroy the planet before reaching our goal. We also need a governmental structure that works with the economy, allowing the kind of progress I'm talking about.

• I've got to pay money to withdraw my own money from the bank.

• If I use my debit card with an ATM from a different bank, that I've got to pay another fee.

• I've got to pay a 2.5% fee on any foreign currency transactions.

• Every bank offers the same foreign currencies, and none offer Reais.

• In order to earn any interest on my money, I can't keep any on my debit card, making it a pain in the ass when I want to buy something with it and I don't have an internet connection to transfer the money to my card.

• If I get a credit card, I immediately start paying interest on cash advances. Therefore I need to keep both a credit card and a debit card if I want both convenience and the ability to withdraw cash from ATMs, meaning I'm paying two sets of fees.

@reidalexanderwicks That's why I would like to look into solutions that eliminate banks. The average Kiwi household spends $20,000+ on revenue for the banks (lots of fees, but it's mostly interest payment above the OCR), of that the banks take at least $10,000 of "profit" out of the country (again, per Kiwi household). If we found a way to eliminate banks, we'd keep $20,000 per year per household more than we do now. We shouldn't need any of those fees. It's all electronic now. Have the RBNZ manage a P2P network of money, and we can eliminate the banks. We just need to re-purpose the banking system. The plus side is this works with or without any "energy", "value", or "crypto-currency" changes.

It's time to get the government banks working for us, not ASB's profits.

@nathansurendran and others. It is true that other areas than just monetary systems matter. I hope that the IMP will manage to fix all of them but the topic is "What's wrong with the banking system" and the one obvious problem is that private banks create our money supply as interest bearing debt. The reason that this matters is that the interest never leaves the economy but grows exponentially (unless we have recurring crashes which lead to debt repudiation). If you doubt this look at the total debt curves of any western nation.
As the % of debt to household disposable income rises (see Reserve Bank graphs), crashes become more frequent until soon the whole system must collapse.
To stop this occuring we must be able to reduce debt, which is not possible under the current system.

@davidjohnston "The question I have, is what’s wrong with the current banking system? Where/how is it not working?"

My answer to that is that about $10,000 per Kiwi household is "bank profit" and shipped to Australia as profit for the major bank's owners. About $20k per household is "lost" to bank overheads.

Banks take Alice's money (and Charles' and David's, etc.) and loan it to Bob. If we had a way to handle P2P loans, then we wouldn't need the banks, and the average household would save $20k per year, and the economy would grow by $10 billion per year no longer drained from our economy.

What would you do with an extra $10 billion a year? I can think of lots of things better than buying some Australian a third yacht.

Personally, I'd buy 20,000 km of PRT http://www.skytran.us/intro/ per year with it until the country was linked by high speed rail.

John Key is trying bribe the regions with a few hundred million in roads. While sending their billions to Australia as bank profits. We can solve both, and in a much better way.

@marcwhinery Great answer. Thank you.

@davidjohnston "If I had to point to one thing, I would say the reckless creation of credit, which lead to a global credit crunch."

The creation of credit wasn't a problem. The global credit crunch happened because the returns on loans were low, but real estate was gaining fast. So, rather than investing in real estate, the financial institutions managed to create derivatives that multiplied the risk and "reward" of loans.

These derivatives were divorced from the loans they were based on. The banks then participated in simple fraud. They packaged high-risk loans together and lied about the risk. People bought them based on the stated risk, and then borrowed against these highly-rated securities issued by major banks.

When the economy slowed slightly, and the foreclosure rate was still well below historic norms, the ripples were being seen through the securities. This caused a panic that ended up hurting the house prices the securities were built on, so the collapse worsened and hastened. I was in the US at the time the collapse started, and it was called the "subprime crisis".

The old white rich males who caused the problem were showing poor young black women as the cause. Better if she was pregnant while holding a baby.

The loans weren't the problem. That's a lie told by those who caused the problem. The problem was that the loans were borrowed against to form new loans, which were borrowed against until there was nothing but loans all the way down.

It was a glimpse into what banking would look like with a 0% reserve. Banks would lend out infinite money, without concern for money availability or risk, making a profit off each transaction, until the system imploded.

The loans were fine. It wasn't until much later when the loans started hitting high default rates, and the highest default rates were in the McMansions, not the entry-level low-income buyers. Those making $5000 a month with a $4000 a month mortgage on a worthless house were the ones to walk away. Not the guy whose house went from $80k to $70k. Oh, and the speculators. Those who bought at $500k, hoping to flip it for $600k got stuck holding a $300k house and $500k in debt. They walked too. This was the first collapse to hit the middle and upper middle class harder than the poor. So the rich white males who caused it made sure to blame it on the poor so the middle class didn't realize they were being screwed.

As the BoE asserts, the system requires confidence to work. And they'll lie cheat and steal their way to confidence.

Hi All,
This post is so interesting, its really great to see so many people interested in this topic!
I am currently in my fourth year of a sustainability degree at the University of Leeds and would really appreciate your opinions on the topic!
It would be so helpful iif you could fill in my survey for my University dissertation! Its about the public's perceptions of the banking system in the UK and openness to change towards a more sustainable system - No prior knowledge necessary!

Any responses would be hugely appreciated! Thanks!

Here's the link: https://www.surveymonkey.com/r/ZXPT8PK

P.S. This is not a scam, I genuinely need responses for my dissertation!

@olenakozakking Hmm maby not a scam but certainly spam! However since this is the only post in the last week i guess we take what we can.
I have done yer survey .
My personal opinion is the bank debt is made up money and is the primary driver of planetary destruction and our imminent extinction