Question
Should 99% of the American people protest by closing their bank and financial service accounts and instead join non-profit credit unions?
Answer
It's people, not labels. It is dangerous to correlate "evil people" with a specific subset of institutions and using institution-level balance of power ideas to effect changes in how power is distributed among evil/good people.
Banking is a mature, highly integrated and technically sophisticated industry (both P2P and connections mediated by the central government). Labels like "cooperative" and "local" mean a heck of a lot more with reference to vegetables than dollars. You think you're decoupled from the banking system if you move your assets to dollar bills under your pillow or to coops?
What do you think the coops are going to do when they are flush with more cash than local capital markets can absorb (there's only so many loans they can make to slow food and farmers' market startups...)? Banks (ALL banks) are not in the business of "storing money." They are in the business of moving it. It's a global flow business, not a local stock business. Secure money storage is the comprehensible side-effect they sell to consumers. Their main business is to keep the money moving. Fractional reserve requirements and deposit insurance infrastructure is about slowing the movement of money down, because banks -- all banks -- have an incentive to keep the money churning as fast as possible. Because they make money based on how fast the money moves, not how much they hold.
The whole premise of the question, "moving" consumer money from one subset of banks to another is based on the mistaken "banks store money" framing. It's like saying "we don't trust the Eastern railroads, we're going to store our trains on the Western railroad tracks."
A more sophisticated way to frame it is: can you move money traffic from one network to a subnetwork with the same coverage, but less "dollar bandwidth"? In this case, this focus on coops/local banks is like asking "can we move all air traffic from the hub-spoke airlines to Southwest's short-hop network?"). This second framing immediately reveals the problems with the idea: besides bandwidth, the alternative topology of Southwest's route network will make certain very heavily trafficked routes extraordinarily inefficient. If clogging and congestion occur, the subnetwork will make less money even though it is managing more assets (think of parked airplanes/gate delays/ in the airplane metaphor, or rolling stock sitting idle in train yards).
Where do you think governments are going to go for short-term credit, or when they want to put more money into circulation? How do you think larger capital movements are going to happen for the big companies you know, trust and love?
A genuine run on the banks sparked by a complete loss of confidence in the institutions is a very, very expensive nuclear option. You have to be prepared for the consequences. These consequences would be far more dire in our massively interconnected and globalized world today, than in previous historical runs.
I happen to think that it is possible to engineer an alternative money-flow network (the Southwest example does extend here... after all, they have been consistently profitable through the ups and downs of the airline industry). But you've got to carefully develop this alternative network vision, slowly start moving more dollar traffic to it as its bandwidth scales (you don't want to overload it too fast), and then let Darwin take over: just as the other airlines started going bankrupt/consolidating while Southwest went from strength to strength, over 2-3 decades, you'll have this Money 2.0 network slowly displacing the Money 1.0 network.
You need the right set of visionary leaders stewarding this transition. I don't see any appearing on the horizon yet.
Banking is a mature, highly integrated and technically sophisticated industry (both P2P and connections mediated by the central government). Labels like "cooperative" and "local" mean a heck of a lot more with reference to vegetables than dollars. You think you're decoupled from the banking system if you move your assets to dollar bills under your pillow or to coops?
What do you think the coops are going to do when they are flush with more cash than local capital markets can absorb (there's only so many loans they can make to slow food and farmers' market startups...)? Banks (ALL banks) are not in the business of "storing money." They are in the business of moving it. It's a global flow business, not a local stock business. Secure money storage is the comprehensible side-effect they sell to consumers. Their main business is to keep the money moving. Fractional reserve requirements and deposit insurance infrastructure is about slowing the movement of money down, because banks -- all banks -- have an incentive to keep the money churning as fast as possible. Because they make money based on how fast the money moves, not how much they hold.
The whole premise of the question, "moving" consumer money from one subset of banks to another is based on the mistaken "banks store money" framing. It's like saying "we don't trust the Eastern railroads, we're going to store our trains on the Western railroad tracks."
A more sophisticated way to frame it is: can you move money traffic from one network to a subnetwork with the same coverage, but less "dollar bandwidth"? In this case, this focus on coops/local banks is like asking "can we move all air traffic from the hub-spoke airlines to Southwest's short-hop network?"). This second framing immediately reveals the problems with the idea: besides bandwidth, the alternative topology of Southwest's route network will make certain very heavily trafficked routes extraordinarily inefficient. If clogging and congestion occur, the subnetwork will make less money even though it is managing more assets (think of parked airplanes/gate delays/ in the airplane metaphor, or rolling stock sitting idle in train yards).
Where do you think governments are going to go for short-term credit, or when they want to put more money into circulation? How do you think larger capital movements are going to happen for the big companies you know, trust and love?
A genuine run on the banks sparked by a complete loss of confidence in the institutions is a very, very expensive nuclear option. You have to be prepared for the consequences. These consequences would be far more dire in our massively interconnected and globalized world today, than in previous historical runs.
I happen to think that it is possible to engineer an alternative money-flow network (the Southwest example does extend here... after all, they have been consistently profitable through the ups and downs of the airline industry). But you've got to carefully develop this alternative network vision, slowly start moving more dollar traffic to it as its bandwidth scales (you don't want to overload it too fast), and then let Darwin take over: just as the other airlines started going bankrupt/consolidating while Southwest went from strength to strength, over 2-3 decades, you'll have this Money 2.0 network slowly displacing the Money 1.0 network.
You need the right set of visionary leaders stewarding this transition. I don't see any appearing on the horizon yet.