New Retail Banking system ------------------------- When a cash society introduces checking account banking, a simple checking account banking service company could simply consist of a large amount of boxes, one for each account, with in the box the valuables, all inside a secured area. When someone wants to transfer valuables from account A to B, the valuable is taken out of the box A and put into box B. The valuable can be cash money of whatever kind, it can also be gold or anything other of value. In theory it can be anything, but a money only system is most practical. When account A and B are in the same bank the transfer can be done behind closed doors. When its not the same bank the transfer will have to physically go to another bank. This system is quite a lot of hands-on work. On the other hand the system simple and obvious, though not immune from corruption. The system can be streamlined by only recording how much money should be in each account without physically moving the money. All the money can then be stored as one large heap, as long as the accounting is perfect it works better. This would lead to one more thing that can go wrong: the totals of the money heap and accounts does not match. The accounting without physically moving money can also be done between several banks, cheaper, and then also there can be lost or created money if the accounting goes wrong. The total of all bank accounts of all banks in accounting could be more or less than the total of all their cash heaps combined. It is possible to set up a bank's bank, where the banks deposit the cash they get. This bank's bank could have one box for the entire cash heap of a bank that does the transfers in accounting only. Then when that bank makes a transfer to another bank the bank's bank could move that cash from that box to another bank its box if that other bank is also a member of the bank's bank. A bank that has one box per account and physically moves the cash from box to box could have all these boxes inside the bank's bank, where the workers moving the money would have to be working. It is equally possible for the bank's bank to store all the money on one large heap, and do all the accounting "in theory." It is then again possible that this bank's bank has more or less money in accounting than in cash. If this bank's bank is owned by the Government, it is possible to not actually have the cash in a giant pile in the bank's bank, but to supply the bank's bank with the cash money to the amount it claims it has accounting. The money can be supplied at the moment that it becomes requested. Thus the money heap at the bank's bank would be a virtual heap, which takes more time to take somewhere because it has to be printed first. If the member banks have brought in cash that has worn down, for instance, it is not necessary to replace it until there is a demand for it. If it were replaced and the central bank kept an exactly matching physical pile of money, much of that money may never be actually used because a lot of trade ends up being done through transferring money from one account to another. Since money is occasionally changed to repel forgeries, on one day the freshly printed never used money would end up being worthless. It has the benefit that it becomes possible to physically count the money, but whether that is really a useful advantage is doubtful. This system then has member banks can compete with each other, while a centralized bank holds most of the cash, except that which member banks have and need to have to satisfy cash withdrawals and deposits. In theory this bank's bank can be private, and there could be several and competing bank's banks. If there are several bank's banks then again there can be a singular bank's bank's bank, which can either be private or Government, and so on. In practice it may be easiest to make the bank's bank a singular Government owned service (see also Limits below). For banks that do the accounting in-house and only maintain a single account with this central bank the individual in-house transfers for that bank would be invisible for the central bank, and the transfers to another bank could be anonymously debited so that the ultimate owner of the account is not known to the central bank doing the bank to bank transfer. Limits ------ Because of the danger of private for profit investment the above mentioned banks are retail service providers, they should not lend money out (they do not invest or speculate with the money for additional gains.) If they do that also, that is a principled different issue not automatically flowing from their control over other people's valuables. It is dangerous to allow a retail bank to lend money, because it has a lot of money that is not its own. This may tempt them to start lending outside the necessary legal requirements ( http://www.socialism.nl/law ) for lending with someone else's money. A retail banking industry as an accounting service provider for money is a valid service industry private business opportunity. A service is delivered that people want: storing of valuables, ability to move them to someone else's store of valuables (accounts). A useful job gets done, a service is provided and it is not speculation: money can be asked in return. This is just a normal business operation. Varies retail banks may offer varies products for varies prices. To limit the ability of a retail-bank to abuse its funds illegally for speculation, these banks can be demanded not to have more then a sum X in cash, while the remainder must be surrendered to a Government owned central bank. The central bank being Government owned should prevent it from speculating with the money itself. The member banks will have to be verified as to their accounting totals, otherwise they can make up fraudulent accounts and withdraw cash money from other people who have an account in that bank through it, without the central bank knowing the difference because it appears the costumers of that bank have made donations to the fraudulent account. The Government accountants could simply add up the grand total in all accounts, and send an independent message to all costumers of that bank, containing how much money they are claimed to have by their own bank. If the totals match but money was looted or is being speculated with and thus temporarily unavailable, at least some costumer accounts should show less then they ought to have. If that happens costumers will not be happy and start leaving that bank, and police could be notified of the issue. People who's account has not been revealed to the accountants will get no message from the accountants, which should alert them that there could be a problem: their account looted and then hidden from Government accountants. If totals match between central bank, all accounts, and everyone independently acknowledges their total, then there shouldn't have leacked money out toward speculation or fraud. If costumers fraudelently or in error claim to have more, then that could be investigated. If a bank is itself fraudulent it should eventually emerge, potentially through a high number of reliable witnisses that claim to be looted, more then with other banks (and some banking people fleeing and/or suddenly buying large homes etc etc). {Technically this is called: 100% reserve banking; every single money unit is fully accounted for and is left in the account the banking costumer has put it in, it is not moved around elsewhere to generate money or simply be looted out for instant profit.} Centralized model ----------------- The above describes a privatized retail banking sector, who does its transfers in accounting and not in physical cash moving, with a single Government owned central bank that facilitates bank to bank transfers and clamps down on the actual cash. The central bank reduces the robbery danger on the member banks, it will be easy to replace damaged bills, it is also a useful service. Another model is that there is only one monopolized retail bank, which would be Government owned because it is a monopoly and outside competition. This means the banking system is simpler. It also means there is no competition for costumers, which would likely lead to a product that appeals to most because the majority can force its will through state democracy. The variety of products offered could be smaller in practice, although in theory the democratic majority may decide to create a variety of retail banking products for varies prices. Transitioning ------------- The banking system can be transitioned from one monopolized central Government retail bank toward private banks simply by not preventing private banks from emerging, and being accommodating to the needs of a private bank for a fee. This way private retail banking initiatives may emerge if they feed a demand. The price of the Government retail banking relative to the private banks if any will push people toward the private retailers or to the Government retail bank. Both systems can stand next to each other, where the difference between a non banking account and a banking account with the central Government bank is simply how much it gets used. To transition a private retail banking sector to a centralized Government bank can similarly be done by opening up the opportunity to have a Government retail banking account. By collecting more money from private banks the cost of its services becomes more expensive, by using money to fund the Government retail banking for free the price difference increases. Eventually costumers will prefer the cheaper Government retail banking. The transfers from one system to the other, or to a combined system, can also be done with a rougher method, obviously. The centralized Government bank may auction off its offices to private initiatives, thus disowning the machinery and retreating into an exclusive role as a central bank. In the same way the Government may grab all the private retail banks and their machinery, hooking all the accounts into the centralized retail banking accounting, which would fix it. Conclusion ---------- Preferences: it seems that the Government centralized retail bank with a private retail banking service industry would deliver a most vibrant and dynamic banking experience, and it reduces the amount of problems that central Government will have to deal with. The Government will then only have to maintain a measure of fair competitiveness in the retail banking industry. The Government would then be left with the predictable task of central accounting, verification that banks follow the law, and maintaining a suitable currency total. This is closer to the actual Government tasks: maintaining the grand infrastructure. If the Government does the entire retail job, it will have to make decisions on the fashionability of checks and the retail offices and the like, which is a level that the Government if possible shouldn't be bothered with because it is not essential, a waste of its valuable resources. The principled task in industry of Government is to maintain the monopolized infrastructure. A central retail bank does effectively qualify as monopolized infrastructure, but retail banking does not necessarily qualify as a singular infrastructure where competition is impossible or detrimental.