The End of Banking: Money, Credit, and the Digital Revolution (Jonathan McMillan)

Book Notes, Highlights & Comments

🚀 The Book in 3 Sentences

  1. Banking activity is based on the creation of money by issuing new loans, and solving the asymmetric information problem
  2. As time passes, banks are more powerful and the regulations are not fulfilling social welfare needs
  3. To solve the problem, we should eliminate banking, by using Information and Communication Technologies, and decentralising among the society their activities

🎨 Impressions

The thesis of this book was a strong one, and the first pages were simply astounding. However, as I kept going, I felt that some explanations were innocuous, which almost made me retire from reading it. In spite of that, my impressions are mainly positive, since it taught me a lot.

Who Should Read It?

It is a nice introduction to the world of banking activities, it explains everything from its core. Therefore, I think everyone should read it, but taking the thesis with a grain of salt. Hopefully, you will earn a lot of lifetime concepts from this book

☘️ How the Book Changed Me

  • It made me more aware of the power that financial institutions are currently having
  • It reinforced my knowledge about the 2008 financial crisis
  • It made me think of finance in broader terms

✍️ My Top 3 Quotes

  • Banking seems like magic, since it is able to reconcile two mutually exclusive financial relations
  • In the digital era, the financial system became a complex monster
  • Information Technology allows to organice the financial system in a better way

📒 Key Takeaways

What Banking Activity Is

Banking activity comes from the necessity of creating capital-intensive economies, in which there is an institution that solves the asymmetric information problem that exists among creditors and debtors

Why Banking has to be eliminated

As financial regulations have been favouring banks to take more risks by reducing minimum-equity requirements for its funding, and because these entities are established mainly as Limited Liability Companies (LLC) —which means they can only respond until the threshold of their capital contributions—, the society is exposed to main crisis as the 2008 one, in which uncertainty is part of the day-to-day life. Therefore, Banking has to be eliminated.

How to replace Banking

We now live it the 21st century, which means we are more immersed into the Digital Revolution. We could embrace this by letting creditors and debtors contact each other instantaneously using Information and Communications Technology, avoiding financial institutions (and financial regulators) to favour their needs in the process.