THE END OF BANKS, MONEY AND THE INTERNATIONAL FINANCIAL SYSTEM

Fernando Alcoforado*

This article aims to demonstrate the likely end of banks, money and the international financial system and their consequences. Banks are coming to an end because technology is putting the banking market in check as people today are much more concerned about paying anything with a credit or debit card without having to take money from the bank. Bank. This is making banks unnecessary. Money, in the traditional sense, died two decades ago, eclipsed by a digitized trade economy. The death of the check, paper or metal money and card is accelerating which is being replaced by digital payments. Meanwhile, the world financial system is collapsing with the inevitable collapse of the dollar. In the international financial system led by the US dollar, the rapid loss of confidence in this currency begins to take place. In recent years several countries have actively sought opportunities to create an alternative reserve currency and abandon the dollar. The end of the dollar will lead to three scenarios: 1) its replacement by a world currency (SDR - Special Drawing Rights: a currency created by the International Monetary Fund used for inter-country payments); 2) the adoption of the gold standard; and 3) the social disorder. Of these three scenarios, the most likely is that of social disorder when neo-fascist governments around the world and world financial bodies will take the power to act with an iron fist to control the global financial system.

1. The end of banks

Il y a un demi-siècle, les opérations bancaires étaient relativement simples et son r?le consistait à servir d'intermédiaire entre les épargnants et les prêteurs. ont passé par un processus de transformation en son activité principale. Bénéficiant de l’ouverture de l’économie mondiale depuis les années 90, ces institutions sont devenues des groupes financiers et des conglomérats diversifiés dont les bénéfices proviennent principalement de la création de crédit, devenue le principal moyen de créer de la monnaie. Ce faisant, les banques centrales de la grande majorité des pays ont complètement perdu le contr?le de leurs systèmes économiques.

Banks make their biggest profits ever by facilitating the concentration and centralization of capital. A major source of bank profit is speculation in general, including negotiating countries' debt and betting on world stock markets. No other sector of the economy can boast such high rates of return, not even any of the largest companies in the productive sector can even match the record profits of the financial system.

Global transaction figures illustrate the size of the financial sector: in 2002, world GDP was US$ 32.3 trillion, while financial transactions amounted to US$ 1,140.6 trillion. At the beginning of the crisis, in 2008, while world GDP was US$ 60.1 trillion, financial movements reached US$ 3,628 trillion (CHESNAIS, Fran?ois. Les dettes illégitime. Quand les banques font main basse sur les politiques publiques. Paris: Editions Raisons d′agir, 2011). According to Fran?ois Chesnais there will be no end to the global economic crisis that erupted in 2008 in the United States while banks and financial investors are in charge, with governments adopting policies wholly driven by the interests of the rentiers and to survive the debt-driven regime as has been happening today.

What is the future of banks? Jonathan McMillan's book The End of Banks (S?o Paulo: Editora Schwarcz S.A. 2018) discusses the role of banks in an increasingly digitized world and also the problems the financial system can create. Resistance to banks came to fruition since the 2008 crisis, when banking giants were blamed for the financial earthquake that ravaged the planet and drained huge, never seen resources from governments, especially in the United States. In this country, Congress approved a US$ 700 billion recovery plan according to Time magazine and the US government invested a total of US$ 10 trillion to help banks and remedy the financial collapse that was taking place. Since the 2008 crisis, the idea of ending banks has been resonating.

Jonathan McMillan asks: How to live without a bank? How to pay bills, make transfers and save our money? The End of Banks book gives unambiguous explanations of these issues. McMillan has come up with solutions to a new financial crisis that many economists around the world have admitted as likely. He cited, for example, the great risk of the Chinese economy, whose domestic debt promises to reach an amount that could eventually collapse. Deutsche Bank recently issued a report listing eleven risks that could lead to a new financial crisis, including the weak performance of the Japanese economy, the UK's exit from the European Union and Italy's economic situation. Many economists are coming to the conclusion that banks must be extinguished.

It should be noted that the large financial drain that banks demanded at the time of the 2008 crisis has not prevented them from making huge profits ever since. From 2008, the banking sector has become more concentrated than ever. In the United States, for example, the number of banks fell by half in 2009, while the share of the four largest US banks rose from 14% to over 40%. And they are increasingly lucrative. In 2018, the profit of only ten of the largest US banks broke the record. In Brazil, the phenomenon is identical: in 2016, the five largest Brazilian banks together had a record with a net profit of 69 billion reais.

Jonathan McMillan explains the role of banks and the reasons why they are harmful to the financial health of society across the globe. To stop worrying about how to pay bills, make transfers, and keep salary, McMillan explains that these are banking activities that no longer need to be performed by banks. On the contrary, they are services that can be performed by technology, which already happens. Financial technology, “fintech” adopted by banks is an amalgam of “finance” and “technology”, which has spread in recent years and banks themselves have set up innovation labs, deploying technology solutions and employing more and more robots for decision making. investment, instead of the classic bank manager. In fact, fintechs only provided technological solutions to banking functionality, but did not bring about substantial changes in the financial system.

Jonathan McMillan argues that these issues are not fundamental when discussing the role of banks. Since the Middle Ages, when banks were created, their main function was to collect deposits from those who had surplus money and, with them, make loans. That is, the real function of banks is to create domestic currency through credit. In the digital age, banking has not only gotten out of hand, it has lost its raison d'être. Although no longer needed, they will continue to dominate the financial system for some time. New possibilities for managing money and credit cannot prevail while uncontrolled banking is still possible. With full government guarantees and without effective regulation, they will remain too lucrative despite the tremendous costs they impose on society. Therefore, it is necessary to end banking activities.

The three main reasons identified by Jonathan McMillan that justify the end of banks' existence are as follows: 1) The excessive risk they take in doing their credit operations, lending money they don't have, leading to derivatives and exposing themselves to a bank run. Imagine if all depositors in a large bank ran to the cashier to withdraw their deposits. And, in fact, the risk lies not with the banks, but with the government, which always guarantees the liquidity of deposits, under the maxim that "they are too big to fail"; 2) banking mixes and intoxicates the monetary policies created by central banks to prevent social and economic crises such as inflation and unemployment. The connection between banks and national issues can never produce good results; and 3) excessive politicization of central banks. The final part of the book is perhaps the most interesting because it makes concrete proposals to exterminate the banks. The main one is to divide banking activities into two separate business lines - lending and securing - thus avoiding the creation of unsecured domestic currency.

McMillan proposes that the bank deposit agreement would once again be a safe deposit agreement. Restricted bank depositors would receive no interest as their deposits would no longer be used to lend. Banks would have to have 100% cash coverage, ie cash equivalent of deposits received. This requirement would ensure that they were always able to respond to depositors' withdrawal requests. If, for example, a run on banks occurred, they would have the liquidity to honor all deposits made by customers, thus waiving the government guarantee, involvement with central banks and, especially, lending of securities they do not have.

The end of banks is coming not only because of the facts exposed, but because technology is putting the banking market in check. In the financial sector, this transformation has already begun. This change is still in its infancy, but the need to go to a bank to do something relatively simple like to keep your money is a thing of the past. Of the hundreds of services such an institution could offer, the most important thing was for your money to be safe and accessible at all times. With the evolution of technology, to keep money has lost relevance. Today people are much more concerned about paying anything with a credit or debit card without having to withdraw money from the bank. This can make banks unnecessary. What people have begun to realize is that the service delivered by banks no longer meets their needs. Companies, in turn, are already seeing this, and every day they are moving toward changing their money-sending and receiving operations from banks.

Worldwide, a completely innovative category of financial services has been called payment banking. A new type of company provides very similar services to banks, but they are not really financial institutions, but payment intermediaries. Some examples are Paypal, PayTM and AirTel. In Brazil, we are moving towards an environment of total debarking of financial services. By regulating payment arrangements by the Central Bank and understanding the powers of such institutions, the Central Bank could offer the market the ability to take power from the five largest banks in Brazil and democratize access to the national financial system.

2. The end of money

Money, in the traditional sense, died two decades ago, eclipsed by a new trading economy. The age of the death of money is becoming viable with the construction of new economic relations. These new relationships are as follows:

?         Pure exchange, which does not involve the use of money in any way;

?         Partial exchange, which is designed to minimize the use of official money; and,

?         Exchange based on the use of money alternative to substitute official money.

The death of the check, paper or metal money and card is accelerating. All are being replaced by digital payments. Dematerialization of money advances, even for those without a bank account who no longer need a bank account to access the financial system. Everything is changing: who processes the payment, how we make the payment, and the currency used. China, for example, has abandoned money by going straight to digital payments without going through a credit card because it is very expensive to deal with physical money (security, transportation, where to store, handling, transfers).

Digital platforms such as Google, Facebook and WeChat (a Chinese mix of Face, Google, WhatsApp, digital banking, IFoods) are becoming financial agents and will challenge banks. Account or credit card debit will be replaced by biometric authorizations (voice command or face recognition, which reads the face and transfers it to the store where the person is). Or possibility is pre-payment authorization, as we do when we use Uber. In Denmark it is already paid digitally. AmazonGo stores register the customer's entry by mobile, he picks up what he wants, without going to the cashier. Account payments are already made by giving data or using points in loyalty programs. With cryptocurrencies like bitcoin, payment digitization will increase.

Note that bitcoin is a decentralized cryptocurrency, being a form of electronic money. Bitcoin is a digital, decentralized currency that requires no third party to function. This means that it does not depend on banks, large corporations or governments to move money. Bitcoin was the world's first cryptocurrency and has been running without interruption for eight years, based on an extremely secure decentralized network called Blockchain created by Satoshi Nakamoto. Bitcoin's main advantages are: freedom of payment, lower fees, security, privacy, control and transparency. No Bitcoin can be confiscated. Payments may be made at lower rates. In addition, Bitcoin is secure and gives more privacy, control and transparency in trading.

Bitcoin can also be used as an investment for those looking to diversify their equity for better earnings. Bitcoin has yielded excellent returns and is likely to become more popular in the long run. Bitcoin is safer than the money you have today in the bank. The security level provided by Bitcoin is much higher than that of traditional banks. In Bitcoin there is not a single point of failure for any malicious actor to be able to attack the network because it would have to break into millions of computers worldwide which is an impossible task. With Bitcoin you have your own bank. Downloading a bitcoin wallet is like having a bank branch available in your hands 24 hours a day. No fees, no boring manager and able to transfer your transaction in no time.

Creating a bitcoin wallet is easy and costs nothing. Just as there are several ways to interact with your bank, you can interact with your bitcoin wallet in a variety of ways, via the smartphone app and desktop / notebook program. Blockchain technology is a type of distributed database where bitcoin transactions are recorded. This technology allows this data to be transmitted between all network participants in a decentralized and transparent manner. Thus, trust with a third party or central entity is not required for the accounting data to be correct and not to be fraudulent. The blockchain is a public transaction book, although it has some anonymous information. Bitcoin is associated with a number that only its owner knows by simply converting to a non-virtual currency that is all clear.

3. The end of the international financial system

While banks and money are under threat, the international financial system is collapsing with the likely collapse of the dollar. It should be noted that no reserve currency such as the dollar has existed forever. The dollar has dominated the world for almost a century. Although the dollar is considered to have replaced the British pound after the Bretton Woods conference at the end of World War II, the value of the pound had fallen long before that conference.

The US dollar-led financial system is beginning to point to the rapid loss of confidence in the US dollar. The loss of confidence in the dollar is manifested by the fact that central banks around the world are excluding the US currency from their reserves. This loss of confidence stems from the fact that the current world economic crisis shows that a monetary system based on paper currency freely issued and without ballast by governments around the world is inherently unstable whose inevitable consequences of this process are: artificial economic growth, the euphoria and the bad investments that such growth generates, and finally the depressions.

It seems that in the coming decades the global economy will move from dominance of the United States and the dollar to a system in which Asia will have more power. In the monetary context, this means that the dollar will probably be cheaper against other currencies, including gold. It is important to note that the dollar gained its status as a world currency thanks to the strength of the US economy. But the current situation does not favor the strengthening of its position, or even its maintenance in view of China's rise as hegemonic economic power.

It should be noted that since the West abandoned the classic gold standard (in which transactions were made in gold coins or 100% gold-backed certificates) in 1914, the international monetary system has been oscillating between a bad system and a worse one. Some countries adopt fixed exchange rates and soon afterwards repent and return to floating exchange rates. Other countries do the reverse movement. On August 15, 1971, while imposing a price and wage freeze on a vain attempt to control explosive price inflation, US President Richard Nixon imposed a resounding end to the Bretton Woods system which set the gold standard for the international financial system. Because European central banks were threatening to redeem as much gold from their swollen dollar stocks as possible, Nixon completely wiped out what was left of the gold standard. For the first time in American history, the dollar was fully fiduciary, with no gold backing.

Since the United States completely abandoned the gold standard in August 1971 and established the floating paper currency system in March 1973, the United States and the world have suffered the most intense, most constant and longest inflationary periods in world history. It is becoming clear that the world no longer admits the crises generated by this unprecedented and unhindered inflation, which has been brought on by the floating currency system itself, which has been in place since 1973. Looking ahead, the diagnosis that can be made for dollar and for the international monetary system is indeed bleak. Unless it returns to the classic gold standard at a realistic price, the international monetary system is bound to continually switch between fixed and fluctuating exchange rates, with each system continuing to face unsolvable problems and working poorly until it reaches its final disintegration. And stimulating this disintegration will inevitably be the supply inflation of dollars.

The prospects for the future are for accelerated monetary inflation in the United States, followed by an international monetary collapse. This prognosis can only be changed if there is a drastic change in the US and international monetary system with the return to a free-market commodity currency - such as gold - and a complete removal of government interference with monetary issues. Data on foreign exchange reserves show a diminishing role of the dollar. In 2018, the dollar's share of international reserves fell to 61.7%, which is the minimum level in the last 20 years.

In recent years several countries have actively sought opportunities to create a reserve currency and abandon the dollar. The oil trade between Russia and China is already done without the participation of the dollar. These countries intensified resource extraction and began buying more gold to prepare for the collapse of the US currency. The tendency to abandon the dollar clearly indicates the diversity of world currencies that can replace it, such as the euro and the Chinese Yuan.

Following the departure of the United States from the nuclear deal with Iran, the European Union intends to buy oil without using the dollar. After Russia and China decided to switch to the Yuan instead of the dollar, a wave of “desdollarization” has swept the world. Iran, Venezuela, Angola, Indonesia, Malaysia, Thailand and Pakistan have already expressed their desire to abandon the dollar or reduce its use in oil trading and other financial transactions. Russia understands that under the pressure of petrodollar its economy is in danger of being strangled. James Rickards, author of The Death of Money (Penguin Random House UK), proposes to create a new globally competitive, gold-backed currency that is strong enough to topple the dollar system.

The abandonment of the dollar as a world reserve currency is also driven by the possibility of the bursting of the US public debt bubble that will reach 140% of GDP by 2024. The US Congressional Budget Department predicts that the deficit This year's fiscal year is US$ 897 billion and by 2022 exceeds the trillion mark. Experts speculate that the US government has little time to reverse this situation that, otherwise it will endure a large-scale crisis comparable to the Great Depression of the 1930s. If the global economy is unable to digest this huge debt, The subsequent crisis will lead the world to economic depression, mass poverty, geopolitical instability, political unrest, and war.

According to the International Finance Institute report, global debt increased by US$ 3.3 trillion last year to US$ 243 trillion. This is a record amount three times the world GDP. In developed countries, the extremely high debt ratio reached 390% of GDP. The world economy may not resist 243 trillion dollars of debt. Economists warn that when this multi-trillion-dollar bomb planted under the world economy explodes, the crisis will be worse than in 2008. In late 2018, the International Monetary Fund (IMF) pointed to unsustainable global debt as the main threat to the world economy. The IMF said the real global debt engine is the United States, whose deficit has nearly tripled since 2000 and now exceeds $ 73.6 trillion, or 106 percent of GDP. US global debt is a factor contributing to the abandonment of the dollar as a world reserve currency.

James Rickards states in his book The Death of Money that the end of the dollar will lead to three scenarios: 1) its replacement by a world currency (SDR - Special Drawing Rights: a currency created by the International Monetary Fund used for inter-country payments); 2) the adoption of the gold standard; and 3) social disorder. The first scenario that contemplates the replacement of the dollar by the SDR as a global reserve currency is already underway. Over time, the dollar's weight in the SDR basket in favor of the Chinese currency, the Yuan, will gradually be reduced. SDR will be under pressure to stabilize the international financial system as it was done in 1979 and 2009. China's agreement will be needed to use the SDR that insists on using it not to save the dollar as it did in the past, but to replace the dollar as soon as possible. The transition will be inflationary in dollar terms due to its devaluation from the SDR.

The second scenario considers the adoption of the gold standard as another alternative to the ceaseless printing of the dollar by the United States government, according to Rickards. This can push inflation to the extreme with gold by restoring confidence or raise deflation to the extreme with gold reevaluated by governments to raise the overall price level. The gold standard should be adopted when confidence collapses. Rickards states that the adoption of the dollar standard associated with the dollar and SDR is inflationary because gold would have to be revalued upwards to support global trade and finance with the current gold stock. The third scenario of social disorder will take the form of neo-fascism by the ruling governments when wage and price controls will be used to control inflation and digital surveillance will be used to combat the black market. Monetary turmoil would be quickly crushed by government action.

Of these three scenarios above, the most likely scenario is that of social disorder when neo-fascist governments and world financial agencies will act with an iron fist to control national economies and the global financial system, respectively. The scenario of social disorder will be imposed not only by the impossibility of substituting the dollar for the world currency (SDR) and the adoption of the gold standard associated with the dollar and the SDR, but for the probable end of the world capitalist system from the middle of the 21st century, as shown in the article The End of the World Capitalist System in the Mid-21st Century (ALCOFORADO, Fernando. The End of the World Capitalist System in the Mid-21st Century. Available at the website < https://www.academia.edu/39554532/THE_END_OF_THE_WORLD_CAPITALIST_SYSTEM_IN_THE_MIDDLE_OF_THE_21ST_CENTURY >, 6/13/2019). The end of the world capitalist system in the mid-21st century will bring the international financial system to an end at this time as well.

4. Conclusions

From the foregoing, it follows that:

? Banking activities no longer need to be performed by banks. In the digital age, banking has not only gotten out of hand, it has lost its raison d'être. Your services can be performed by technology, which is already happening.

? With full government guarantees and without effective regulation, banking activities will remain too lucrative despite the tremendous costs they impose on society. Therefore, it is necessary to end banking activities.

? New possibilities for managing currency and credit cannot prevail while uncontrolled banking is still possible.

? To continue to exist, banks should have 100% cash coverage, ie cash equivalent of deposits received. This requirement would avoid their bankruptcy.

? Banks are coming to an end because technology is putting the banking market in check. With the evolution of technology, saving money has lost relevance. We are moving towards an environment of total nobanking of financial services.

? Money, in the traditional sense, died two decades ago, eclipsed by a digitized trade economy. The death of the check, paper or metal money and credit card is accelerating. All are being replaced by digital payments. With cryptocurrencies like bitcoin, payment digitization will increase.

? The world financial system is collapsing with the collapse of the dollar. The US dollar-led financial system is beginning to point to the rapid loss of confidence in the US dollar.

? The loss of confidence in the dollar is manifested by the fact that central banks around the world are excluding the US currency from their reserves. This loss of confidence stems from the fact that the current world economic crisis shows that a monetary system based on paper currency freely issued and without ballast by governments around the world is inherently unstable whose inevitable consequences of this process are: artificial economic growth, the euphoria and the bad investments that such growth generates, and finally the depressions

? The abandonment of the dollar as a world reserve currency was also driven by the possibility of the bursting of the US public debt bubble reaching 140% of GDP by 2024. The IMF said the real global debt machine is the United States, whose The deficit has almost tripled since 2000 and now exceeds $ 73.6 trillion, representing 106% of GDP.

? The end of the dollar will lead to three scenarios: 1) its replacement by a world currency (SDR - Special Drawing Rights: a currency created by the International Monetary Fund used for inter-country payments); 2) the adoption of the gold standard; and 3) social disorder.

? The most likely scenario for the world financial system is that of social disorder when neo-fascist governments and world financial bodies will act to control the global financial system and prevent its collapse by repressing social movements with an iron fist. The scenario of social disorder will be imposed not only by the impossibility of substituting the dollar for the world currency (SDR) and the adoption of the gold standard associated with the dollar and the SDR, but mainly for the probable end of the world capitalist system from the middle of the century XXI.

? The end of the world capitalist system in the mid-21st century will bring the international financial system to an end at this time as well.

The likely demise of banks, money and the international financial system points to the need for a new international system that avoids the scenario of social disorder in the world and ensures the governance of the world economy. The governability of the world economy will only be achieved with a world government democratically elected by all the peoples of the world [ALCOFORADO, Fernando. Como inventar o futuro para mudar o mundo (Inventing the future to change the world). Curitiba: Editora CRV, 2019].

REFERENCES

ALCOFORADO, Fernando. Como inventar o futuro para mudar o mundo. Curitiba: Editora CRV, 2019.

______________________. The end of the world capitalist system in the mid-21st century. Available on the website <https://www.academia.edu/39554574/O_FIM_DO_SISTEMA_CAPITALISTA_MUNDIAL_EM_MEADOS_DO_S%C3%89CULO_XXI>, 06/13/2019.

CHESNAIS, Fran?ois. Les dettes illégitime. Quand les banques font main basse sur les politiques publiques. Paris: Editions Raisons d′agir, 2011

MCMILLAN, Jonathan. O fim dos bancos. S?o Paulo: Publisher Schwarcz S.A. 2018.

MISES BRASIL. As crises monetárias mundiais. Available on the website <https://www.mises.org.br/Article.aspx?id=258>.

RICKARDS, James. The Death of Money. Penguin Random House UK, 2014.

SOUTO, Ivyna. A morte do cheque, do dinheiro em papel e do cart?o está próxima. Available on the <https://www.polemicaparaiba.com.br/polemicas/a-morte-do-cheque-do-dinheiro-em-papel-e-do-cartao-esta-proxima/>, 07/04/2019. 

SPUTNIKNEWS. World financial system collapses: How does the world prepare for the collapse of the dollar? Available on the website <https://br.sputniknews.com/economia/2018060511387106-financas-dolar-colapso-crise-china/>, 2018.

WIKIPEDIA. Bitcoin. Available on the website <https://pt.wikipedia.org/wiki/Bitcoin>.

* Fernando Alcoforado, 79, awarded the medal of Engineering Merit of the CONFEA / CREA System, member of the Bahia Academy of Education, engineer and doctor in Territorial Planning and Regional Development by the University of Barcelona, university professor and consultant in the areas of strategic planning, business planning, regional planning and planning of energy systems, is author of the books Globaliza??o (Editora Nobel, S?o Paulo, 1997), De Collor a FHC- O Brasil e a Nova (Des)ordem Mundial (Editora Nobel, S?o Paulo, 1998), Um Projeto para o Brasil (Editora Nobel, S?o Paulo, 2000), Os condicionantes do desenvolvimento do Estado da Bahia (Tese de doutorado. Universidade de Barcelona,https://www.tesisenred.net/handle/10803/1944, 2003), Globaliza??o e Desenvolvimento (Editora Nobel, S?o Paulo, 2006), Bahia- Desenvolvimento do Século XVI ao Século XX e Objetivos Estratégicos na Era Contemporanea (EGBA, Salvador, 2008), The Necessary Conditions of the Economic and Social Development- The Case of the State of Bahia (VDM Verlag Dr. Müller Aktiengesellschaft & Co. KG, Saarbrücken, Germany, 2010), Aquecimento Global e Catástrofe Planetária (Viena- Editora e Gráfica, Santa Cruz do Rio Pardo, S?o Paulo, 2010), Amaz?nia Sustentável- Para o progresso do Brasil e combate ao aquecimento global (Viena- Editora e Gráfica, Santa Cruz do Rio Pardo, S?o Paulo, 2011), Os Fatores Condicionantes do Desenvolvimento Econ?mico e Social (Editora CRV, Curitiba, 2012), Energia no Mundo e no Brasil- Energia e Mudan?a Climática Catastrófica no Século XXI (Editora CRV, Curitiba, 2015), As Grandes Revolu??es Científicas, Econ?micas e Sociais que Mudaram o Mundo (Editora CRV, Curitiba, 2016), A Inven??o de um novo Brasil (Editora CRV, Curitiba, 2017), Esquerda x Direita e a sua convergência (Associa??o Baiana de Imprensa, Salvador, 2018, em co-autoria) and Como inventar o futuro para mudar o mundo (Editora CRV, Curitiba, 2019).