Blockchain

Do We Even Need Banks? Ireland Didn’t For Most Of 1970

While traditional flights to safety in investing have focused on low risk return investments, it is a sign of the times that during the recent currency woes seen around the globe, people are turning to Bitcoin despite its reputation as being high risk.

This is most likely down to Bitcoin being unique in its ability to be used either as a store of value as well as a medium of exchange, while also leaving the investor in complete control of their investment. With no central authority, it cannot be affected by overnight bans, as we are  currently seeing with traditional fiat currency notes throughout the world.

The decentralized peer-to-peer design of Bitcoin means that it communicates in all languages and knows no borders. I believe the only way it can be stopped is by shutting down the entire global Internet.

Bitcoin has been fulfilling what it was created to do without fail for over eight years now and as long as it continues to fulfill the needs of investors and consumers, there will always be a demand for it. This is evident from the rise in price and transaction volumes, which is steadily growing, month after month, year after year.

Cashless society

The 50 year vision for a cashless society has never been closer, with larger banknotes from all parts of the world either banned or in the process of being banned. The EU has targeted the 500 euro note and India has removed the 500 and 1000 rupee notes. Australia is discussing removing the $50 and $100 dollar bills out of circulation, and the Australian Citibank became the first bank to declare it is no longer accepting coins or notes anymore.

UBS analyst Jonathan Mott, said:

“Removing large denomination notes in Australia would be good for the economy and good for the banks. Benefits would include reduced crime and welfare fraud, increased tax revenue and a ‘spike’ in bank deposits.”

That little quote says a lot and people should take notice as it clearly states that the removal of fiat from society will benefit nobody but the banks themselves with a “spike” in deposits and the government with increased tax revenue.

Banks play an important role in society and are meant to be here as a service to their customers. However, from watching the situation in Greece last year, where television reporters stood outside the doors of closed banks in Athens predicting armageddon, you would think we couldn’t exist without them.

Irish banking strike

In 1970 all banks in Ireland closed during a strike lasting six and a half months, which at the time was predicted to have a similar catastrophic forecast to that which occurred in Greece.

This strike began on the May 1 and lasted until Nov. 17, 1970.

The facts are contrary to what was expected and it had very little impact on the Irish people. Instead of panicking, the people of Ireland used their survival instinct and very rapidly discovered other ways for carrying out the functions previously performed by the banking industry.

Economist Michael Fogarty, who wrote the official report on the bank dispute, was quoted by the Irish Independent as saying that: “the services of the clearing banks proved by no means as indispensable as would have been expected before the dispute.”

Others take the example of the Irish bank strike as evidence that much of what banks do is a “socially useless activity.”

Undated cheques often endorsed over to others but never cashed, became a form of currency. When the supply of cheques dried up people wrote new ones on any available piece of paper, sometimes adding a postage stamp to give it an official appearance. There were even stories of cheques being written on toilet paper and beer mats.

Ireland had a population of 3 mln at the time and their 11,000 pubs and 12,000 shops became the substitutes for the banks.

The system worked because it was based on local knowledge and trust. Those who were exchanging checks and IOUs knew each other well.

Antoin E Murphy, who carried out a study on the strike’s effect, found the public’s ability to assess risk “was based on a vast pool of information available to transactors on the credit-worthiness of other transactors.”

The accuracy of their judgment was demonstrated when the strike ended with most pieces of paper turning out to be worth the value that was written on them. There were few insolvencies, and overall, imports, which were expected to be badly hit, were largely unaffected.

It’s all about the trust

Fast forward 47 years to the present day and we have a global decentralized peer-to-peer system in place, and like those using beer mats in Ireland during the banking strike of the 1970’s, it is based on trust.

Bitcoin not only removes the need for banks or any form of middlemen but it is also a proven store of value and a medium of exchange that is a safety net against the currency woes happening all over the world.

While 2016 seemed to be the year of Blockchain, I believe in 2017 we will see the focus shift back to the beginning of this financial technological revolution we are living through, which all began with Bitcoin.


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