Why Banks Are Doomed: Technology And Risk
by Charles Hugh-Smith
The entire banking sector is based on two illusions: 1) Thanks to modern portfolio management, bank debt is now riskless; and 2) Technology only enhances banks’ tools to skim profits; it does not undermine the fundamental role of banks. The global financial meltdown of 2008-09 definitively proved riskless bank debt is an illusion. It’s not just that banks are no longer needed – they pose a needless and potentially catastrophic risk to the nation. To understand why, we need to understand the key characteristics of risk.