You all have laid out solid and fundamental reasons as to why banks are hated but I believe the biggest one was missed and I will explore that. The biggest reason why I and most people here probably hate banks is because
-They exclude more than 75% of the world from financial services
And that fact alone makes me sick to my stomach. I could go on a rant for two hours about how inhumane, and terrible that is but I think we all here know the power and ruthless nature of banks. Think of that 75% next time you think we are just mad at the banks alone.
This is a really good point. I had honestly never considered that. I had thought people were primarily against banks because they disagreed with the ideas of loans and interest rates, but this casts a whole new light on the subject.
Although, I cannot help but wonder about other functions banks perform. Apologies to those who are already know this, let me summarize a few details to give the background for my question.
One requirement for currency to be usable is purchasing power stability over time, and in this sense Bitcoin is a heavily deflationary currency. Which makes it great as a speculative asset, but terrible as a usable currency.
One way the Federal Reserve controls inflation is through adjusting the fractional reserve ratio, which determines how much banks can lend relative to the deposits they have on hand. For example, if a bank has $100 in deposits, and the fractional reserve ratio is 10%, then the bank can lend out 90% of its deposits. But if I understand it correctly, the bank defines that $100 as the 10% held in reserve, and then lends out $900. While this sounds questionable, and means approximately 90% of the "money" in circulation is not actually backed by a physical paper bill, it also means the Federal Reserve can finally tune the amount of money in circulation by adjusting the fractional reserve ratio. If the rate of inflation is too high (by which I mean price-inflation), they simply increase the reserve ratio and banks will be able to lend less, and thereby the amount of the currency decreases. And vice versa if they are trying to counteract a deflationary cycle. I speak the perspective of being within the United States, because that is what I am most familiar with. But as far as I know the same basic mechanism is used anywhere with a central bank.
Bitcoin's deflationary problem is very clearly evidenced by its more than 1000% increase versus the US dollar in the past 12 months. This has caused it to be dropped as a method of payment from a number of major players who were beginning to accept it. So this makes Bitcoin, in its current state, a poor contender as a currency or as a stable store of value.
Now I do not want to defend the current banking system in any way. The central role that they have played an economic crises, providing funding to too many dictators and despots, and their exclusion of the vast majority of the world population, are inexcusable and should be changed. But I cannot help but think that there must be some place for a banking-like system in Bitcoin, if for no other reason than to help stabilize the currency and allow it to be usable as one.
I fully acknowledge that this is rife with potential problems and pitfalls, and could just open the whole Pandora's box of the current banking system. And I am relatively new to Bitcoin and the larger crypto community. What do other people think about this? Is this the problem I think it is, or am I misinterpreting something fundamental about Bitcoin?
Also, hello everybody. This is my first post in a forum, ever in my life. I am always reading, but I have never felt comfortable enough to post. But godzillarekt007's point inspired me to try and join the discussion. So, hi.
