Bankers are counting the days until they can do away with cash altogether

Financial institutions are constantly creating ways to exploit their customers, argues Malcolm Parkin

It is now hard to imagine why banks have branches at all. They resent their social function because servicing the private individual is a nuisance and an expense. It has no useful money making purpose for them in today’s digital and online age. Thus they close branches, and are now closing cash machines. In certain situations, depositing cash with some banks incurs a fee; such is their intent to discourage its use.

The digital age largely did away with the need for actual cash – today just three per cent of money is cash – and the banks saw a golden opportunity. For as long as we all did not simultaneously want to withdraw our money in cash, they could create computer entries to satisfy demands such as loans, and could then simply handle inter-bank movements of their magic money via their own Automated Clearing System BACS.

Banks also have an accounting system that is unique, in that loans in their balance sheets are shown as both liabilities and assets. Thus their books balance. It is beyond belief. A loan that may not be repaid is allowed to be shown as an asset. Their argument is that the value of the securities they hold, to cover the loans they make, exceeds the value of those loans.

What a dodgy premise that is, as the secondary bank failure of 1973 showed, when the value of property used as security for loans was firstly found to be optimistic, and then often worth less than valuation when sold to repay those loans. As a