keyholez:

fiatluxemburg:

Will recent events result in a more decentralized, robust system that more closely approximates what Interfluidity describes?

Lolz. Yeah right. (By which I mean: this is not the trajectory that things are on right now, although it could be.) Every policy effort thus far has gone in exactly the opposite direction — more centralized, hence less robust — which is part of the reason I’m so “emotional” about these goings-on. The opportunity for change created by the crisis has been squandered, or rather exploited by the surviving behemoths to become even more behemoth-y.

Well, yes. But consider something like peer-to-peer lending (which I blogged about at work). Wikipedia:

Person-to-Person Lending models attempt to reintroduce the social components that are lost in traditional centralized banking models, while maintaining a mixed quantitative/qualitative balance of diversification - as opposed to the purely quantitative diversification available through institutional lending. They also attempt to take advantage of the lack of overhead implicit in being primarily online ventures, thereby reducing the infrastructure costs (such as physical branches) inherent in traditional bank lending models. These cumulative savings may serve to narrow the bid/ask spread. For example, a bank may offer its deposit account customers a meager 1% return, yet, at the same time, lend out those same customer funds (on deposit) to the bank’s other customers who need to borrow - and for a much higher rate of interest - while pocketing the difference. Person to Person Lending attempts to correct this inefficiency and create a “virtuous cycle” which would allow those who have funds to lend to garner a better return, while, at the same time, providing a more favorable interest rate to those who need to borrow, by removing the bank from the equation.

And it’s doing pretty well:

In 2005, there were $118 million of outstanding peer-to-peer loans. In 2006, there were $269 million, and, in 2007, a total of $647 million. The projected amount for 2010 is $5.8 billion.

I recognize this is a pretty minor phenomenon in the grand scheme of things. However, there must be some money getting put into this alternative banking process that would have entered the normal (or I guess they call it shadow sometimes?) financial system had it not been for a loss of faith in the way we were doing things. And this does start to resemble the decentralized decision making ideal:

Person to Person Lending allows individual participants to directly control the allocation of their own capital, as opposed to the traditional bank lending models which pool all funds together and completely remove the individuals who actually own the money from the decision-making process regarding who may borrow that money, for how long they may borrow it, and under what rates and terms.

It might be a better way to allocate capital. It also might expand in scope faster than it would have as a result of the “crisis.” On the large scale it might be trivial, but in the long run it might become significant.

If I/”we” have the courage of my/”our” convictions we should be betting on alternatives to the extent that they exist. Musn’t that ever growing behemoth eventually collapse under its own weight, even if it is too big to fail?  Won’t the more resilient and effective arrangements win out? And if not, why not?

Also, would that imply we are all doomed?