Money, where is it going? and how does it get there?
Today, I discover that the fastest way to pay a bill is with my debit card. AND THAT IT TAKES 3 BUSINESS DAYS.
Think about that for a minute.
I remember seeing a program about how cheques ‘cleared’ in the ‘olden days’ (1970s).
When a bill was payed at a bank with a paper cheque, it was gathered up with all the other cheques, and sent down to London, where the paper cheques where whisked between clearing branches of the appropriate banks, this process took at most 4 days.
Now, in the time where I can communicate securely with almost any point on the planets surface with a delay only measurable in the milliseconds, it takes one day less.
How about cash you ask… SURELY, that is processed more quickly, no clearing is needed. Nope! Cash takes LONGER, between 3 and 4 days.
It is not only those payment methods, the old ones, the one that used to take 4 days to shuffle physical paper around the country? That now takes between 4 and 7 days to clear.
What is going on?
Well, I have a theory.
Banks control all money transactions, and if they can interpose a delay between the point of taking the money and the point of putting it somewhere else, why, they can USE the money in the interim.
This delay has nothing to do with technology, nothing to do with what really happens.
Banks control that delay to enhance their liquidity.
If, every month, they handle the transfer of a salary payment into a persons account, and for that payment, they ‘hold’ the money for 5 days, thats a sixth of the month (if you include weekends).
So, they effectively HAVE 1/6 of that persons wages, all the time (when averaged over everyone)
Not only that, but that money is transferred multiple times, each time, being ‘held’ by the banks. Oh, what a lovely scam.
And how can they improve profitability in these uncertain times? INCREASE THE HOLDING TIME.
Who is watching this? who is controlling this?
Shockingly, nobody (that I know of)