Retail and Wholesale Level Banking

My blog entry prior to this one touched on the Retail/Wholesale levels of Banking.  It had some links explaining the definition of Retail/Wholesale levels for background information.  This morning I read this link:

http://www.huffingtonpost.com/rj-eskow/yes-glass-steagall-matter_b_8579520.html

Note:  I am finding it more convenient to insert the entire link when it contains or condenses the subject line and bolding that portion.

Various definitions found by Google search on Retail/ Wholesale Banking define them from different perspective frames.  In my own point of entry to the problem domain, Retail level is user consumer (little people) and accounting for their real money transactions and making loans in real money (created out of thin air as debt based money) and receiving payments on those loans.  Wholesale level is (big people) business enterprise. 

The little fish business enterprise on the Wholesale level of bank business are more like the little people at the retail level to the extent that there is small difference.  They take out bank loans of real (debt based) money and pay them back with the same real money.

What really makes the difference between Retail and Wholesale banking?  Banking is about Money Supply . 

Money Supply is defined by different levels of Money or call it degrees of Moneyness.  The degree is defined by M levels but really it is a degree ranging from hard money to degrees of softer money all the way out to make believe money which is really soft and abstract having potential value only to the extent there is a belief that it does.  In reality value at the far end of make believe is held to account for its real value in terms of hard money if it can be exchanged for hard money.

If there is not enough hard money currency, the kind of money that little people use mostly at the Retail level of banking for those holding financial paper funny money associated somehow with  hard money evaluations by wishes, guesses, insurance, flim flam, etc to actually get their hard money by changing whatever they have into currency then where does that currency come from?

Bail out, of course.  Bail out is a concept applicable to the Wholesale level banking business.  In the Information Age the entity relationship among entities is described as Entity Name to Entity Name.  Information is a conceptual thing and in the Information Age new entities emerge because a higher level of abstraction can detach  their logical properties from their tightly bound physical properties.  New structural relationships emerge.  Often because there is a financial incentive called make money.

Socially our Entity to Entity relationship is changing as well.  Detaching logic from it physical binding,  creating new structures.  That is another matter.  I digress but it makes a point.

Back to the link: http://www.huffingtonpost.com/rj-eskow/yes-glass-steagall-matter_b_8579520.html  

The repeal of the Glass-Steagall Act let the fox in the hen house.  The same fox could have its cake and eat it too.  The walls between Retail and Wholesale level banking business were removed.  The fox was in the hen house because the entire fence was removed.  Bad day for the chickens!  Of course it was because they were having a bad day in the first place that caused the fence to be put up.  They been there and got eaten before.

Bankruptcy was the rule on both sides of the Retail/Wholesale level banking business that kept the game more or less fair unless the rules or power to enforce them changed.  Social conscience was a referee.  When bankruptcy no longer applied on the Wholesale side of Banking business currency serving the Retail side had to be expanded to settle Wholesale side obligations.

Our entire concept of money in terms of what is and what is not generic conceptual "money"  must be rigorously identified by a fundamental definition and distinction between Official Currency Medium of Exchange and anything else all the way out to dreams and schemes that are something that can be traded for Currency.

Banks cannot be trusted to manage Retail and Wholesale Currency business dealings with any Retail or Wholesale entity as they are defined by current definitions in concept or law.  They can only be trusted to Account for matters in involving Official Currency on both levels. 

How is this done?

Binary, of course!  A thing is or it is not.  That is binary.  Works for me.  It is one thing or it is another.  It is an apple or it is an orange.  In an alternate binary universe at a higher conceptual level an apple may be considered present or absent.  That is two different natures of the same thing.  Two different states of being.  That is fine for the hardware computer world and makes computing possible by this binary relationship.  On the software conceptual side it is a one or a zero.  Two different intrinsic things.  One is an Apple the Other is an Orange.  Two different things with some shared entity attributes, methods and messages that it can receive, act upon and transmit.  Some unique things that are exclusive to each that make them different.

All Money is either Currency or it is not.  It is Currency or something that can be valued in terms of Currency to be used in the medium of exchange but is not currency. 

The problem is this:  The generic conceptual entity "Money" is the Problem Domain of a very old legacy system in which it plays a role as a medium of exchange.  Before the idea Money can be used as Currency in exchange transactions it has to be created as an object entity on the conceptual level.  Legacy thinking produced a mixed up but working system of money.  Mixed up and working by and for the creators of the legacy system by bankers for their benefit.  Mixing up physical and conceptual entity attributes and the controlling top level object class to which they belong.

Our greatest achievement that has become the model for combining physical and logical structures to serve us in the modern world is hardware physical systems on which levels of software exist at the most fundamentally related one to one granular level of a single instance of a granular piece of pure software logic being related to a granular piece of physical existence or non existence on the physical level.  It is the physical non existence to which a conceptual attribute is assigned that gives a conceptual meaning to something that is not in real time existence.  The neat trick of the human mind.

Our oldest legacy system is founded on presence/non-presence state of being.  In the real world of our perception or not of this world.  A higher level conceptual world beyond the real time space one.  There are always higher levels.  Reality has to start somewhere where the rubber of time/space meets the road.  We determine where that is and define it as self evident in existence, real or purely unbounded conceptual existence truth to be self evident.  We build our systems on that.

Our best model on which to design a monetary system today is the Internet and World Wide Web.  That technological system serves and serves up on a client/server basis many things on a growth line towards everything, one way or the other.  It is our grandest design.  Our legacy system grandest design to organize and integrate the world is the Money System.  This old system in now a square peg that is being pounded into a round hole.  Square and round are binary physical forms.  The monetary system must be restructured and the best model is the integrated hardware and software systems that we have created to date.  They are the product of our best conceptual thinking and understanding of how to use the natural physical properties of this world to express our abstract conceptual structures to serve us.

The problem with the legacy banking system is that it is based on the foundational supremacy of controlling the presence or absence of a conceptual entity called money as a medium of exchange expressed as a number that is either absent or present to some numerical degree greater than zero that the banking system totally controls.  The power to do that where it comes from and how it is applied is another matter.  Banks create money from nothing through its sole power to create an entity with a declared value and therefore conceptual presence as the binary alternate of its state of non conceptual being.

The problem with the legacy banking system is that the software system was created before a real hardware system to manage it.  Hardware progressed from stones and notches in sticks to serve the software, is still serving the software of modern banking.  The problem with advancement of hardware computing systems and their related software to make universal applications is that they are logical.  Based on real physical relationships of hardware to logical conceptual software structures of Information Engineering.

Hardware and software of the Information Age change prior systems by being a better method to structure them and their relationships.  Often exposing fundamental failings and inconsistencies of existing systems. 

Big Tech computing is built on the open source of the universal ability for anyone to structure a hardware/software system on any scale based on the fundamentals of presence/absence of an electric charge and its direct meaning conceptual relationship building of software structures.  Software and hardware are directly related at every level of implementation.  What exists electronically in hardware exist in its counterpart software.  It is complex but tightly bound.

I see this:  The Currency System and its end users, any entity that transacts with Currency, should be restructured by Information Systems Design.  Banks would remain Accounting entities for currency transactions.  Bank would remain in the loan origination business but not by creating money out of nothing.  A Currency manager independent of the Banking System would create currency entity units and as system to manage them in direct relation to ownership of currency recorded in the banking accounting systems.  All currency accounting systems at banks should be aggregated on some elements to a single Accounting Aggregation Entity.

New Retail/Wholesale level criteria:

If it deals with Currency it is Retail.  If it deals with non currency finance it its wholesale. 

Currency is a walled garden.  Bank and Finance institutions must play in one or the other but not both.  They are tow different things.