Google Bank

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Banking is a proxy business, providing a virtual segregation out of single account by using different accounting books.

Say,
- Swiss private bankers have many accounts for customers, but actually they have only one bank account in a bank.

- Citibank Singapore has many accounts for customers, but Citibank has only one account in the central bank.

Again, banking is a proxy business, creating virtual segregation through bookkeeping, and creating many accounts for customers, based on one account.

Theoretically, this virtual segregation of accounts can be automated. To make it simple, let us focus on only deposit account. So long as the summation of the virtual deposit accounts outstanding is equal to the source account outstanding balance, we can keep splitting one account into two accounts by adding unique identifiers (new book names). Also once we delegate the ability to split the accounts to create new accounts, practically, we are delegating the banking capability (proxy capability).

So suppose, we set up an internet bank (B1) in U.S. having one central bank account at the Federal Reserve Bank. The internet bank (B1) has a button to click, "create a bank". Once click the button, it creates another bank (B2) by splitting the central bank account of (B1) virtually.

(B2) has the same button "create a bank", so we can split the bank account of (B2), to create the third bank (B3) and the fourth bank (B4) so on.

This process is recursive and it can continue infinitely, creating a tree structure with the root node of the central bank account. This can be fully automated by a program, just keep adding a new bank node out of the existing bank node.

The benefits of this virtual banking system are:

1. All the customers are sharing the same central bank account virtually, which has no credit risk. No need to worry about if banks are safe or not. Once this system is in place, people might wonder looking backward, why we used to have the intermediaries just to create credit risk (bank default risk).

2. There is no human intervention. This is just a system. All we need is just direct linkage to the authority which has the right to print money, and automated way to keep sharing the access to the monetary authority.

3. This is great one step forward in human history, to delegate the access to the safe place (no credit risk), to each individual level. And there will be less reason to inject tax payers’ money to those too big to fail.

This idea may sound a bit funny at this moment, the world economy, however, is getting more volatile with the advancement of financial technologies. And once we saw a very big economic crisis, such as, Japanese Government bond default triggering massive sales of US treasury, so on, securing the access to the place where individual can safely place their money on, will become a higher priority for sure.

Also there might be a concern over money laundering, with this proxy idea. But the reality is, banking is proxy business by its nature, as having one account in central bank and transfer money within the central bank. In addition, Banks are trying hard, with KYC (know your customer), but sometimes even official identification documents can be purchased in third countries at very cheap price.