I'm aiming to emphasize the positive in life more, so rather than talk about the large number of things I strenuously disagree with (most notably an invocation of Lee Ohanian's wildly wrongheaded work on 1937) in this recent John Cochrane talk let me just focus on a rather intriguing idea of his that conventional retail banking functions are obsolete:
Here we are in a golden moment, because technology can circumvent all the standard objections. It is said that people need liquid assets, and banks must borrow short and lend long to provide such assets. But now, you could pay for coffee with an electronic transfer of mutual fund shares. The fund could hold stocks, or mortgage backed securities. Nobody ever ran on a (floating-NAV) mutual fund. With instant communication, liquidity need no longer coincide with fixed value and first-come first-served guarantees.
That sounds unworkable due to financial market turbulence. Equity markets display disturbing large day-to-day and even hour-to-hour price fluctuations, and it would be very confusing for your cup of coffee to cost substantially more on Tuesday than it did on Wednesday. But the underlying impulse here seems correct to me. There are a lot of economic problems associated with the need to generate currency that's useful to firms and households for the practical needs of conducting transactions. If we had a pure barter economy there would be no recessions and no banking crises. But it would be incredibly inconvenient and overall living standards would plummet. Technological transformation of payment systems should, in principle, allow us to address a lot of these practical issues in different ways and perhaps eliminate some of the problems.