One of the benefits of Uber and Waze, to cite just two, is that these companies have disrupted highly regulated parts of our lives. Bitcoin shows the promise to do the same in monetary matters and other financial services. Further efforts to innovate in financial markets will improve our lives (e.g. Apple Pay), expand sources of capital (e.g. hedge fund commercial lending) and foster new financial services (e.g. C2FO).
This article, "What Failure of Macroeconomics", provides an interesting analysis of the last banking crisis in 2008. Three key points:
"Banks emulate each others' strategies...., they herd. The failure of one is therefore likely to be correlated with the failure of others.
One bank's failure will have a chilling effect on others; they'll try to hoard cash by withdrawing credit.
Non-financial firms [commercial enterprises] can't easily switch away from bank finance."
As more and more companies continue to disrupt the regulated financial service(s) industry, the reliance on commercial banks for finance will be reduced. As this reliance on commercial banks declines, the impact of changes (wild swings) in bank commercial lending levels will be reduced. That is undoubtedly a good thing as the possibility of a future banking crisis is diminished.
One issue to ponder. If commercial banks play a smaller role in commercial finance, will the Fed still be able to effectively control the money supply. How will the government manage economic policy without an effective Fed. Don't lose sleep over this question and the upcoming inability of the government to effect economic policy. We will just sort it all out in the new, disrupted, innovative financial services market.
This post may just sound like another commercial for FA Hayek, but I think regulated industries disrupted by a Bitcoin or an Uber strongly suggests that the role of government will be reduced in the future. What the new, reduced scope of government should be is the really interesting question.
(Note: Earlier posts on the financial crisis are here.)