Chapter 6 Postal Banking

The creation of postal service banks, often referred to as postal banking, is an intriguing concept that ties into the broader discussion of monetary systems, debt-based banking, and government-issued currency. Postal banking involves using the existing infrastructure of a country’s postal service to provide basic banking services, such as savings accounts, small loans, and payment processing. Here is how it relates to the debate between debt-based banking (Federal Reserve System) and government-issued, debt-free currency.

6.1 Postal Banking as a Public Option in Banking

Postal banking represents a government-run alternative to private banks, offering basic financial services to the public without the profit-driven motives of private institutions.
This aligns with the idea of government-issued, debt-free currency, as it emphasizes public control over financial services and money creation.
By providing banking services directly through a public institution, postal banks could reduce reliance on private banks, which are central to the debt-based Federal Reserve System.

6.2 Financial Inclusion

One of the key arguments for postal banking is its potential to address the issue of financial exclusion. Millions of Americans, particularly in rural or low-income areas, lack access to traditional banking services.
Postal banks could provide affordable, accessible financial services, reducing the need for predatory alternatives like payday loans or check-cashing services.
This would democratize access to financial services, which is a criticism of the current debt-based system that often favors those with established credit or wealth.

6.3 Reduced Dependence on Private Banks

Postal banking could reduce the public’s reliance on private banks for basic financial services, thereby weakening the dominance of the debt-based banking system.
If postal banks were allowed to issue loans or provide credit, they could potentially operate outside the Federal Reserve’s debt-based framework, offering a model closer to Lincoln’s Greenbacks (government-backed, debt-free money).

6.4 Stabilizing the Economy

Postal banks could act as a stabilizing force during financial crises. Unlike private banks, which are profit-driven and may restrict lending during downturns, postal banks could continue to provide credit and liquidity to the public.
This would complement the Federal Reserve’s role as a lender of last resort, but with a more direct focus on serving individuals and small businesses.

6.5 Potential Challenges and Criticisms

Competition with Private Banks: Private banks may oppose postal banking, arguing that it represents unfair competition and could disrupt the existing financial system.
Limited Scope: Unless postal banks are given the authority to issue loans or create money, they would primarily serve as a savings and payment platform, limiting their impact on the broader monetary system.
Political Risks: Like government-issued currency, postal banking could be subject to political interference, potentially leading to inefficiencies or mismanagement.

6.6 Postal Banking and the Federal Reserve System

Postal banking could coexist with the Federal Reserve System, but it would challenge the dominance of private banks in money creation and financial services.
If postal banks were allowed to issue loans, they could create money in a way that is less tied to private debt, offering a partial alternative to the debt-based system.
However, postal banks would likely still operate within the broader framework of the Federal Reserve System, as they would need to comply with monetary policy and regulations.

6.7 Historical Context

The U.S. actually had a postal banking system from 1911 to 1967, which provided savings accounts through post offices. It was created to offer a safe alternative to private banks, particularly for small depositors.
The system was eventually phased out as private banks expanded and became more accessible, but its revival has been proposed in recent years as a way to address financial inequality and exclusion.

6.8 How Postal Banking Relates to the Broader Debate

Proponents of Government-Issued Currency: Postal banking aligns with the idea of public control over money and financial services, reducing reliance on private, profit-driven institutions.
Proponents of the Federal Reserve System: Postal banking could complement the existing system by providing services to underserved populations without fundamentally altering the debt-based framework.

In essence, postal banking represents a middle ground in the debate. It doesn’t fully replace the Federal Reserve System or private banks, but it introduces a public option that could address some of the criticisms of the current system, such as financial exclusion and over-reliance on private debt.