Why banking is in trouble

Or rather, the interest based business model of banking is under threat. Obviously I am employed by a bank and thus, banking is my bread and butter... so I must be an alarmist. The recent Bank of England working paper shows that the low/negative intrest rates are not an anomaly. In fact intrest rates have been on the decline since the 14th century.

If this is not alarmist enough. Here is the same data in in a narrower plot:

Why should we worry? Banks in many countries earn their money primarily by pocketing the difference ('spread') between the (low!) interest the give on savings and the (high!) interest they charge on loans. With this income they subsidise the payment traffic. Free flowing payments is the oil in the cogs of liberal economies. May be this trend will expose the true cost of banking; but then again: be careful what you wish for.

Data from:

graphics inspired on: