Banking extracts value
Banks sell themselves as facilitators of economic growth. This is a fundamental misdirection. Banks are extraction mechanisms that systematically capture value created by others.
The value creation myth
The banking narrative positions financial institutions as essential lubricants for economic activity. Without banks, we’re told, capital cannot flow efficiently to productive uses.
This framing obscures the actual function: banks extract value from both sides of every transaction they facilitate. The “service” is simply the mechanism for extraction.
Real value creation happens when someone builds something, grows something, or solves a problem. Banks insert themselves into these processes not to enhance them, but to capture a portion of the value created.
Information asymmetry as extraction tool
Banks operate on systematic information advantages that they carefully maintain and exploit.
They know your complete financial position while you know only fragments of theirs. They understand risk calculations you cannot access. They have regulatory relationships you cannot penetrate.
This asymmetry isn’t accidental—it’s the foundation of their extraction system. Equal information would collapse their profit margins immediately.
The compound extraction problem
Banking extraction compounds over time through several mechanisms:
Interest rate manipulation - Banks borrow at rates they help set through central bank relationships, then lend at multiples of those rates.
Fee multiplication - Every banking service generates fees that compound across transactions, creating extraction layers on extraction layers.
Credit creation privilege - Banks create money through lending, essentially printing value they then charge interest on.
The mathematical result is that banking systems extract exponentially more value than they could ever create through legitimate service provision.
Regulatory capture completes the system
Banks don’t just extract value through market mechanisms—they capture the regulatory apparatus that could limit their extraction.
Banking regulations are written by former bank executives, enforced by regulators who rotate into banking jobs, and designed with “systemic stability” frameworks that prioritize bank profitability over public benefit.
This isn’t corruption in the traditional sense—it’s structural capture that makes extraction legally mandatory rather than merely profitable.
The productive economy subsidy
Every dollar extracted by banking is a dollar not available for actual productive investment. This creates a systematic wealth transfer from value creators to value extractors.
Small businesses pay extraction fees to banks that then compete with them through bank-owned investment funds. Workers pay banking fees that fund the very financialization processes that suppress their wages.
The productive economy essentially subsidizes its own parasitization.
Digital extraction amplification
Digital banking has amplified extraction capabilities exponentially:
- Algorithmic pricing - Dynamic fee structures that extract maximum value from each transaction
- Data monetization - Customer financial data becomes a tradeable commodity
- Platform dependency - Digital payment systems create inescapable extraction points
- Micro-extraction - Fractional fees on previously free transactions
Technology didn’t democratize banking—it perfected extraction.
The central bank backstop
Central banks provide the ultimate extraction guarantee: when extraction becomes so extreme that it threatens system stability, public resources bail out the extractors.
This creates moral hazard where banks can maximize extraction knowing that extreme consequences get socialized while profits remain private.
The “too big to fail” doctrine is actually “too extractive to fail”—banks can extract value until they threaten systemic collapse, then extract public value through bailouts.
Alternative value systems
Recognition of banking as extraction rather than service creation points toward fundamentally different approaches:
Direct productive investment - Capital flows directly from savers to producers without extraction intermediaries.
Mutual credit systems - Communities create money through productive agreements rather than debt relationships.
Public banking - Banking as infrastructure rather than extraction mechanism.
These alternatives exist and function. They’re suppressed not because they don’t work, but because they don’t generate extraction opportunities for existing power structures.
The extraction imperative
Banking extraction isn’t a side effect of financial services—it’s the primary function disguised as service provision.
Understanding this reframes economic policy discussions entirely. The question isn’t how to make banking more efficient, but how to minimize the value extraction that banking represents.
Every dollar that flows through banking systems gets taxed by extraction mechanisms that contribute nothing to productive value creation.
Systemic implications
When extraction systems become large enough, they begin to shape entire economies around extraction rather than production.
Financialization represents the triumph of extraction over creation. Economic activity gets reorganized to maximize extractable value rather than created value.
This explains why productivity gains don’t translate to widespread prosperity—increased productivity just creates more opportunities for systematic value extraction.
The banking system doesn’t serve the economy. The economy serves the banking system’s extraction requirements.
Banking’s fundamental value proposition is a lie. They extract value from productive economic activity through information asymmetries, regulatory capture, and systematic exploitation of money creation privileges.
Understanding banking as extraction rather than service provision clarifies why financial systems consistently produce inequality and instability—they’re working exactly as designed.