H&F: Who is Jonathan Macmillan? It's a composite that was created by the anonymous person to whom I'm speaking and another person, correct?

Jonathan Macmillan: Yeah, so the other person is an economics editor at a newspaper in Switzerland. He has a PhD in Economics. He's the guy with the theory. He wrote about banking and banking regulation in his PhD thesis.

H&F: And the anonymous person to whom I'm speaking right now is a banking analyist.

Jonathan Macmillan: Yeah, I’m an investment banker. I worked in London before and now I’ve been working in New York for a year. I have the practical background and knows about all the fancy investment bank products, like derivatives.

H&F: Why is the name of your book "The End Of Banking"?

Jonathan Macmillan: Many people have a misconception of banking; they think that we take money from depositors and give it out for mortgages, for small business loans, for student loans. But in reality, banking is the creation of money out of credit. So when we extend a loan, it's not that we take existing money from someone else and give it to a borrower; it's really the creation of new money from credit. And when we talk about the end of banking, we are saying that this model no longer works. And that's because we have had a digital revolution, and that means ... we can no longer control or regulate banking, and we don't need it anymore.

H&F: So when you say the digital revolution changed this banking model that had existed for decades, what do you mean? What changed?

Jonathan Macmillan: In the Industrial Age, as you can imagine, everything had to be recorded on paper. So when you extended a loan, the whole bookkeeping process was all done on paper. And that kind of constrained banking had a very simple setup. So you had one bank, with one book, and one balance sheet. And they had the loans on the one side, and deposits on the other side. But with the digital revolution, we have electronic communications, we have electronic networks, we have a lot of computational power. So this constraint was lifted, and banking could detach itself from the bank balance sheet.