That’s not how it would work. Everything would be remote hosted. Your local machine would not have any storage. It would be akin to a WYSE terminal with network connectivity, USB ports for peripherals, and an HDMI output for your monitor/TV. Everything’s in the cloud.
Even in your example, however, all that’s required is a kernel-mode exploit to sniff all of the channels into your processor, and your data is no longer secure.
Microsoft’s already going “to the cloud” with Office 365 in the business world. All of our email is stored on MS servers with remote hosts handling all mail exchanges. This is an end run for Microsoft to finally get what they believe is theirs and no longer have to worry about losing money to licensing for their Office products. The next generation of corporate desktops will be hosted by Microsoft. Mark my words.
“Microsoft’s already going “to the cloud” with Office 365...”
I think you are right. I would never do it myself and I think business would go for a private cloud maybe, but that is where MS is going.
Except for the huge businesses, which basically don't care, since they hire morons, inadvertently, most serious, smoothly-running businesses, medium and small, will bail wholesale.
Mark my words.
Some folks will host. But it won’t be universal. Too many companies like to own their own data. And too many have issues with their network. Nobody wants to be in a situation where when the internet goes down productivity ends. Sorry but dumb terminals are the past, and the industry has been trying to re-package them for 20 years, they managed to find one that’s kind of popular but it won’t take things over. It still has too many of the problems that are why dumb terminals are the past.