Banks are a riddle wrapped up in an enigma. We all kind of know that they do stuff with money we don’t understand, while the last crisis left a feeling of deep mistrust and confusion. We try to shed a bit of light onto the banking system. Why were banks invented, why did they cause the last crisis and are there alternatives?
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Banking Explained – Money and Credit
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Misses the part of the housing crisis where the government forced banks to make these mortgages in hope of lifting blacks out of poverty? Then says that the money vanished into thin air when really it came out of the bank's pocket because they couldnt recoup the money by foreclosing the houses? Then makes it seem like they were evil for asking for money from the government that made them bankrupt? Weird look on banks man.
Uh, negative interest, banks default more than people, government rewards them for it, asset seizure due to gross and deliberate mismanagement ... Banks are where your money is held hostage until the bank/governmentment cartel decides to steal it. Maybe they'll invent a crime first as an excuse.
Technology is advancing rapidly and humanity is stagnating because of an obsolete and decadent system called monetary system. Education, innovation and development are not a priority for the monetary system. It is the economic benefits of banks and large corporations that matters most, leaving the human being at a second or third level. I do not logically see a developed world within a monetary system. In fact, it should collapse at any time. It hurts that the video does not speak of the true intentions of the monetary system, at the hands of a few troglodytes, who only seek the economic benefit over human beings and their environment. There is no world of eternal resources, nor will there be a human being who pays for it.
Yeah, it's so ultimate that the processing power to mine it is shredding the Co2 levels in our atmosphere and making global warming worse. Because that's apparently a good thing? And what do we get in return? An unstable currency that is almost solely used for speculative purposes only and not accepted by a vast majority of merchants?
it has little to do with the banking system ?
Please do some research. Bitcoin is the ultimate solution to every single problem in the banking system.
Remind me your answer in few years, you will understand better.
I disagree with this video, so it is a dislike from me. Even though lending is useful for wealth and economic growth, considering how devastating the 2008 financial crisis was and how much money is wasted paid on interest (especially taxes spent on interest), it is simply not worth the risk.
But historically speaking the 2008 crash was not that devastating. Unemployment rose by about 5% and GDP for most countries dropped by about 2-4%. Significant, sure, but nowhere near the levels of the great depression (with an increase of 20% to the unemployment rate), or the numerous panics before the creation of our modern banking system. Also whose to say if the money spent on interest is worth it or not? Interest is the expensed paid for getting money earlier than you should've. If the borrower invests the money properly, they can more than make up for the interest they have to pay. Opportunity costs.
Nonsense, banks just take your money, give it to someone as loan on 5% interest, keep 3% of that and give 2% to you as profit. New form of economic slavery. Only hell fire can fulfil your banking greed.
Fucking what? How is that slavery? You're not forced to give the bank your money, you choose to because the bank gives you a free 2% interest in profit, something you wouldn't have gotten otherwise. Everyone wins. You get a free 2% profit, the bank gets a 3% profit, and the borrower gets the amount of money he desired to attempt a venture that will earn them more than the 5% interest they have to pay.
Probably one of the worst video put out by this channel sugar coated version of banking doesn't even mention the difference between fiat currency and actual money. If the general public actually knew how the banking system actually worked they'd be rioting tomorrow !
Wojtek The Bear that's oh so nice for you. Though not knowing the simple definition of simple words makes me think your opinion is just kinda meh ! It's like religious idiots saying but the theory of evolution is just a "theory" not knowing a scientific theory has a completely different meaning from the every day definition of theory meaning guess which in science is a hypothesis.
Money and currency are two completely different things and I suggest you do some research and find out what that difference is. Or maybe you could ask your bank manager (boss)
Edit : wait a moment I didn't mention that gold was actually money and fiat currency is backed by nothing but the actual bank and people believe it has actual value . So you do k ow the difference between money and currency ! PMSL what the fuck ! Is the cognitive dissidence driving you mad ! You don't want to accept the fact the banking system is deeply corrupt to its very core and these banking cartels keep the human population in continual bondage! But as technology improves and hopefully one day we get out into space and not just the few but regular folk to go work and live. Thus system will eventually crumble like all other systems and we will come up with a better one that benefits the human race as a whole. We will at one point have to move to a universal living wage as jobs are taken up by automation a good chunk will disappear over night once self driving cars are perfected. The elite know this and unless they want to be murdered in the the street from the mob then they are going to have to come up with something to elevate the pressure and make people feel they have purpose ,food ,shelter and of course are still consuming the latest fads and gadgets etc. Having a space mining boom would be a perfect goal for the human race next.
This is utter garbage, they cherry picking information, factional reserve banking, what about that, it's selling B.S. Rate rigging, exchange rate rigging, it's a nefarious cabal, 99% controlled by Jewish interests. 0.2% of the worlds population are Jews yet they control 99% of the entire worlds money supply, only roughly 3 ot 5% of the world money supply is in physical currency the rest is just digital, backed by fuck all, it all runs on I.O.U's FACT! They own the film industries, worlds biggest news/media outlets, they are into some the the biggest global money societal effecting industries around the whole world. All, headed for the most part by the Rothschilds who run everything, all the central banking systems in almost every country.
'When the Banks break, it is seldom the bankers who go hungry'. Mr Pump, Going Postal (Terry Pratchett)
I'm very glad to see the different models of banking are gaining ground today, and that the Banks were given a wake up call.
@+Wojtek The Bear I think you meant 'soapboxing', and if I sound like that, then my apologies. However, i do have a reservation about the banks since the recession. I'm sure there are exceptions of course. I was simply generalizing,
Ever wonder why a bank is called a bank? River banks contain, direct, and control the flow or current of the water. Pretty simple. Wherever the bank of the river goes, so goes the current. The bank contains the current or flow.
In a brief play as devil's advocate here, the big banks before the 2008 bailout didn't make risky loans in the early 00's apropos of nothing. They were encouraged to by government programs attempting to increase US home ownership and threatened with fines if they did not. Also, it was a moderate economic boom period and most US citizens were making riskier investments and making more frivolous consumption spending too.
I'd say the Fed's actions were typical behavior for a recession. I don't think it always the correct response. By the time of a recession, I think it's too late for policy change to help the situation significantly. I definitely agree that changes made too fast cause uncertainty in the mind of citizens. I'd advocate for an even more obstinate Fed. When there's a lot of money in the system and spending and liquidity is high, it leads from a higher peak from which to fall.
I think the problematic seeds were already sewn when the securities became overvalued by investors and banks. I would agree with you that it's not the concept of those securities that were bad. It could have been okay if they didn't get so heavily hyped.
+cataphracts123 This is where you got to watch so you don't conflate the Federal Reserve's actions with those of other entities. During this period, the Federal Reserve was only responsible for keeping money liquid. Basically they made sure that interest rates remained low. That's proper procedure after an economic recession (which the Tech Bubble turned into), and even then the Fed was aggressive in raising the interest rates once more when they realized the housing bubble could be a problem. Granted, they never really the full extent of the problem until after the fact, and to a layperson it might look like the Fed wasn't aggressive at all in raising interest rates, but that's only because there's a two period lag for the effects of an interest rate change to be fully realized, so central banks are generally very cautious in changing the rates. You don't want to raise interest rates too fast before you can tell if the economy can handle it.
Otherwise, also don't misunderstand what I was getting at with the securities. They started out pure and beneficial, allowing loaning institutions like commercial banks to diversify their mortgage portfolio and remove variability and risk in their profits. The mania this resulted in led to an increased push to give mortgages to riskier individuals though. Many banks would even advertise that getting a mortgage on a home was a guaranteed profit (as home prices were skyrocketing, so you could sell a home for way more than you originally bought it for, paying back the mortgage and then some), So when the housing market collapsed, these riskier borrowers were the first to default as they couldn't afford the loan in the first place and were waiting for housing prices to increase.
It's important to note that there were checks in place to prevent this. Agencies exist solely to analyze assets like the securities and determine their riskiness. Turns out though they weren't completely independent and had an interest in the securities being seen as safe as possible, so even when the securities were full of at-risk borrowers, the agencies continued to rate the bonds as A and AA, some of the safest assets possible. A lot of lessons were learned from this whole experience.
Certainly, but I think this is a "yes, and" situation. They were risky loans, but they were as safe as they could find at the time like you said.
You're definitely right on the Bush and Clinton thing. I know it goes at least as far back as Carter with the Community Reinvestment Act. There may have been other nongovernment factors involved in the increased housing market demand, but I am ignorant on how cultural history would contribute to this. I don't think the intent was bad, but I believe this was the natural conclusion of market manipulation by the federal reserve and programs like this.
That's not true though. Banks had been looking for a 'safe' asset to invest in. Previously they thought that the safe investment was developing countries. After all, it's impossible for an entire country could go bankrupt, right? Turns out that wasn't true, creating the Saving's and Loans Crisis. Lesson learned, the investment banks started looking for another 'safe' asset to invest in, this time seeing it in the rise of the technology stocks in the stock market. Well, surplus demand for these stocks created a buying mania, leading to an eventual crash of the market (the Tech Boom and Bust). This lead to them looking for yet another safe investment. Some bankers came up with the idea of pooling a bunch of mortgages together and then splitting up that pool in order to diversify risk of a mortgage failing. The idea being that even if someone defaults on the mortgage, the pool itself is still profitable, so banks still make money. Seeing this as a new safe investment, investment banks ate them up.
True, the Federal Reserve's lower interest rates didn't help matters, and Freddie Mac and Fannie May started following in the other banks footsteps, but the exuberance shown by the banks in investing in housing started before any program created by Bush or Clinton. It also wasn't a bad thing in and of itself. The problem was that there was only so many home buyers, so in order to create more and more of these securities, commercial banks had to loan out money to riskier and riskier home buyers and the risk these home buyers presented was never truly presented. That was absolutely no fault of the government.
This video is wrong. Not only is it wrong but it fails to explain anything of substance as to how money and banking actually work, or why they were screwed up in the past, or why they are so screwed up now.
I think this is a really simplified vision of the banking system. It can not be summarised into receiving money and lending it at a higher interest rate. However it can always be helpful for giving someone a basic definition of a bank and an idea about the subprimes crisis.
In fact, a bank lends out ways more funds than what it receives, so funds it does not own. It is called the fractionnal-reserve banking.
Except that's not true. Fractional-Reserve banking refers to the repeated loaning out of the same funds, so $1000 might be loaned out on an initial deposit of $100. That being said, THIS IS DONE BY A GROUP OF BANKS! A single bank can do it by itself.
Bob deposits $100 in Bank A. Bank A, under regulation by the Federal Reserve, has to hold 10% of the $100 as reserve, so they loan out the other $90. That's where the term fraction reserve comes from, because the loan is a fraction of the total reserve. So Bank A loans $90 to Jill, who deposits the money into her bank, Bank B. Bank B then does similarly as Bank A, taking 10% of the 90 ($9) and loaning out the rest ($81). You'll notice that never in this scenario has a bank lent out more than it was given as deposits. If you add up all the money outstanding though ($19 in reserve and $171 loaned out) you can see more money has been loaned out than was originally deposited. Taking to the maximum possible degree, you can get bout $1000 loaned out and in reserve on an initial deposit of $100 (100 deposit divided by 10% required reserve).
We don't really need banks anymore. Seriously. What exactly besides waste trillions on paper trails do they do that a person in this day in age couldn't? Store money? They do that electronically. Give out loans? we get enough billionaires already to do that stuff.
So what exactly do banks do besides charge us fees for taking our cash for a period of time?
well that's a good point because "insert bankers terms to appear smart and confuse those ignorant" is alright. Cutting through that bullshit, which is all bullshit, it really is as you get older and learn how the banking system actually works you realize Credit isn't even needed if things cost what they really cost to produced without bankers taking a piece of the pie. Seriously why do you think college , houses, cars cost so much money and things like cars and houses are made so cheaply overseas?
People can diversify their own money, universal healthcare is much cheaper, make money more liquid means giving out credit to indenture people who just want to own houses and go to college.
Oh and by the way who do you think banks get loans from? cough cough. Governments and guess who pays for govenments? oh that's right people. People pay for the governments who give banks loans so bank can give people loans. Seriously Look it up. Most banks couldn't afford to run these days without government backing FDIC for example.
So essentially people loan money to the bank without interest to get loans from the banks with interest.
i have a trick
lets say that 1000 people deposte money on your bank
1....... 2000 $
............... and now i take 4000$ from the third guy and spend it on my self
when he come and ask for money i give him from the others money and when the others came i give them from the other
it can't be spotted only if they all come and ask for money at the same time
if you do it back in 10th century
no one will discover this 😎
I was born in a wrong era
Just imagine. What if one day the usury system will be completely destroyed in our the world. Charity-based system will be flurished on that day. In the future, any charity-based company will be so financially well off til they don't need charity, they give charity. And what if on that day any company implemented usury collapses and will be unstable, till they need to start to practice the charity system on their company to ensure their company restabtablized. On that day, any debt transaction will not be allowed. It's possible. We can do that. It happened throughout history.
+Wojtek The Bear Keynesian through and through I think this is kind of futile but I stand by what I've said. We'll see what happens, but the petrodollar's days are numbered and its ordinary, honest folks who'll suffer. People who made wealth honestly and intelligently. It's sad because when it did come crashing down, the market and capitalism will be blamed as always and crooks in Government will get away with cushy pensions...
I've never used Discord and don't care much for an in depth conversation on this mainly because there's not much to converse about, but you should really look up what inflation is before you make such a bold claim like that central banks create it. As shown by the Fisher Equation: MV=PT or, in other words, the monetary supply times the velocity of money (how quickly it changes hands), equals the price level times the volume of goods being sold. As the volume of goods remains constant in the short run, this is typically simplified to say money supply times velocity of money equals inflation.
Of the two, the Federal Reserve has influence over both, but doesn't directly control either. Thanks to fractional reserve banking, much of the money supply is directly controlled by commercial banks (not a bad thing). Only a small portion of it was printed by the Federal Reserve. They can influence the money supply by setting a lower or higher required reserve ratio, but even this is only a constraint, nothing more. In other words, if the Fed requires that instead of being forced to hold 10% of all deposits as reserves, banks have to hold 15%, this wouldn't affect banks that have already been holding that amount as reserves. This is what happened directly following the 2008 recession. Banks, facing a lot of uncertainty, were unwilling to invest a lot, so held a lot of their deposits as reserves, so changing the required reserves ratio wouldn't change anything for them.
Then there's the velocity of money, or how quickly money changes hands. A good indicator of this is consumer confidence. If consumer confidence is high, there is a lot of economic activity, so money changes hands faster, causing inflation. If consumer confidence is low, economic activity slows and you get disinflation, possibly even deflation. Besides encouraging banks to invest, thereby increasing the ease at which consumers can get money, the Fed has no way of influencing this.
Beyond that, the central bank reacting to unemployment and inflation is inherently a market phenomenon as unemployment and inflation are determined by market activity. It's the firm's choice whether to hire people. It's the consumer's choice whether to use their money or save it for later. These are market decisions that can have a serious impact on both unemployment and inflation, making them market phenomenon.
Finally, it is important to note that the Federal Reserve pursued a pretty aggressive policy in terms of raising interest rates. It might not look that way to the layman, but that's only interest rates don't typically fluctuate a whole low. This is mainly due to the effects of the interest rate not being felt until months after the initial change, so economists and economics experts don't know if the markets will respond well to a change in the interest rate until months afterward. Because of this, they usually don't make major changes to it, and make sure the changes they do make aren't detrimental to the economy before making the change more extreme. The US was also just coming out a recession during the time in the Tech Bubble, so obviously interest rates were going to be low.
+Wojtek The Bear I think you overestimate what Central Bank banks can actually do and underestimate their tendency to make matters worse. Again, a YouTube comments section ain't the best place for a discussion on the economy so I'll extend the offer of a chat in discord or some other site for a more in depth conversation.
I would still hold however that the FED or Central Bank reacting to unemployment is not a market phenomenon. When the Fed lends out to other banks at 1% that encourages bad investments as we saw in 2008 with all those terrible loans that banking was built on.
The Fed don't control inflation, they create it. There is an expansion of credit at the start of a boom, I can even see that in my own country. This new credit is confused for actual savings, for actual funds, but it's just bad debt and inflation that they are lending. It's not sound money, in any sense of the term.
Because the central bank determines this through market activity. Mainly the inflation and unemployment rates. If the central bank decides that inflation is too high or unemployment too low (which can happen and is a sign of an overheating economy), they have the ability to raise interest rates, among other things, to curb this overheating. No central bank arbitrarily decides to mess with the interest rate as that only creates uncertainty, which is horrible for markets.
Oh, and the Fed doesn't directly control the market interest rate. They only directly control the rate at which they loan to commercial banks, called the discount rate, which they use to influence the rate at which banks charge each other, known as the Federal Funds Rate (the name makes it counterintuitive). The market rate is a derivative of these. Doesn't change the core argument, but it's an important distinction.
I saw the tardis at the time when the coins shot out of the second house
It was btw the 5th one out of the 8 coins, which one was turned into a really tiny tardis.
5:47 Make your money matter
*With a dog that looked kind of funny tho.*
No. Banks are not intermediaries. It's double-entry book-keeping. When a bank makes a loan it adds an entry to the ledger in the assets column, which is the amount of money that the customer owes the bank. And it makes a corresponding entry in the liabilities column, which is the amount it owes the customer (the deposit). ie. loans create deposits. Not the other way round.
When was the last time that a bank made a loan that reduced the amount of money you have in your account? Or anyone has in their account? Think about it.
What the fuck? You don't know what fractional reserve banking or double-entry bookkeeping are, do you? Double-entry bookkeeping just means that both sides of the accounting equation: assets=liabilities+equity must balance out. Equity being the profits of a company and the valuation of the company's shares. Why you think this proves that loans create deposits is beyond me. The entries are updated at the same time. If a take out a loan for $100, I update my accounts payable, a liability, and my cash, an asset, at the same time. Otherwise the sides wouldn't be equal.
Beyond that, the accounting is the whole reason banks DON'T don't debit your account. They know not everyone's going to come clamoring for their money all at once, so they only need to keep a portion of it on hand at any given time for those that want to make a withdrawal. The rest they are free to loan out. So, while Joe Schmoe might have $100 with Bank of America, Bank of America didn't keep his entire $100. They loaned most of it out. That being said, he can still withdraw his money at any time, the money would just come from the reserves the bank holds made up of everyone's money, not just his.
Hello, Mr. Conspiracy Theorist! You do realize a stable line of credit is one of the largest ways to help poor people, and getting rid of banking institutions would only force them to go to more predatory lenders, which is 100 times worse for them. Giving them a stable line of credit is poverty economic 101.
Not even close to the whole story on banks especially the part where people put money in savings for interest... Do you know most people get .01% on savings? Might as well be nothing. Plus yearly interest eats up what's left
Yearly interest? You mean inflation? True, the interest on savings is low, and inflation does it all of it up (and more!), but you know what's worse than earning .01% interest? Earning 0%, which is what you get when you just sit on your cash. So, while putting your money in the bank gives you small returns, the returns are still better than your alternatives. Inflation will eat into both either way.
No, stop conflating the two! You're being very disingenuous. You get a loan because you need a short term influx of cash for something, an investment, to hold you over, whatever. Maybe your car broke down so you need $10,000 to buy a new one. The loaning institution on the other hand expects payment in the long term. For a house, this is usually 15-30 years. A car might be 2-8 years. Obviously they want to make sure you will be able to make the minimum payments on the loan during that time span. Why on Earth would a creditor lend you money if they think you can't pay it back?
this video is terrible. You didnt explain how banks give 0 interest loans to government where they print money to oblivion, and how money is backed by nothing, which makes it just a number on the screen.
That's because saying "banks" give anything to the government is ludicrous. First, only one entity is allowed to print money and that's the Bureau of Engraving and Printing within the US Treasury. Second, the only way governments like the United States are lent money is through the buying and selling of Us Treasury bonds, which is once again handled by the US Treasury, not a bank. Finally, money doesn't need to be backed by shit. You realize gold, which once backed money, has next to no inherent value, right? And yet the international system has yet to collapse.
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