"If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless" -Thomas Jefferson
You have to be knowledgeable of a little accounting. Assets, liabilities, balance sheet, debits and credits. For example, your bank account is your asset. It’s the bank’s liability. When you make a payment to somebody else in another bank, your deposit goes down, the payees bank account goes up, and the banks exchange reserves (which are their bank accounts at the central bank) to settle the transaction.
@Basta11 I get that much, it's at a more fundamental level that I don't understand. From what Richard tells us, that more fundamental level is rather more controversial. Transactions used to be purely on goods and services without money. Money made that more flexible. In my mind, money seems to be based on a promise, that is to say trust. Out of that are created incredibly complex means of manipulating it. There seems to be no longer any link to a fundamental base. To me, it feels like a house of cards. In reality, I just carry on as usual, and it has no more effect on my life than the existence of quarks or the size of the universe.
@ well, to me there is commodity money where the medium was some utility in and of itself. It’s like a built in collateral. Precious metals like silver will always have its bullion value. Then there is fiat money which is a social construct. The basis of which is the legal systems. If you extend credit to me, and I brush it off, then you have legal recourse. Another example of such a social construct is a land deed. It only has effect if the government which has effective jurisdiction of that land recognizes it. A German baron who owns a castle in Bavaria during ww2 probably gets to keep it after the war. If the castle was in Koenigsberg, there is no chance he still owns it no matter how many documents he has.
If you have a beef, it's with the 15-year younger version of you who decided to take a loan to buy a house. But be prepared to explain to that former self why they should take 40 years to save up tha cash while renting, rather than just taking the 30-year mortgage. I think you might have a difficult time convincing your former self.
@thomasjgallagher924 rules put in place by sociopaths who plundered everything before you were born. But if you don't succeed, it's your fault. Could not be possible. The rules they laid out were BS. Responsibility transfer. Absolute madness.
They have a reserve ratio, thats how banking started, they work on the principle that not everyone will want their cash at the same time so they need to have say 10% in actual cash. Sometimes you get a run on the bank when too many people want cash at the same time, then they are in trouble.
The mechanisms of how BOE create and circulate money through the economy would be a good one Richard, broad and narrow money were once strictly separate, not so much now these days it seems.
No, it should be viewed as a liability, they have just flipped the switch to calling it an asset... meaning... the more debt created the larger the asset, which is subversion. What did your ma and pa always tell you... Save the pennies and the pounds will look after themselves? They view debt as the asset now.... because its fraud!
We've known this beyond doubt for a decade now yet it has barely filtered through into the public consciousness. I have been called everything from an idiot, a nutter, to a conspiracy theorist for pointing this out to people, but we have to do what we can to educate people.
Pointing people to the Band of England report Q1 2014 that generally shuts them up. In Werner's research, 'can banks individually create money out of nothing', he literally created a loan, and the bank let him follow the process; even the bank was surprised when they found out they had made the money out of nothing, though also admitted that it had to be this way otherwise the double-entry accounting is wrong. We all know if it doesn't add up to zero, then something is wrong. I'm sorry if you already knew this.
@@grantbeerling4396 No worries, some people look on a report from the BoE with suspicion, plus the paper has a nice explanation of the various theories of banking. But yeah they both make the point.
@@edbop The BoE actually have a video on their TH-cam channel called " The creation of money " It actually explains that it really is created via a keyboard terminal. It should be required viewing in every school?
@@Incognito-jf1dr Yeah credit to the BoE. it is a simple accounting trick which should at least be taught in economics classes. Sadly you go ask an economics lecturer even nowadays and they will look at you blankly in disbelief.
Bank of England commercial banks. Yes the Bank of England which is responsible for the sterling zone, can and does print money. But if the Bank of England does print more money than the rate of growth in the economy, it devalues all currency already in circulation - that's called inflation. Did the BoE print too much money during COVID? You bet! And inflation has taken off like a rocket since.
If not using GBP then No, it would be a new central bank issuing its own currency. Nothing to do with BOE. If Scotland used the GBP (which is the worst idea ever) then it would have to deal with BOE which is why using GPB is a terrible option.
From $37K to $65K that's the minimum range of profit return every month I think it's not a bad one for me, now I have enough to pay bills and take care of my family.
YES!!! That's exactly her name (Lucille Friedman) so many people have recommended highly about her and am just starting with her 😊from Brisbane Australia 🇦🇺
When banks create money out of thin air and lend it for an interest where does the interest money come? Is it again from a loan? And how about central bank money creation? Where does the money come for bond interest? Does world bank, international bank of settlements, Asian development bank work thus way. When a bank has different sister banks in different countries does they create money out of thin air in different currencies
" When banks create money out of thin air and lend it for an interest where does the interest money come?" 1) Commercial banks don't create money out of thin air. 2) The interest you pay on your loan , comes out of the surplus of your productive labour. You will be unlikely to secure a loan from a bank if you are unemployed. Indeed, if you lose your job, it's highly likely the bank will try to reclaim your loan - or re-posses your new(ish) car.
@@apflewis I think what the OP was puzzling over is what are the ramifications when in order to pay back a loan with interest money must be pulled from elsewhere in the economy to make up that interest amount. How do we get a model of the effects of this over time... what does the model have to include, how specific does it have to be? When posed in the abstract, it looks as though the system doesn't work, i.e. that interest is due for which the money to pay it doesn't exist unless more loans are issued ad infinitum, and this does seem to have some resemblance to the manner in which society is changing, i.e. with more debt issued around housing, and a race to own the asset upon which the majority of the lending takes place, a race to get in an optimal position within this debt-pyramid built around hard assets, largely housing and land. And in relation to this, the semantics of 'created out of thin air' seem pretty apt, because the ease of which that debt is created, the lack of friction, seems vastly disproportionate to the debt obligations created around real assets.
@@lukeskirenko " money must be pulled from elsewhere in the economy to make up that interest amount. " No, that is incorrect. You pay the interest out of your productive surplus, I gave an adequate answer in my original reply. An interesting discussion might be, should you defer any purchase that requires a loan, and save for the purchase. You know, old school. 😅
@@apflewis Yes, you can use that terminology, but you pay the interest with the money earned from your productivity, i.e. the surplus is denominated in money which travelled to you from somewhere else, the capital representing your surplus has an origin and a history which is bound up with the credit-creation mechanism. So I don't see how the semantics of 'surplus' obviates the need to think about the system as a whole and whether credit creation via issuance of debt is sustainable.
That is the roll of central banks i.e. to introduce enough new money to reflect the productive growth of the economy, reflecting all of the work that we do which adds value to the whole of society. Issue too much and you risk inflation and currency devaluation, hence the priority of controlling inflation.
Well, banks are allowed to engage in what I think is best called "supervised check-kiting"; when they make a loan, they are legally required to have collateral, so the money they create is covered if the loan isn't paid back. That's how they create money - which means the amount of money in circulation is now no longer bounded by the gold in Fort Knox, but instead by all the real wealth in society that can be used as collateral.
Except most of that is not real wealth it is speculative. Not to mention these loads then have collateral debt options executed on them. The whole system is a huge house of cards, little better than someone betting with money they don't have on a horse race.
Collateral does not help. In the subprime crisis the house owners did all have collateral - the houses. But the banks did collapse anyway. The problem: those, who demand houses, went bust in the subprime crisis, which made the houses worthless, because there was no one wanting to buy them. Collateral does not back the debt because it is not the supply those are after, who got the money. The job of the debtors is to create a fitting supply for the demand they had created by spending the money from the loans. A collateral may serve this purpose too, but this is the exception from the rule. In general, collateral does not back the loans nor does gold. Almost nobody wants gold because it is mostly useless to the people. When I am hungry I prefer bread over gold, which is why the baker should bake bread to pay back the loan.
Or to make it more clear: the house owner pays all the workers involved to build the house. When the house owner goes bust, what does it help the workers, when the house owner gives a few bricks to them in exchange for the money, because it is all he has?
@@ThomasVWorm The banks collapsed because they vastly over valued the collateral and then sold the bad loans to investors so they could make more bad loans which they could get off their book quickly by selling them on too. The ratings agencies are to blame for this, they became lazy and corrupt and this was the root of the problem.
Richard, I have accepted the fact that High Street banks create money when they make loans since the early days of Positive Money. (2010 ish) But once again in your explanation you mention that creating money will lead directly to inflation, but clearly since 2008 there has been no apparent correlation between the two. So where is the mechanism? I am not being obtuse, I genuinely dont understand. Any chance of some help with this, please.
Actually, there has been a correlation between the two, but not as you imagine. If bank credit is the dominant form of money, and the central bank creates bank credit, where does that form of money end up first? Or, who gets that money first? Or, during the pandemic when global central banks issued billions of dollars of credit where did that money end up? Follow the money and find out where it eventually ended up. Then compare where in your economy endogenous inflation - inflation not caused by supply shocks - appeared. Then you will see exactly who got the money created by QT since 2008. I'll give you 3 clues: 1) multiple rounds of Quantitative Easing pumped through dealer commercial banks by central banks; 2) Covid spending spent on households vs corporations; 3) luxury spending volumes post-lockdown.
@@CuriousCrow-mp4cx That may undoubtedly be correct. But how does certain sectors becoming 'richer' directly cause inflation (meaning a decrease in the value of money already in existence, which is what is so often suggested when talking of money creation?)
@@CuriousCrow-mp4cx the IMF website says this ". . . . If the money supply grows too big relative to the size of an economy, the unit value of the currency diminishes; in other words, its purchasing power falls and prices rise." My question is why?
@@andielines Demand side inflation. If there is a lot of money floating in the economy then producers increase the price of their goods, because they can. There will still be people with enough money to afford their goods. Theoretically in classical economics the prices will rise until an equilibrium is reached between money chasing goods and the price of goods. Except this is bunk because the economy is always a dynamic system and never actually reaches that equilibrium. What we get is producers making more goods, then discovering they have more to sell than people can buy at that price, and the price falls again eventually reaching a sort of stable price, at a lower level.
The inflation went into the property as the wealthy bankers were the ones who benefitted from not lowering interest rates even though the BOE had the base rate at near 0%. The wealthy are few, and they only need maybe 5 fridges. If you give the same money ( via the exchange of productive labour) to 200,000 people, you have the potential for at least 200k fridges and work completed for the rest of society. Thus, FDR's New Deal. Money in the hands of the few always inflates land because the land is finite in place and time, i.e. Buy land, they don't make it anymore! (Mark Twain).
I, too,, can create money out of thin air. I do it every time I use my credit card (the clue is in the name). This is money that previously did not exist. Yes, it is guaranteed by a bank, who says that I an 'good for it' (they are my 'backstop') - but it is I who create it. I destroy it again when I pay my monthly CC bill. As there is always some still on account, there is always some of my money in circulation.
@@GetGwapThisYear And...... We can create our own promissory notes, which the bank is supposed to securitize on our behalf for a fee.. We are the masters, not the banks.... indeed, everyone used to be referred too as Master, not MR, before they scammed every single man, women and child with fractional reserve banking.
@@GetGwapThisYear No, they do not. As Richard will tell you, they do not create anything until they have entered it into the account. I have created it. I can make it clearer to you by talking about cheques. That is my IOU, with a promise that my agent (the bank) will give them the money on request. Or the recipient can endorse it (if it is not crossed) and use it to pay his debt. Sound like money? The bank has no idea of the sum involved, so cannot make any account entries. It remains money I have created until it has been cleared.
@@Tensquaremetreworkshop they provide you with a credit limit bro. Let the fantasy go. You’re not creating shit. They’re just subletting a licence for a meagre amount of money.
The "thin air" thing is utter nonsense. When money is created out of thin air, it is worthless. It needs debt, which means somebody who promises to produce and sell for the money, what is demanded by those, who are paid with the money. Money is a bookkeeping system. The "thin air" thing completely ignores, what the bookkeeping is all about: the debt, which is created, when we buy stuff. Buying is not barter but single-sided: only one party is giving. When it is not meant to be a gift, it creates debt. In my opinion this is the biggest mistake always being made: only seeing the bookkeeping without taking into account, about what we do the bookkeeping.
Couldn’t this be broken down to fundamentals? Like all value is based on energy (as well as all things). When the bank approves a lone and enters it on a keyboard, it has created value in the form of potential energy. Once that money is woven into the fabric of the economy-buying a car, building a house, paying for labor and services, etc, that potential energy transforms into kinetic energy, the manifestation of value.
You say that money isn't ours, because it belongs to the government - but the government is ours, so collectively the money is ours, too We do own it. All of it 🙂
@marcopolotimetraveller gold is an unreactive metal with good electrical conductivity. It is one of the most malleable and ductile of metals It's market value is a curious and persistent bubble, but ultimately just as irrational as crypto
@marcopolotimetraveller I get the historic reasons why it was a good exchange token, but in the modern era of fiat currency, those reasons don't meet current requirements It's valuable because other people think it has value, rather than any utility it provides. That's an asset bubble, though admittedly a very persistent one!
Morning Richard - BOE sets the Commercial Bank reserves % but how does the Commercial Bank creates the reserves or does the BOE creates the reserves too? In your example of £10K would the commercial bank issues an extra £100 as a reserve (0.1% reserve)? Thank you in advance.
Double Entry Bookeeping. The form of money created is an electronic ledger entry, i.e. credit. To put it into perspective, the Bank of International Settlement states that less that 5% of all transactions are made in cash or central bank credit, the rest is commercial bank credit.
There is no % reserve requirement and hasn't been since pre-GFC. Commercial banks lend via the two-sided balance sheet expansion Richard explained. I.e. their deposit liabilities go up along with their new loan asset increasing. Commercial bank lending has nothing operationally to do with reserves or the Bank of England. The BoE reserves that banks hold are merely used in an ex post fashion to settle inter-bank transactions between bank customers banking at different banks.
Bretton Woods and the last IMF (1976) loan was taken because the BOE and treasury were still operating under the illusion of finite (based on gold) rather than infinite Fiat. I can say this with some confidence as it was as late as Q1 2014 that the Bank Of England finally admitted that the banks, as Richard so brilliantly explained, can create money when a loan is made. The former theory of a) Banks just being an intermediary between two types of people, i.e. the depositors' money being used for loans, and b) fractional reserve theory ( look it up too complex to answer here). Both have been entirely debunked by Richard Werner's research (google it): 'Can banks individually create money out of nothing' (along with the MMT crowd from the early 1990s)? He literally followed the money in a bank; even the bank was surprised to find out that they had, in fact, created new money, but also understood the double entry of everything always adding up to zero. i.e. when the loan is repaid, the debt is destroyed; therefore, the money no longer exists within that agreement. Arguments had been raging since 1973 when the UK went to fiat following the US in 1971 ( even Keynes changed his mind about how banks create money, with the quip that put twelve economists in a room, and you'll get thirteen different answers), this was before the BOE article (google it; Bank of England Q1 2014) Unfortunately, many Econ 101 books used in universities still teach the Fractional Reserve Theory of money, even though the BOE has bluntly stated in no uncertain way that it's wrong. Notice how, in 2008, neither the US nor the UK went to the IMF. Why? Because they understood they could just 'create the money'. That is a good question for Richard to explain far better than I do! Good question, by the way.
@@tonygold1661 the UK government would have no need to go to the IMF, the can do all they need to do with teir own treasury an Bank of England. If they go to the IMF it's stupid policy
No more orthodoxy on both/all sides we require a genuine paradigm change which always destroys orthodoxies all around and creates an integrative thirdness greater oneness of truths, applicabilities and resolutions. Brush past the orthodoxies you're holding onto on both sides. New paradigms, despite being in complete conceptual opposition to the present paradigm, are always thought to be absurd until you look at them and their applications and realize they are the solution to the present anomalous paradigm. The paradigm of Debt ONLY as the monopoly concept for the creation and distribution of new money and the burden to repay will be dispelled by strategically implemented Monetary Gifting. No more worn out orthodoxies or palliative reforms. Paradigm change is the only option.
Funny how people talk about change these days without ever feeling the need to even mention what is changing and in what way. Your comment is a word salad of utter nonsense.
So they have to have the means to back their lending up ,in other words , but I would have thought the % would keep them afloat ,unless like you say ,the people default on their loans ..
No, they only need 10% on deposit of the money they have on loan. This is why the property crash of 2008 caused so much trouble for the banks, the banks suddenly had to find the money to cover all the bad loans they had on the books and they didn't have it.
No. They have to have enough money in reserve to pay their depositors, and meet their bills (invoices) outstanding. They do not need the money to cover their loan book, which is entirely separate. But the Bank's reserves on deposit at the Bank of England, by law, must equate to at least 10% of the loan book, which puts a ceiling on the loan book. But the shareholders are owed a separate amount (no of shares times nominal price of shares) which in the market often is exaggerated (no of shares times market share price). If the loans start defaulting then the markets sense that there is nothing backing the market share price anymore, and the market price falls. People panic that they will lose their money on deposit and all try getting it out at once ( a bank run), and the bank reserves fall. This then affects the amount of new business a bank can do, as it reduces the reserves, and the end result is a death spiral leading to a bank collapse. Except once the dust from 2008 settled, at least in the UK, a new system came in where the Bank of England can intervene by putting new money into a Bank to bolster the Bank's reserves, and thus stopping the death spiral. Quantitative easing, amongst other things, was a way for the Bank of England to increase a bank's reserves so that they can lend more money, and thus stimulate the economy.
so a bank punches numbers into a computer for your mortgage ,money that does not exist , at no risk to themselves and you get to pay them for the next 30 years . they make huge profit of your labor and they do f all for it . i understand the service the question is why are mortgages not offered by government with the only profits being operating costs .
Because otherwise money managers wouldn't get their income. Banks do face a financial risk when lending though as you may default. That is the justification for the interest they charge on that loan.
@@JGS2295 what risk ? The taxpayer will have to pay and suffer austerity if banks fail because of their risks. Plus banks are all engaged in the Financial Casino, buying derivatives, gambling basically.
@@Incognito-jf1dr Oh I totally agree with you on the financial sector's parasitic extraction of wealth and moral hazard allowed by poor credit regulation and a, with good regulation it's a good thing, lender of last resort central bank and government willing to bail the sector out. But it is still true that individual banks face risk of insolvency. There have been bankruptcies of banks in recent history.
Banks don't create money. They create lines of credit. Money is a medium of exchange. The money is created wen we use the credit line to transact with another party.
Money is not a medium of exchange. This is utter nonsense invented by economists. A medium of exchange would work completely different. We do not live in a barter economy. Money is a bookkeeping system of debt. Debt is created when buying stuff and cleared when selling stuff. We almost never do barter.
@@ThomasVWorm personally i prefer to be paid for my labour with currency, rather than goats, cows or bushels of wheat. I find grocery stores have these annoying restrictions which prevent me paying for my shopping with livestock (plus the goats are a nightmare in the fresh produce aisle!) Once people developed an externalised store of value (beads, gold, feathers, whatever) that *represented* commodities, then that store of value becomes a medium of exchange - as long as the selling party will accept it at a rate I am willing to pay for their goods. And once people get fed up of carrying around bags of beads or gold or whatever, paper certificates stating that they have sufficient of that item on deposit to pay what the seller is asking are the next logical (although not inevitable) step.
To adjust it's reserves at the Bank of England. Most of the money is just borrowed overnight so that at the end of the days clearing cycle (which actually occurs in the early hours of the next morning) it has enough money to pay out what it owes other banks, and still have the minimum reserve on deposit at the Bank of England.
The electricity supplier gives a loan to you, when he allows you to consume electricity but sends the bill up to a month later. When we start to have electricity in our homes, there was a little device in your home, where you had to insert coins to turn electricity on.
@@ThomasVWorm Yeah, I don't think you understood my point. If you pay your energy supplier by direct debit, then it is usually set so that a certain amount is paid each month regardless of consumption for any particular month. They insist that you keep your account with them in credit, just like a bank account, and will happily have it hundreds of pounds in credit without telling you or lowering your DD amount.
I think people are not qualified to function in a capitalist society without a level of understanding of the financial sector. I think it's past time we had a GCSE in Finance. There is a massive disparity in the input. Children are getting off their parents on money management and personal ecconmics. In a wealthy family, they get taught good practice. In a poor family, finance and banking are dirty words, and the way it works is a mystery. It would be overwhelmingly in the banks interest to provide this and to have oversight in what is taught. It would help address the growing number of those who are ecconomically inactive.
I know this wasn't a video on money supply, but I caught the blasé reference to money supply creating inflation and this isn't really supported by the data when talking about consumer prices. I'll admit to not knowing as much about the history of inflation in the UK as the US, but most spikes in consumer inflation come from acute supply shortages, particularly of labour, and particularly during times of military conflict and conscription. Increases in money supply are more closely correlated with asset price inflation, but that's not what most people think of when you say "inflation". For consumer prices to be hit by money supply increase, you have to have not only people consuming more of the same goods and services, the places offering those goods and services need tk be running near capacity. Go into any number of coffee shops in a week and while you'll note that they can be flat-out at times, there will be times when they can handle more orders with the same staff. This is wht the price of an espresso is more closely affected by the price of coffee cherries rather than consumer demand.
Profit and interest... plus they have granted themselves insurance polices if you default on your promises within 3 years, insurance will pay out and cancel out the £10,000. Meanwhile the debt collectors buy the debt for pennies and chase you for the full amount... (debt collectors buy the debt without consent of you and without your knowledge) The entire system is built of layers of fraud upon fraud....
I think the central banks and commercial banks prefer peoples heads to hurt, and not understand how they work. Making a loan by tapping a keyboard, then benefiting from the interest paid on it, is literally money for nothing - sure there is a risk of default but for the most part the risk is very small.
Richard please explain the role of interest in the private money creation process. I think that you once said there were no constraints on the money creation of the central bank from having to pay it back to anyone. There is a government bond market, but that is a choice the treasury makes and it is useful in controlling the amount of money in the reserves of private banks. But my question is how does the private interest charged by private banks resolve itself in the very long run, can this cause a problem?
The interest banks receive is used for- 1) to pay interest to depositors 2) pay much of the running costs of the bank 3) create the profits and share dividends (which is a sort of interest). Interest is a rent paid for the use of a good- no different from any other rent. One borrows because the use of the money gives a greater return that that rent.
JP Morgan was being disengeuous, because credit is money. And he made his fortune by using bank credit. Why? Both currency and credit are commodities that have a financial value, and they can be bought, rented out, gifted, spent or sold. The vast majority of money in the modern age is credit. Get paid your wages by check or bank transfer into a bank account? That is credit. Take out a car loan or buy a house with a mortgage? That is credit. According to the Bank of International Settlement (BIS), 95% of financial transactions in the global economy are made by bank credit. Cash as currency, or specie such as gold and silver, are increasingly rarely used in the day to day business in the global financial system. Even China, allegedly buying gold as a hedge against inflation, don't send it to pay it's bills. They have to exchange it for cash or credit to use it's value. Once technology made it easy to transfer information quickly or cheaply, the use of currency and specie began to decline in favour of bank credit. So now bank credit is the dominant form of money.
@@marcopolotimetraveller JP Morgan the man lived during the period where US was on the gold standard. Money is no longer tied to gold. This is the essence of the problem. The monetary system changed but people stuck to the old ways
Dear Richard could you do sn item on National insurance? The contract as I understand it is that by paying NI over a lifetime's earnings a worker has paid into an insurance fund that guarantees certain benefits such as healthcare, unemployment benefits and a pension for their life following retirement. I understand that it doesn't work quite like a savings fund so tell us how it works. Partly because I am worried that the government is planning to break this social contract.
You’re not paying towards a pension for yourself later in life, you’re paying the state pension of current pensioners right now, as they were when they were working.
I think Ni should actually be insurance. Like a nationalized insurance company it could supply pension and NHS, also elderly care. Between everyone this would be doable and inexpensive. It could stop governments taking money out of NHS.
The government seems to be attempting to frame the pension as a benefit rather than something paid for over a lifetime of paying national insurance. It is a disgustingly disingenuous way for the government to behave considering we are under obligation to pay and were given assurances when we payed it.
While the basic premise of this is correct there is a fractional reserve required by the bank so they can't create 100% free money I believe they need 10% of it to be based on cash on deposit with them, hence the term fractional reserve loans. They are still just creating 90% of it out of thin air though.
Read the Bank of England Q1 2014 report; it is 100% created. According to the Bank of England, the fractional reserve theory and the intermediary theory are both dead in the water.
Looks like Geraldine Land's sales team are working overtime on your channel Richard. She can conjure money and profits from thin air too . She just needs your .money first !!😅😅😅😅😅😅
There is no reserve requirement. Speaking of reserve requirements, they don't do what you'd initially assume. These requirements won't actually restrain banks in their lending activities for a very simple reason; central banks target interest rates, not money supply aggregates. If you wanna get technical then there's also the maintenance period and how that affects demand elasticity for bank reserves.
1844 then. When it sounds like it started to go wrong. Time to repeal that and all the other regulations since (and prior). Like state backed deposit insurance for example . Regulations and a central bank are why the financial sector keeps failing.
So the stricter capital ratios that banks must maintain since 2008 are in the central bank reserve account? Also, would be interested to hear what you think the Chancellor will do in October. Do you think Rachel Reeves will raid people's savings?
Your use of language is inadequate to describe the reality of the impact of QT since 2008. Where the vast amount of that money ended up wasn't in households, but in assets and profits of corporations. So there's a choice right now. Either stop subsidising the asset wealthy, or mug the those dependent on wages for a living. Cheap money is too addictive, and taxation is a useful tool to deal with that.
Love this. Here is academic telling you your house is on fire after the firefighters have left the building... I wonder what other deep financial insights has he got instore for us?
Hi Richard. Would you say that private debt is too high ? What effect does our current level of debt have upon the economy ? Is borrowers spending capacity limited by this debt to a detrimental degree? What dangers are there for the banks and the country in the event of a downturn and a sharp reduction in credit ? Thanks
I would also like to hear more about this. Prof Steve Keen predicted the Great Financial Crisis based on very high private debt levels. It's what we SHOULD be worried about, instead of public debt levels. The economy and its stagnation seems increasingly predicated on private debt servitude.
Richard, can you touch on the reasons/justifications for banks charging interest on loans, and payment of interest on savings please? Are the two related on a similar double-entry type basis?
They charge interest on loans to make profit. They pay interest on savings to attract depositors. The more they have in deposits, the more they can loan out, the more interest (profit) they can receive.
@@lukemclellan2141 That doesn't seem tot be the case since at least 2018... The banks do not want or need to pay you interest... This suggests to me they do not want savers because the entire system is now based on debt alone... if large amounts of debt, then the interest rate you get paid is minuscule along with inflation meaning.. saving is futile.
@@lukemclellan2141 thanks, but I understand the capitalist motivations for it. What I was asking for was the fundamental economic justification for it, with a function beyond profit generation for the bank.
The regulation of commercial banks is not only to control solvency risk but to control inflation, if you consider minimum interest rates as a regulation. Whilst the main instrument controlling inflation is taxation, interest rates are important particularly for asset inflation.
Again confusing people deliberately. I can make money out of thin air for someone ,"on my own books". But when it comes to them spending it, I have to get hold of real money. Also banks can exist without a central bank. Also there is no reserve requirement for UK banks.
You do not need to get hold of real money for spending, when others do the same for you. Eg. all the people in your neighbourhood. So everybody owes to others and others owe to them. Each week you meet in the local pub and you make transactions between the books to reduce all the debt to the net debt. Or you leave the entire bookkeeping to the bar keeper, which turns the bar into a bank.
@@ThomasVWorm This sounds like the situation where there is only one bank. I've been meaning to brainstorm about this. Not so much regarding commercial banks, but instead the central bank, because there is only one of them.
@@metallitech I describe two situations: 1. everybody is its own bank 2. the barkeeper is the (central) bank What we do have, is between 1 and 2. You always do have a central bank, when the state has its own currency and it mints coins. It then is a bank, since it creates debtors and customers of this bank by taxation. Banks will depend upon this currency. Without, each bank has its own currency.
@@ThomasVWorm OK I understand the analogy now. But it doesn't mention that the deposit balances of the banks are worthless for the weekly settlement, for which they have to get hold of central bank money.
@@metallitech between their own customers, the settlement in a bank is happening instantly. When the transactions between the banks are not directly between them but via a central bank, it is also almost instantly.
Not quite thin air. What actually changes hands is the promise of future energy and sweat. Tomorrow's work will get done so that the repayments are made.
Hello Mr. Murphy, this video was well needed and appreciated! 🙏 Would you like to give your listeners some historic background of how the amount and proportions of public and private debt changed over the decades and why (events). Public debt also only seems to be rising sind around 1900 (in the US at least), maybe because of the establishment of central banks. But how did the government get financed before, especially with lacking income taxes to redeem publ8c spending. Likely there also was little to no public spending, at least for social services, but surely for investments in infrastructure? I mean, government money creation from nothing must also have been the before the central banks were installed, And surely also when the Gold standard was still active, right?
Check out the the history of Halawa along the regions linking to the Silk Road, and the development of Finance in history. Currency or or metals were too bulky to use in daily life. So the creation of cashless means of transferring and distributing financial value were evolved in the earliest years of international trade. Hence the creation of banking. Consequently, there is a link between trade, technology, and finance.
Yes, governments created money in various forms and by various methods long before commercial banks existed. When states or monarchs paid (mostly their soldiers) in coins which were exchanged at a value far above the worth of any precious metal they contained, the coins only had such value because taxes could be decreed to be payable only in the 'king's coin'. Soldiers could buy food, and the farmer could pay their tax. Most transactions tho have always been through some form of credit accounts, such as a bar tab or an account with a supplier. More fascinating, check out tally sticks. English medieval monarchs would pay for public works (more often warships, etc unfortunately) by taking a stick of wood with a wavy grain, marking it with a number value, then splitting it down the middle. One half was kept by the exchequer, and the other carried away by whoever the the king was paying, say, the shipbuilder. That stick was then a transferable token of great value, to be used in further private transactions, or for payment of taxes. They couldn't be forged because the exchequer would match the two halves of the tally stick when the tax was paid. Some believe this system played an essential role in the rising power of England in the late Middle Ages.
True. Since Banks issued notes initially and these became seen as money they then decided they could create more notes than they had backing securities (gold initially). This is fractional reserve lending. This is why New Labour were responsible for the 2008 crash in the UK because they let the banks set their own reserve ratios. Effectively all banks are in debt totally because they loan more than they have in assets. Now the problem comes when people think the bank may lose their money and a high ratio of people want their money out and the reserve ratio is too small to contain the demand. This is a “run on the banks” and what we saw at northern rock. The problem with 2008 wasn’t that the banks didn’t trust each other it was that the people could have lost faith in all banks and collapsed the system entirely and that would be a collapse of all order. Gordon brown and Alistair darling did save the world because they saved the banking system, but Labour did cause 2008 with this and other policies.
The reserve requirements need to be mentioned otherwise an infinite amount of credit could be created. If 12% is the agreed reserve then this would need to be set aside at the BoE.
For the duration of the loan, the additional money created will inflate the money supply. Over abundance of anything devalues it, which is a problem we have been experiencing for quite some time with our currency, is this solely due to the large and increasing national debt not being paid off? Do defaults on loans permanently inflate money in the system?
The question is who takes the risk? Are they liable for the bad loan? Do THEY have to pay for the loss or it's paid by the Bank of England from generated qe money, thus diluting the money supply. Because if the loan is repaid than the bank is making the profits. So the losses should be paid by them too.
The commercial bank is liable for the bad loan, and this is why there are capital requirements. The capital is assets minus liabilities, and this has to be at a certain level. Loans going bad erodes the capital. The capital is the shareholders' value.
The problem with a debt based financial system is the interest payable on the debt, what happens when the interest payments are paid by raising more debt and so on? It's clear, mathematically, that these systems inevitably burn out due to the debt burden. I don't think even mmt has an answer to that?
Debt creates rentier economies where money made by selling debt is spent not in investing into industry, but in asset bubbles and speculation. It is human propensities that dictate the fate of money in the economy. And the propensity for greed plays a role. Truly, creating money is necessary but insufficient to manage endogenous inflation. Adequate and focused taxationis also necessary to prevent the undesirable impacts of inflation. I mean, compare the fates of the US and Denmark. Both used QE to cover the costs of rescuing their banking systems and Covid spending. But where they differ is how they distributed the money and how they managed inflation. The US spent and gave away the money it created, and made no effort to adequately tax the profits from that money. Denmark loaned that money and taxed the profits. Guess who had less endogenous inflation?
It becomes clear and simple if you view the full monetary cycle. Suffice to say, all money is debt, govt owes itself, and to the degree that it pays interest to private sector - bonds for example - that's another way in which public sector spends money into existence for the private sector. It may be overstatement, but you can also think of the "national debt" as the money supply. It's all the money it's created that hasn't been taxed out of existence yet
NOTICE TO ALL MY TROLLS: I hope you was paying attention to Richard J murphy's How Debt is created out of thin Air? Muhahahahahahahahahahahahahahahah Only part of the story tho.... What he didn't tell you is what is going on the other side of the ledger that we cant see!!! 🤣🤣🤣🤣🤣
Yes double entry but the money advanced comes out of "other deposits" it gets from "savings" and Government Loans!! The ratio of assets held to be lent out again is varied by BOE to ensure that Banks have enough money to cope with "runs" when many customers want their money back! Governments though are less constrained as they can create "credit" even though they do not receive "savings"! Treasury issues bonds at interest to get others to take on some of its debts
Hey Richard... I've just had a very interesting meeting with DJE Media about the TH-cam comment sections... One of the most productive meetings I've had in a while!!!!! Interesting times ahead!!! Muhahahahahahahahahahahahahahahahah...................................👻👻👻👻👻👻👻👻👻👻👻👻👻👻👻
All banks suspected Suckers and this is for specific! Needs Collateral INFLUANCE AND FIDDLE TOO LIKE 2008 BY BANKS YES ????? POOR PEOPLE PAY back? STATE
Democracy is a means of distributing influence, if not also power. There is no state anywhere on earth where control of money creation is not delegated to institutions, none that are directly controlled by democratic rules. At best it is indirectly controlled. Not even in Switzerland, a democracy that values regional government and referenda, is the financial system is exposed to direct democracy. It's firmly in the control of central government.
@@yellowgreen5229 The short answer is im fine with banks making an appropriate profit, but id also like to see the public educated on the subject of money creation. Re centralisation of the banking system, it has its own problems and could be a disaster for the transactors, in particular if a programable money were to be introduced and misused. Having the power to create money is a great responsibility, we should be careful what we wish for.
@@mrblack61 I'm dubious that you are fine with banks profiteering off the public, but this is why workers are wage slaves. Nobody has the right to my money, u want to give yhem yours then that us for you, not the first class traitor.
Well, I picked the challenge to put my finances in order. Then I invested in cryptocurrency and stocks, through the assistance of my discretionary fund manager
The first step to successful investment is figuring your goals and risk tolerance either on your own or with the help of a financial professional but it's very advisable you make use of professional
"If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless" -Thomas Jefferson
@@JohnDaniels prophesy fulfilled.
@@paulgibbons2320back in the day it was known as "common sense".
Every video of yours that I watch, the more I am convinced that I don't have the foggiest what money is.
@@ianbigsand7 can you empty your bank accounts and send me money to me please. .
I'll show you what money is!
@Moving2Win not debt, credit. Money is gold.
You have to be knowledgeable of a little accounting. Assets, liabilities, balance sheet, debits and credits.
For example, your bank account is your asset. It’s the bank’s liability. When you make a payment to somebody else in another bank, your deposit goes down, the payees bank account goes up, and the banks exchange reserves (which are their bank accounts at the central bank) to settle the transaction.
@Basta11 I get that much, it's at a more fundamental level that I don't understand.
From what Richard tells us, that more fundamental level is rather more controversial.
Transactions used to be purely on goods and services without money. Money made that more flexible.
In my mind, money seems to be based on a promise, that is to say trust. Out of that are created incredibly complex means of manipulating it.
There seems to be no longer any link to a fundamental base. To me, it feels like a house of cards.
In reality, I just carry on as usual, and it has no more effect on my life than the existence of quarks or the size of the universe.
@ well, to me there is commodity money where the medium was some utility in and of itself. It’s like a built in collateral. Precious metals like silver will always have its bullion value.
Then there is fiat money which is a social construct. The basis of which is the legal systems. If you extend credit to me, and I brush it off, then you have legal recourse.
Another example of such a social construct is a land deed. It only has effect if the government which has effective jurisdiction of that land recognizes it.
A German baron who owns a castle in Bavaria during ww2 probably gets to keep it after the war. If the castle was in Koenigsberg, there is no chance he still owns it no matter how many documents he has.
It's credit. Loans create deposits. Process is reversed when loans are repaid. They just create the loan.
Double-entry bookkeeping.
Is the monthly payment the deposit or is it the interest portion of the monthly payment.
@@Jesus-CAL What monthly payment is that?
@@mattgilbert7347 The monthly payment created by the loan.
15 years of your life working to pay interest on a 30 year mortgage that was create out of thin air by a bank, this seems unfair 🤨
It's worse than that. It's actually a defacto enslavement. 😂
If you have a beef, it's with the 15-year younger version of you who decided to take a loan to buy a house. But be prepared to explain to that former self why they should take 40 years to save up tha cash while renting, rather than just taking the 30-year mortgage. I think you might have a difficult time convincing your former self.
@thomasjgallagher924 rules put in place by sociopaths who plundered everything before you were born.
But if you don't succeed, it's your fault. Could not be possible. The rules they laid out were BS.
Responsibility transfer.
Absolute madness.
If it wasn't for the mortgage, you wouldn't get to live in the house, while you're paying for it.
@LinusK500 so what. They stop you from building a house where you want. It's not exactly a privilege.
The creation and destruction of money, a balancing act.
Reminds me of when i studied in Scotland in 1969 and was surprsed to find bank notes from different commercial banks eg Clydeside.
If you wanted to turn the loan into cash where would the bank get the cash??
They have a reserve ratio, thats how banking started, they work on the principle that not everyone will want their cash at the same time so they need to have say 10% in actual cash. Sometimes you get a run on the bank when too many people want cash at the same time, then they are in trouble.
@ the reserve ratio is zero in the U.S. but that doesn’t mean banks CAN’T keep cash reserves.
Another great explainer.
The mechanisms of how BOE create and circulate money through the economy would be a good one Richard, broad and narrow money were once strictly separate, not so much now these days it seems.
Your bank loan is a bank asset, simples.
No, it should be viewed as a liability, they have just flipped the switch to calling it an asset... meaning... the more debt created the larger the asset, which is subversion. What did your ma and pa always tell you... Save the pennies and the pounds will look after themselves? They view debt as the asset now.... because its fraud!
We've known this beyond doubt for a decade now yet it has barely filtered through into the public consciousness. I have been called everything from an idiot, a nutter, to a conspiracy theorist for pointing this out to people, but we have to do what we can to educate people.
Pointing people to the Band of England report Q1 2014 that generally shuts them up. In Werner's research, 'can banks individually create money out of nothing', he literally created a loan, and the bank let him follow the process; even the bank was surprised when they found out they had made the money out of nothing, though also admitted that it had to be this way otherwise the double-entry accounting is wrong. We all know if it doesn't add up to zero, then something is wrong.
I'm sorry if you already knew this.
@@grantbeerling4396 No worries, some people look on a report from the BoE with suspicion, plus the paper has a nice explanation of the various theories of banking. But yeah they both make the point.
@@edbop The BoE actually have a video on their TH-cam channel called " The creation of money "
It actually explains that it really is created via a keyboard terminal.
It should be required viewing in every school?
@@Incognito-jf1dr Yeah credit to the BoE. it is a simple accounting trick which should at least be taught in economics classes. Sadly you go ask an economics lecturer even nowadays and they will look at you blankly in disbelief.
Bank of England commercial banks. Yes the Bank of England which is responsible for the sterling zone, can and does print money. But if the Bank of England does print more money than the rate of growth in the economy, it devalues all currency already in circulation - that's called inflation. Did the BoE print too much money during COVID? You bet! And inflation has taken off like a rocket since.
Does this mean that if Scotland wanted to create its own bank, it would need permission from the BOE? 🤔
If not using GBP then No, it would be a new central bank issuing its own currency. Nothing to do with BOE. If Scotland used the GBP (which is the worst idea ever) then it would have to deal with BOE which is why using GPB is a terrible option.
Look up Macro N Cheese, Ep 138, The Lightbulb Moment - Malcolm Reavell
It will answer your question and you might enjoy the episode.
From $37K to $65K that's the minimum range of profit return every month I think it's not a bad one for me, now I have enough to pay bills and take care of my family.
As a beginner, it's essential for you to have a mentor to keep you accountable. I'm guided by a widely known crypto consultant
She is Expert Lucille Friedman
YES!!! That's exactly her name (Lucille Friedman) so many people have recommended highly about her and am just starting with her 😊from Brisbane Australia 🇦🇺
Her name rings a bell; I've encountered it multiple times, usually associated with stories of her trading achievements. She deserves a lot of credit.
This sounds so good and I would like to be a party to it, is there any way I can speak with her?
Credit out of thin air
Debt out of thin air!
When banks create money out of thin air and lend it for an interest where does the interest money come? Is it again from a loan? And how about central bank money creation? Where does the money come for bond interest? Does world bank, international bank of settlements, Asian development bank work thus way. When a bank has different sister banks in different countries does they create money out of thin air in different currencies
"
When banks create money out of thin air and lend it for an interest where does the interest money come?"
1) Commercial banks don't create money out of thin air.
2) The interest you pay on your loan , comes out of the surplus of your productive labour. You will be unlikely to secure a loan from a bank if you are unemployed. Indeed, if you lose your job, it's highly likely the bank will try to reclaim your loan - or re-posses your new(ish) car.
@@apflewis I think what the OP was puzzling over is what are the ramifications when in order to pay back a loan with interest money must be pulled from elsewhere in the economy to make up that interest amount. How do we get a model of the effects of this over time... what does the model have to include, how specific does it have to be? When posed in the abstract, it looks as though the system doesn't work, i.e. that interest is due for which the money to pay it doesn't exist unless more loans are issued ad infinitum, and this does seem to have some resemblance to the manner in which society is changing, i.e. with more debt issued around housing, and a race to own the asset upon which the majority of the lending takes place, a race to get in an optimal position within this debt-pyramid built around hard assets, largely housing and land. And in relation to this, the semantics of 'created out of thin air' seem pretty apt, because the ease of which that debt is created, the lack of friction, seems vastly disproportionate to the debt obligations created around real assets.
@@lukeskirenko " money must be pulled from elsewhere in the economy to make up that interest amount. "
No, that is incorrect. You pay the interest out of your productive surplus, I gave an adequate answer in my original reply. An interesting discussion might be, should you defer any purchase that requires a loan, and save for the purchase. You know, old school. 😅
@@apflewis Yes, you can use that terminology, but you pay the interest with the money earned from your productivity, i.e. the surplus is denominated in money which travelled to you from somewhere else, the capital representing your surplus has an origin and a history which is bound up with the credit-creation mechanism. So I don't see how the semantics of 'surplus' obviates the need to think about the system as a whole and whether credit creation via issuance of debt is sustainable.
That is the roll of central banks i.e. to introduce enough new money to reflect the productive growth of the economy, reflecting all of the work that we do which adds value to the whole of society. Issue too much and you risk inflation and currency devaluation, hence the priority of controlling inflation.
Well, banks are allowed to engage in what I think is best called "supervised check-kiting"; when they make a loan, they are legally required to have collateral, so the money they create is covered if the loan isn't paid back. That's how they create money - which means the amount of money in circulation is now no longer bounded by the gold in Fort Knox, but instead by all the real wealth in society that can be used as collateral.
Except most of that is not real wealth it is speculative. Not to mention these loads then have collateral debt options executed on them. The whole system is a huge house of cards, little better than someone betting with money they don't have on a horse race.
Collateral does not help. In the subprime crisis the house owners did all have collateral - the houses. But the banks did collapse anyway.
The problem: those, who demand houses, went bust in the subprime crisis, which made the houses worthless, because there was no one wanting to buy them.
Collateral does not back the debt because it is not the supply those are after, who got the money.
The job of the debtors is to create a fitting supply for the demand they had created by spending the money from the loans. A collateral may serve this purpose too, but this is the exception from the rule.
In general, collateral does not back the loans nor does gold. Almost nobody wants gold because it is mostly useless to the people. When I am hungry I prefer bread over gold, which is why the baker should bake bread to pay back the loan.
Or to make it more clear: the house owner pays all the workers involved to build the house.
When the house owner goes bust, what does it help the workers, when the house owner gives a few bricks to them in exchange for the money, because it is all he has?
@@ThomasVWorm The banks collapsed because they vastly over valued the collateral and then sold the bad loans to investors so they could make more bad loans which they could get off their book quickly by selling them on too. The ratings agencies are to blame for this, they became lazy and corrupt and this was the root of the problem.
Richard, I have accepted the fact that High Street banks create money when they make loans since the early days of Positive Money. (2010 ish) But once again in your explanation you mention that creating money will lead directly to inflation, but clearly since 2008 there has been no apparent correlation between the two. So where is the mechanism? I am not being obtuse, I genuinely dont understand. Any chance of some help with this, please.
Actually, there has been a correlation between the two, but not as you imagine. If bank credit is the dominant form of money, and the central bank creates bank credit, where does that form of money end up first? Or, who gets that money first? Or, during the pandemic when global central banks issued billions of dollars of credit where did that money end up?
Follow the money and find out where it eventually ended up. Then compare where in your economy endogenous inflation - inflation not caused by supply shocks - appeared. Then you will see exactly who got the money created by QT since 2008. I'll give you 3 clues: 1) multiple rounds of Quantitative Easing pumped through dealer commercial banks by central banks; 2) Covid spending spent on households vs corporations; 3) luxury spending volumes post-lockdown.
@@CuriousCrow-mp4cx That may undoubtedly be correct. But how does certain sectors becoming 'richer' directly cause inflation (meaning a decrease in the value of money already in existence, which is what is so often suggested when talking of money creation?)
@@CuriousCrow-mp4cx the IMF website says this ". . . . If the money supply grows too big relative to the size of an economy, the unit value of the currency diminishes; in other words, its purchasing power falls and prices rise." My question is why?
@@andielines Demand side inflation. If there is a lot of money floating in the economy then producers increase the price of their goods, because they can. There will still be people with enough money to afford their goods. Theoretically in classical economics the prices will rise until an equilibrium is reached between money chasing goods and the price of goods. Except this is bunk because the economy is always a dynamic system and never actually reaches that equilibrium. What we get is producers making more goods, then discovering they have more to sell than people can buy at that price, and the price falls again eventually reaching a sort of stable price, at a lower level.
The inflation went into the property as the wealthy bankers were the ones who benefitted from not lowering interest rates even though the BOE had the base rate at near 0%. The wealthy are few, and they only need maybe 5 fridges. If you give the same money ( via the exchange of productive labour) to 200,000 people, you have the potential for at least 200k fridges and work completed for the rest of society. Thus, FDR's New Deal.
Money in the hands of the few always inflates land because the land is finite in place and time, i.e. Buy land, they don't make it anymore! (Mark Twain).
I, too,, can create money out of thin air. I do it every time I use my credit card (the clue is in the name). This is money that previously did not exist. Yes, it is guaranteed by a bank, who says that I an 'good for it' (they are my 'backstop') - but it is I who create it. I destroy it again when I pay my monthly CC bill. As there is always some still on account, there is always some of my money in circulation.
Your card issuer creates the money out of thin air, same as a bank does when granting you a loan.
@@GetGwapThisYear And...... We can create our own promissory notes, which the bank is supposed to securitize on our behalf for a fee.. We are the masters, not the banks.... indeed, everyone used to be referred too as Master, not MR, before they scammed every single man, women and child with fractional reserve banking.
@@GetGwapThisYear No, they do not. As Richard will tell you, they do not create anything until they have entered it into the account. I have created it. I can make it clearer to you by talking about cheques. That is my IOU, with a promise that my agent (the bank) will give them the money on request. Or the recipient can endorse it (if it is not crossed) and use it to pay his debt. Sound like money? The bank has no idea of the sum involved, so cannot make any account entries. It remains money I have created until it has been cleared.
@@Tensquaremetreworkshop
@@Tensquaremetreworkshop they provide you with a credit limit bro. Let the fantasy go. You’re not creating shit. They’re just subletting a licence for a meagre amount of money.
Yes
The "thin air" thing is utter nonsense. When money is created out of thin air, it is worthless. It needs debt, which means somebody who promises to produce and sell for the money, what is demanded by those, who are paid with the money.
Money is a bookkeeping system. The "thin air" thing completely ignores, what the bookkeeping is all about: the debt, which is created, when we buy stuff. Buying is not barter but single-sided: only one party is giving. When it is not meant to be a gift, it creates debt.
In my opinion this is the biggest mistake always being made: only seeing the bookkeeping without taking into account, about what we do the bookkeeping.
companies make money out of thin air by offering shares. Correct .
Couldn’t this be broken down to fundamentals? Like all value is based on energy (as well as all things). When the bank approves a lone and enters it on a keyboard, it has created value in the form of potential energy. Once that money is woven into the fabric of the economy-buying a car, building a house, paying for labor and services, etc, that potential energy transforms into kinetic energy, the manifestation of value.
You say that money isn't ours, because it belongs to the government - but the government is ours, so collectively the money is ours, too
We do own it. All of it 🙂
@marcopolotimetraveller gold is an unreactive metal with good electrical conductivity. It is one of the most malleable and ductile of metals
It's market value is a curious and persistent bubble, but ultimately just as irrational as crypto
@marcopolotimetraveller I get the historic reasons why it was a good exchange token, but in the modern era of fiat currency, those reasons don't meet current requirements
It's valuable because other people think it has value, rather than any utility it provides. That's an asset bubble, though admittedly a very persistent one!
The banks can't trust each other but we're supposed to trust the banks.
Morning Richard - BOE sets the Commercial Bank reserves % but how does the Commercial Bank creates the reserves or does the BOE creates the reserves too? In your example of £10K would the commercial bank issues an extra £100 as a reserve (0.1% reserve)? Thank you in advance.
Double Entry Bookeeping. The form of money created is an electronic ledger entry, i.e. credit.
To put it into perspective, the Bank of International Settlement states that less that 5% of all transactions are made in cash or central bank credit, the rest is commercial bank credit.
There is no % reserve requirement and hasn't been since pre-GFC.
Commercial banks lend via the two-sided balance sheet expansion Richard explained. I.e. their deposit liabilities go up along with their new loan asset increasing. Commercial bank lending has nothing operationally to do with reserves or the Bank of England. The BoE reserves that banks hold are merely used in an ex post fashion to settle inter-bank transactions between bank customers banking at different banks.
Why has the Bank of England had to go to the IMF in the past because the BoE became insolvent?
Bretton Woods and the last IMF (1976) loan was taken because the BOE and treasury were still operating under the illusion of finite (based on gold) rather than infinite Fiat.
I can say this with some confidence as it was as late as Q1 2014 that the Bank Of England finally admitted that the banks, as Richard so brilliantly explained, can create money when a loan is made. The former theory of a) Banks just being an intermediary between two types of people, i.e. the depositors' money being used for loans, and b) fractional reserve theory ( look it up too complex to answer here). Both have been entirely debunked by Richard Werner's research (google it): 'Can banks individually create money out of nothing' (along with the MMT crowd from the early 1990s)? He literally followed the money in a bank; even the bank was surprised to find out that they had, in fact, created new money, but also understood the double entry of everything always adding up to zero. i.e. when the loan is repaid, the debt is destroyed; therefore, the money no longer exists within that agreement.
Arguments had been raging since 1973 when the UK went to fiat following the US in 1971 ( even Keynes changed his mind about how banks create money, with the quip that put twelve economists in a room, and you'll get thirteen different answers), this was before the BOE article (google it; Bank of England Q1 2014)
Unfortunately, many Econ 101 books used in universities still teach the Fractional Reserve Theory of money, even though the BOE has bluntly stated in no uncertain way that it's wrong.
Notice how, in 2008, neither the US nor the UK went to the IMF. Why? Because they understood they could just 'create the money'.
That is a good question for Richard to explain far better than I do!
Good question, by the way.
The government went to the IMF, not the Bank
@@tonygold1661 the UK government would have no need to go to the IMF, the can do all they need to do with teir own treasury an Bank of England.
If they go to the IMF it's stupid policy
@@ProgressiveEconomicsSupporter The Government went to the IMF because of the currency crisis.
The IMF loan was to stabilise the pound .
The government went to the IMF for US dollars, not for UK pounds.
who owns the bank of england, and who sits on the board
...only with every "loan" they create.
No more orthodoxy on both/all sides we require a genuine paradigm change which always destroys orthodoxies all around and creates an integrative thirdness greater oneness of truths, applicabilities and resolutions. Brush past the orthodoxies you're holding onto on both sides. New paradigms, despite being in complete conceptual opposition to the present paradigm, are always thought to be absurd until you look at them and their applications and realize they are the solution to the present anomalous paradigm.
The paradigm of Debt ONLY as the monopoly concept for the creation and distribution of new money and the burden to repay will be dispelled by strategically implemented Monetary Gifting. No more worn out orthodoxies or palliative reforms. Paradigm change is the only option.
Funny how people talk about change these days without ever feeling the need to even mention what is changing and in what way.
Your comment is a word salad of utter nonsense.
Are we living in a false economy?
So they have to have the means to back their lending up ,in other words , but I would have thought the % would keep them afloat ,unless like you say ,the people default on their loans ..
No, they only need 10% on deposit of the money they have on loan. This is why the property crash of 2008 caused so much trouble for the banks, the banks suddenly had to find the money to cover all the bad loans they had on the books and they didn't have it.
@@schrodingerscat1863
No. They have to have enough money in reserve to pay their depositors, and meet their bills (invoices) outstanding. They do not need the money to cover their loan book, which is entirely separate. But the Bank's reserves on deposit at the Bank of England, by law, must equate to at least 10% of the loan book, which puts a ceiling on the loan book. But the shareholders are owed a separate amount (no of shares times nominal price of shares) which in the market often is exaggerated (no of shares times market share price).
If the loans start defaulting then the markets sense that there is nothing backing the market share price anymore, and the market price falls. People panic that they will lose their money on deposit and all try getting it out at once ( a bank run), and the bank reserves fall. This then affects the amount of new business a bank can do, as it reduces the reserves, and the end result is a death spiral leading to a bank collapse. Except once the dust from 2008 settled, at least in the UK, a new system came in where the Bank of England can intervene by putting new money into a Bank to bolster the Bank's reserves, and thus stopping the death spiral. Quantitative easing, amongst other things, was a way for the Bank of England to increase a bank's reserves so that they can lend more money, and thus stimulate the economy.
@@schrodingerscat1863@schrodingerscat1863, Spot on; some banks had reserves below 1%! Thanks to de-regulation
so a bank punches numbers into a computer for your mortgage ,money that does not exist , at no risk to themselves and you get to pay them for the next 30 years .
they make huge profit of your labor and they do f all for it .
i understand the service
the question is why are mortgages not offered by government with the only profits being operating costs .
Because the banks control the government. Do remember we had an unelected PM who was a representative of Goldman Sachs?
👆THIS! 🙌
Because otherwise money managers wouldn't get their income.
Banks do face a financial risk when lending though as you may default. That is the justification for the interest they charge on that loan.
@@JGS2295 what risk ?
The taxpayer will have to pay and suffer austerity if banks fail because of their risks.
Plus banks are all engaged in the Financial Casino, buying derivatives, gambling basically.
@@Incognito-jf1dr Oh I totally agree with you on the financial sector's parasitic extraction of wealth and moral hazard allowed by poor credit regulation and a, with good regulation it's a good thing, lender of last resort central bank and government willing to bail the sector out.
But it is still true that individual banks face risk of insolvency. There have been bankruptcies of banks in recent history.
Can and do. lend 20x asset collateral in Japan.
Banks don't create money. They create lines of credit. Money is a medium of exchange. The money is created wen we use the credit line to transact with another party.
They are one and the same in the eyes of the transactors.
Money is not a medium of exchange. This is utter nonsense invented by economists. A medium of exchange would work completely different. We do not live in a barter economy.
Money is a bookkeeping system of debt. Debt is created when buying stuff and cleared when selling stuff. We almost never do barter.
@@ThomasVWorm personally i prefer to be paid for my labour with currency, rather than goats, cows or bushels of wheat. I find grocery stores have these annoying restrictions which prevent me paying for my shopping with livestock (plus the goats are a nightmare in the fresh produce aisle!) Once people developed an externalised store of value (beads, gold, feathers, whatever) that *represented* commodities, then that store of value becomes a medium of exchange - as long as the selling party will accept it at a rate I am willing to pay for their goods. And once people get fed up of carrying around bags of beads or gold or whatever, paper certificates stating that they have sufficient of that item on deposit to pay what the seller is asking are the next logical (although not inevitable) step.
@@servicekid7453 ok, I have my own currency I can pay you with. You can work for me.
If a bank makes krs money up out of thin air to lend out. Why does it need to ....borrow.....money short term ?
To adjust it's reserves at the Bank of England. Most of the money is just borrowed overnight so that at the end of the days clearing cycle (which actually occurs in the early hours of the next morning) it has enough money to pay out what it owes other banks, and still have the minimum reserve on deposit at the Bank of England.
Clearly you do not pay by direct debit to your electricity supplier.
The electricity supplier gives a loan to you, when he allows you to consume electricity but sends the bill up to a month later.
When we start to have electricity in our homes, there was a little device in your home, where you had to insert coins to turn electricity on.
@@ThomasVWorm Yeah, I don't think you understood my point. If you pay your energy supplier by direct debit, then it is usually set so that a certain amount is paid each month regardless of consumption for any particular month. They insist that you keep your account with them in credit, just like a bank account, and will happily have it hundreds of pounds in credit without telling you or lowering your DD amount.
I think people are not qualified to function in a capitalist society without a level of understanding of the financial sector. I think it's past time we had a GCSE in Finance.
There is a massive disparity in the input. Children are getting off their parents on money management and personal ecconmics. In a wealthy family, they get taught good practice. In a poor family, finance and banking are dirty words, and the way it works is a mystery.
It would be overwhelmingly in the banks interest to provide this and to have oversight in what is taught.
It would help address the growing number of those who are ecconomically inactive.
Can credit unions do the same?
I know this wasn't a video on money supply, but I caught the blasé reference to money supply creating inflation and this isn't really supported by the data when talking about consumer prices. I'll admit to not knowing as much about the history of inflation in the UK as the US, but most spikes in consumer inflation come from acute supply shortages, particularly of labour, and particularly during times of military conflict and conscription. Increases in money supply are more closely correlated with asset price inflation, but that's not what most people think of when you say "inflation". For consumer prices to be hit by money supply increase, you have to have not only people consuming more of the same goods and services, the places offering those goods and services need tk be running near capacity. Go into any number of coffee shops in a week and while you'll note that they can be flat-out at times, there will be times when they can handle more orders with the same staff. This is wht the price of an espresso is more closely affected by the price of coffee cherries rather than consumer demand.
What happen to the £10,000 the bank created when the load is payed back?
The money created is then “destroyed”. This curbs inflation as the banks make money from the interest accrued.
Profit and interest... plus they have granted themselves insurance polices if you default on your promises within 3 years, insurance will pay out and cancel out the £10,000. Meanwhile the debt collectors buy the debt for pennies and chase you for the full amount... (debt collectors buy the debt without consent of you and without your knowledge) The entire system is built of layers of fraud upon fraud....
They erase it
@@kiuk_kiks No it isn't...
@@WarrenPeaceOG no they dont...
My brain hurts!
I think the central banks and commercial banks prefer peoples heads to hurt, and not understand how they work. Making a loan by tapping a keyboard, then benefiting from the interest paid on it, is literally money for nothing - sure there is a risk of default but for the most part the risk is very small.
Richard please explain the role of interest in the private money creation process. I think that you once said there were no constraints on the money creation of the central bank from having to pay it back to anyone. There is a government bond market, but that is a choice the treasury makes and it is useful in controlling the amount of money in the reserves of private banks. But my question is how does the private interest charged by private banks resolve itself in the very long run, can this cause a problem?
The interest banks receive is used for-
1) to pay interest to depositors
2) pay much of the running costs of the bank
3) create the profits and share dividends (which is a sort of interest).
Interest is a rent paid for the use of a good- no different from any other rent. One borrows because the use of the money gives a greater return that that rent.
JP Morgan was being disengeuous, because credit is money. And he made his fortune by using bank credit. Why? Both currency and credit are commodities that have a financial value, and they can be bought, rented out, gifted, spent or sold. The vast majority of money in the modern age is credit. Get paid your wages by check or bank transfer into a bank account? That is credit. Take out a car loan or buy a house with a mortgage? That is credit. According to the Bank of International Settlement (BIS), 95% of financial transactions in the global economy are made by bank credit. Cash as currency, or specie such as gold and silver, are increasingly rarely used in the day to day business in the global financial system. Even China, allegedly buying gold as a hedge against inflation, don't send it to pay it's bills. They have to exchange it for cash or credit to use it's value.
Once technology made it easy to transfer information quickly or cheaply, the use of currency and specie began to decline in favour of bank credit. So now bank credit is the dominant form of money.
@@marcopolotimetraveller
Metallism is an anachronistic view of money. You watch videos on MMT yet you still espouse antiquated views on money.
@@marcopolotimetraveller JP Morgan the man lived during the period where US was on the gold standard. Money is no longer tied to gold. This is the essence of the problem. The monetary system changed but people stuck to the old ways
@@marcopolotimetraveller If it serves the four purposes of money, then it is money. (If it walks like a duck...)
Could anyone of us set up a bank then!?
Dave Fishwick tried. There’s a film version of his story ‘Bank of Dave’. Although film version Dave has more success.
@@nyeainsbar2793 Bank of dave is a dipshit...
@@nyeainsbar2793 Bank of a dickhead...
Dear Richard could you do sn item on National insurance? The contract as I understand it is that by paying NI over a
lifetime's earnings a worker has paid into an insurance fund that guarantees certain benefits such as healthcare, unemployment benefits and a pension for their life following retirement. I understand that it doesn't work quite like a savings fund so tell us how it works. Partly because I am worried that the government is planning to break this social contract.
@Jethro-q6u thanks Richard
You’re not paying towards a pension for yourself later in life, you’re paying the state pension of current pensioners right now, as they were when they were working.
I think Ni should actually be insurance. Like a nationalized insurance company it could supply pension and NHS, also elderly care. Between everyone this would be doable and inexpensive. It could stop governments taking money out of NHS.
@Jethro-q6uif private companies can provide pensions why cant the state? Surely the more people paying in the cheaper it gets.
The government seems to be attempting to frame the pension as a benefit rather than something paid for over a lifetime of paying national insurance. It is a disgustingly disingenuous way for the government to behave considering we are under obligation to pay and were given assurances when we payed it.
While the basic premise of this is correct there is a fractional reserve required by the bank so they can't create 100% free money I believe they need 10% of it to be based on cash on deposit with them, hence the term fractional reserve loans. They are still just creating 90% of it out of thin air though.
Read the Bank of England Q1 2014 report; it is 100% created. According to the Bank of England, the fractional reserve theory and the intermediary theory are both dead in the water.
Nope.
@@metallitech Agreed
Looks like Geraldine Land's sales team are working overtime on your channel Richard.
She can conjure money and profits from thin air too .
She just needs your .money first !!😅😅😅😅😅😅
What are the commercial bank reserve requirements in the UK?
There is no reserve requirement.
Speaking of reserve requirements, they don't do what you'd initially assume. These requirements won't actually restrain banks in their lending activities for a very simple reason; central banks target interest rates, not money supply aggregates.
If you wanna get technical then there's also the maintenance period and how that affects demand elasticity for bank reserves.
Ask for mortgage money 💰 in cash ? Hmmmm
1844 then. When it sounds like it started to go wrong. Time to repeal that and all the other regulations since (and prior). Like state backed deposit insurance for example . Regulations and a central bank are why the financial sector keeps failing.
The financial system failed repeatedly long before that, like the whole south seas bubble.
Haha deregulation results in mammoth chaos - you little anarchist you 😄
So the stricter capital ratios that banks must maintain since 2008 are in the central bank reserve account?
Also, would be interested to hear what you think the Chancellor will do in October. Do you think Rachel Reeves will raid people's savings?
Your use of language is inadequate to describe the reality of the impact of QT since 2008. Where the vast amount of that money ended up wasn't in households, but in assets and profits of corporations. So there's a choice right now. Either stop subsidising the asset wealthy, or mug the those dependent on wages for a living. Cheap money is too addictive, and taxation is a useful tool to deal with that.
@@CuriousCrow-mp4cx and taxation that mugs those dependent on wages again.... The system has created an imbalance that is not sustainable.
Love this. Here is academic telling you your house is on fire after the firefighters have left the building... I wonder what other deep financial insights has he got instore for us?
Hi Richard. Would you say that private debt is too high ? What effect does our current level of debt have upon the economy ? Is borrowers spending capacity limited by this debt to a detrimental degree? What dangers are there for the banks and the country in the event of a downturn and a sharp reduction in credit ? Thanks
I would also like to hear more about this.
Prof Steve Keen predicted the Great Financial Crisis based on very high private debt levels. It's what we SHOULD be worried about, instead of public debt levels. The economy and its stagnation seems increasingly predicated on private debt servitude.
Richard, can you touch on the reasons/justifications for banks charging interest on loans, and payment of interest on savings please? Are the two related on a similar double-entry type basis?
They charge interest on loans to make profit.
They pay interest on savings to attract depositors. The more they have in deposits, the more they can loan out, the more interest (profit) they can receive.
@@lukemclellan2141 That doesn't seem tot be the case since at least 2018... The banks do not want or need to pay you interest... This suggests to me they do not want savers because the entire system is now based on debt alone... if large amounts of debt, then the interest rate you get paid is minuscule along with inflation meaning.. saving is futile.
@@lukemclellan2141 thanks, but I understand the capitalist motivations for it. What I was asking for was the fundamental economic justification for it, with a function beyond profit generation for the bank.
Commercial banks can create money, but unlike central banks they can't create net financial assets
The regulation of commercial banks is not only to control solvency risk but to control inflation, if you consider minimum interest rates as a regulation. Whilst the main instrument controlling inflation is taxation, interest rates are important particularly for asset inflation.
Again confusing people deliberately. I can make money out of thin air for someone ,"on my own books". But when it comes to them spending it, I have to get hold of real money. Also banks can exist without a central bank. Also there is no reserve requirement for UK banks.
You do not need to get hold of real money for spending, when others do the same for you.
Eg. all the people in your neighbourhood. So everybody owes to others and others owe to them.
Each week you meet in the local pub and you make transactions between the books to reduce all the debt to the net debt.
Or you leave the entire bookkeeping to the bar keeper, which turns the bar into a bank.
@@ThomasVWorm This sounds like the situation where there is only one bank. I've been meaning to brainstorm about this. Not so much regarding commercial banks, but instead the central bank, because there is only one of them.
@@metallitech I describe two situations:
1. everybody is its own bank
2. the barkeeper is the (central) bank
What we do have, is between 1 and 2.
You always do have a central bank, when the state has its own currency and it mints coins. It then is a bank, since it creates debtors and customers of this bank by taxation. Banks will depend upon this currency.
Without, each bank has its own currency.
@@ThomasVWorm OK I understand the analogy now. But it doesn't mention that the deposit balances of the banks are worthless for the weekly settlement, for which they have to get hold of central bank money.
@@metallitech between their own customers, the settlement in a bank is happening instantly. When the transactions between the banks are not directly between them but via a central bank, it is also almost instantly.
Not quite thin air. What actually changes hands is the promise of future energy and sweat. Tomorrow's work will get done so that the repayments are made.
Hello Mr. Murphy, this video was well needed and appreciated! 🙏
Would you like to give your listeners some historic background of how the amount and proportions of public and private debt changed over the decades and why (events).
Public debt also only seems to be rising sind around 1900 (in the US at least), maybe because of the establishment of central banks.
But how did the government get financed before, especially with lacking income taxes to redeem publ8c spending.
Likely there also was little to no public spending, at least for social services, but surely for investments in infrastructure?
I mean, government money creation from nothing must also have been the before the central banks were installed,
And surely also when the Gold standard was still active, right?
Check out the the history of Halawa along the regions linking to the Silk Road, and the development of Finance in history. Currency or or metals were too bulky to use in daily life. So the creation of cashless means of transferring and distributing financial value were evolved in the earliest years of international trade. Hence the creation of banking. Consequently, there is a link between trade, technology, and finance.
Yes, governments created money in various forms and by various methods long before commercial banks existed. When states or monarchs paid (mostly their soldiers) in coins which were exchanged at a value far above the worth of any precious metal they contained, the coins only had such value because taxes could be decreed to be payable only in the 'king's coin'. Soldiers could buy food, and the farmer could pay their tax. Most transactions tho have always been through some form of credit accounts, such as a bar tab or an account with a supplier.
More fascinating, check out tally sticks. English medieval monarchs would pay for public works (more often warships, etc unfortunately) by taking a stick of wood with a wavy grain, marking it with a number value, then splitting it down the middle. One half was kept by the exchequer, and the other carried away by whoever the the king was paying, say, the shipbuilder. That stick was then a transferable token of great value, to be used in further private transactions, or for payment of taxes. They couldn't be forged because the exchequer would match the two halves of the tally stick when the tax was paid. Some believe this system played an essential role in the rising power of England in the late Middle Ages.
@CuriousCrow-mp4cx yeah, I'm aware of that. I didn't mean to go that far back in history 😉
It's All about trust. Banks now need to have a certain reserve ratio.
True. Since Banks issued notes initially and these became seen as money they then decided they could create more notes than they had backing securities (gold initially). This is fractional reserve lending.
This is why New Labour were responsible for the 2008 crash in the UK because they let the banks set their own reserve ratios.
Effectively all banks are in debt totally because they loan more than they have in assets. Now the problem comes when people think the bank may lose their money and a high ratio of people want their money out and the reserve ratio is too small to contain the demand. This is a “run on the banks” and what we saw at northern rock.
The problem with 2008 wasn’t that the banks didn’t trust each other it was that the people could have lost faith in all banks and collapsed the system entirely and that would be a collapse of all order.
Gordon brown and Alistair darling did save the world because they saved the banking system, but Labour did cause 2008 with this and other policies.
The reserve requirements need to be mentioned otherwise an infinite amount of credit could be created. If 12% is the agreed reserve then this would need to be set aside at the BoE.
Yes the fractional reserve is important otherwise the banks could create infinite money out of thin air.
There is no reserve requirement. There is a capital requirement. Capital is assets minus liabilities. This should still limit lending, I think.
For the duration of the loan, the additional money created will inflate the money supply. Over abundance of anything devalues it, which is a problem we have been experiencing for quite some time with our currency, is this solely due to the large and increasing national debt not being paid off? Do defaults on loans permanently inflate money in the system?
The question is who takes the risk? Are they liable for the bad loan? Do THEY have to pay for the loss or it's paid by the Bank of England from generated qe money, thus diluting the money supply. Because if the loan is repaid than the bank is making the profits. So the losses should be paid by them too.
The commercial bank is liable for the bad loan, and this is why there are capital requirements. The capital is assets minus liabilities, and this has to be at a certain level. Loans going bad erodes the capital. The capital is the shareholders' value.
The problem with a debt based financial system is the interest payable on the debt, what happens when the interest payments are paid by raising more debt and so on? It's clear, mathematically, that these systems inevitably burn out due to the debt burden. I don't think even mmt has an answer to that?
Debt creates rentier economies where money made by selling debt is spent not in investing into industry, but in asset bubbles and speculation. It is human propensities that dictate the fate of money in the economy. And the propensity for greed plays a role. Truly, creating money is necessary but insufficient to manage endogenous inflation. Adequate and focused taxationis also necessary to prevent the undesirable impacts of inflation. I mean, compare the fates of the US and Denmark. Both used QE to cover the costs of rescuing their banking systems and Covid spending. But where they differ is how they distributed the money and how they managed inflation. The US spent and gave away the money it created, and made no effort to adequately tax the profits from that money. Denmark loaned that money and taxed the profits.
Guess who had less endogenous inflation?
It becomes clear and simple if you view the full monetary cycle. Suffice to say, all money is debt, govt owes itself, and to the degree that it pays interest to private sector - bonds for example - that's another way in which public sector spends money into existence for the private sector. It may be overstatement, but you can also think of the "national debt" as the money supply. It's all the money it's created that hasn't been taxed out of existence yet
NOTICE TO ALL MY TROLLS: I hope you was paying attention to Richard J murphy's How Debt is created out of thin Air? Muhahahahahahahahahahahahahahahah Only part of the story tho.... What he didn't tell you is what is going on the other side of the ledger that we cant see!!! 🤣🤣🤣🤣🤣
Yes double entry but the money advanced comes out of "other deposits" it gets from "savings" and Government Loans!! The ratio of assets held to be lent out again is varied by BOE to ensure that Banks have enough money to cope with "runs" when many customers want their money back! Governments though are less constrained as they can create "credit" even though they do not receive "savings"! Treasury issues bonds at interest to get others to take on some of its debts
Hey Richard... I've just had a very interesting meeting with DJE Media about the TH-cam comment sections... One of the most productive meetings I've had in a while!!!!! Interesting times ahead!!! Muhahahahahahahahahahahahahahahahah...................................👻👻👻👻👻👻👻👻👻👻👻👻👻👻👻
Pray, tell!
Is that the people who just go around starting arguments about who and what they can film? Who cares?
How does BoE decide who can be a bank?
Between there mates in the fraternity, some of them used to be known as freeman on the land... and post masters....
I saw a documentary decades ago about a guy trying to start a bank. It seemed insurmountable. Comments later say "Bank of Dave"
@@WarrenPeaceOG Bank of Dave is a plank and simply a diversion away from the truth.
@@WarrenPeaceOG What a load
The FED does
All banks suspected Suckers and this is for specific! Needs Collateral INFLUANCE AND FIDDLE TOO LIKE 2008 BY BANKS YES ????? POOR PEOPLE PAY back? STATE
I thought we were in a democracy so it is ‘our’ money as we own the government
In a real democracy there'd only be one bank run by the people we elect.
Democracy is a means of distributing influence, if not also power. There is no state anywhere on earth where control of money creation is not delegated to institutions, none that are directly controlled by democratic rules. At best it is indirectly controlled. Not even in Switzerland, a democracy that values regional government and referenda, is the financial system is exposed to direct democracy. It's firmly in the control of central government.
This is an immoral apology to aggression qua Statism.
Truly shameful.
Abolish Private Banking
DemocraticSocialismNOW
One bank to rule them all? The soviet system, proponents of CBDC would applaud you.
@@mrblack61 so u are fine with banksters legally profiteering!
@@yellowgreen5229 The short answer is im fine with banks making an appropriate profit, but id also like to see the public educated on the subject of money creation. Re centralisation of the banking system, it has its own problems and could be a disaster for the transactors, in particular if a programable money were to be introduced and misused.
Having the power to create money is a great responsibility, we should be careful what we wish for.
@@mrblack61
I'm dubious that you are fine with banks profiteering off the public, but this is why workers are wage slaves.
Nobody has the right to my money, u want to give yhem yours then that us for you, not the first class traitor.
How do most of you guys still making profit? Even with the downturn of economy and ever increasing life standards
Well, I picked the challenge to put my finances in order. Then I invested in cryptocurrency and stocks, through the assistance of my discretionary fund manager
Mrs Nancy Williams Laplace
The first step to successful investment is figuring your goals and risk tolerance either on your own or with the help of a financial professional but it's very advisable you make use of professional
This is correct, Nancy's strategy has normalized winning trades for me also and it’s a huge milestone for me looking back to how it all started..
Nancy is considered a key Crypto Strategist with one of the best copy Trading Portfolios and also very active in the cryptocurrency space.
Collateral.
Could anyone of us set up a bank then!?
@@clementattlee6984 Just make sure you are all mates first? Now.... Lets talk about freeman on the land?