Why most of our money isn't real
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- เผยแพร่เมื่อ 28 ก.ย. 2024
- Our financial system is pretty wild.
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Johnny Harris is an Emmy-winning independent journalist and contributor to the New York Times. Based in Washington, DC, Harris reports on interesting trends and stories domestically and around the globe, publishing to his audience of over 3.5 million on TH-cam. Harris produced and hosted the twice Emmy-nominated series Borders for Vox Media. His visual style blends motion graphics with cinematic videography to create content that explains complex issues in relatable ways.
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That "The Big Short" outro though in the end 👌- great stuff, Johnny.
YESS I laughed out at the Irony🤣
It was perfect
They won't blame themselves, that's for sure
oh no its this guy....
love your channel btw
Someone on Twitter said it best:
“If taxpayer money bails out a bank, the bank should become publicly owned.
You can’t privatize the profits, but socialize the losses.”
Yes!
Amen to that!
then if you are poor, and the government pays you for that, you can´t get money for work anymore?
The point of some people depositing stuff in the bank is too invest and make a little extra money. If you give that deposit money to a person that doesn’t want to work to get a paycheck then you just loose that money
@@nikolaievans2432 You want people to starve to death?
Hey Johnny, one key detail you left out: The FDIC sold all the assets of SVB to pay the account holders, not the shareholders (who were left out to dry). So this is a MASSIVE victory for everyone except the greedy SVB owners. This *is* how the system should work, and we should celebrate that we found a way to punish greed while ensuring people's money is safe.
not just shareholders were left out, the debt holders were also left for loss
Fuck a shareholder, that’s their investment they gotta live with the risks. That seems to be the crux of of why people are so torn on this situation though like everyone can agree in the short term this is the only move that prevents panic because we’re all dumb. I don’t think anyone has the answer yet to whether long term this sets a bad precedent. Frankly I think all of these TH-cam videos about the crisis are exacerbating things. Like at the end of the day these TH-camrs are risking more unrest more panic for the short term attention/profit, they might calm fears too who knows. It’s a slippery ass slope and we’re all a bit guilty here
Just so that people know the whole picture, this bank was considered well run and innovative. In October of 2021 their stock got up to $750. In December of 2022 the stock fell all the way down to $198. Clearly a massive move down and a company in major distress.
It was possible knowing how banks work and the fact that the Fed was gonna have to raise rates, you could have bet against this bank using options and made a absolutely huge return.
Trump helped to cause this disaster by doing away with regulations on regional banks like Silicon Valley. This bank was able to keep its investment portfolio in riskier than necessary bonds and the Federal government had no way of knowing about it.
Wait really? Can you point me to the article? Because that would be extremely significant! That would be almost unheard of in the past half century, I think...
@@monhi64 Good point. We need less incentive to create buzz, overall. On the wonkier side, In general I say fuck a shareholder too, but for the whole system to work at all, you need to give everybody some kind of insurance, but tier it much more in favor of people who were not intending to gamble but were just looking for a place to put their money. But yeah we sometimes forget that money is entirely imaginary, just a symbol of some sort of value we already brought or could bring into the world. The stock market is just a flying ball of imaginary money, everybody tossing some in and pulling some out. But is the stock market totally unnecessary? Well, if you weren't able to trade stocks in companies after investing in their IPO, then your gain or loss would be permanently tied to the success of that company, and people would have a lot less incentive to invest. So you have less investment and therefore, in theory, less innovation across the economy. I think the sweet spot is just treating people fairly according to their stake in things - if you work for a company or have a reasonable amount of money in a bank, then you should have a vote in who is on the board who are responsible for identifying various courses of action or investment, and then you should have a vote about which of those courses to take. There's no reason why large shareholders should be the unquestioned dictators of the private sector (which is guaranteed to penetrate the public sector - siphoning money off a tank filled with the collective wealth of huge numbers of poorer people is a fantastic way to stay rich, after all). If we're going to have a system based on private ownership, then it should be fair - what a brilliant concept! But that's the actual root of many of our problems today.
I am FLOORED by how fast you all made this video happen and how good it is. It's next level. Incredible work that shows an incredible team 💪
You're awesome too ya know :D
What is this, a crossover episode?
Your videos are just as good Cleo!
I hope he's not overworking his team
Its for them to make money back. So its that thing also. And there is a lot of fluff to this VDO. When too many people are talking about something, the action has already passed.
There's the example of how Iceland's government dealt with their bank collapse in 2008. As far as I know, they chose to save the clients' money, but not the bank itself, and punished the managers and reckles investors and not the majority of the people. They also adjusted more policies and achieved unexpected economical growth after the whole country has basically bankrupted in the crisis
This is a joke right? Yall looking for solutions without addressing the actual problem of banks lying about how much money they have.
Legalised greed then punishing the greedy is like being upset at people for getting too fat after you opened an all you can eat burger and donut buffet for free.
If I lie about having a million dollars I go to jail, if the bank does it, it's a sign of a fictional economy.
Yall can suck on my credit!
This was the opposite in America
They also gave jail time to those bankers that were guilty of misappropriation.
Meanwhile the ones in the states get a slap on the hand and senior management gets new jobs at new banks
Dont forget ragulation
feel bad for the lowest paid workers that may be affected, but not CEO's. A lot of them have created this abusive corporate pay structure where they are paid 300 to 400 percent the salary of entry level workers. Most add very little value. They posture and perform with speeches, meetings, and excessive travel to provide the appearance of working hard. It's a con.
Very big con and that is why i have always maintained that people should never have their money in the bank! Get a financial advisor and even make so much more while saving!
@@andreasleonard0 Very true , I diversified my $400K portfolio across multiple market with the aid of an investment advisor, I have been able to generate over $900k in net profit across high dividend yield stocks, ETF and bonds in few months.
My husband and I were following this same trajectory. Last two years, I pulled out my money and invested with her wealth manager. Not catching up with her profits over the years, but at least I earn more
@@kevsmills we’re only just an information away from amassing wealth, I know a lot of folks that made fortunes from the Dotcom crash as well as the 08’ crash and I’ve been looking into similar opportunities in this present market, could this coach that guides yo help?
@@vivianecardoso0 It's run by ISABEL LINDA DUERI, who I learned about and got in touch with thanks to a CNBC interview. Since then, it has served as the point of entry and departure for the games we have emphasized. A search on the internet can be done if tracking is necessary
Hey johny, I actually work in the finance department of a startup that had a bank account on SVB, great video! That being said, I do have a commment on the bailout part. It's important to note that in the SVB case, the bank itself was not bailed out, customers were, so while our startup got access to our cash, the bank was allowed to bankrupt and was taken over by the FDIC (which is a government agency). All of the owners of SVB lost 100% of their invested money, and institutions that had made loans to it lost their money as well, and the FDIC is selling the bank's assets to pay customers back, only if after selling assets there's money still lacking, then the FDIC will use it's money (which is the insurance fund thingy) to pay (only) customers back.
I think the government was smart on this one, interfering with veeeery little (probably none) cost to tax payer, and the bank owners did lose all their money, so that ought to teach them a lesson, bank management did take their bonus but they lost their carreers and only customers were saved in this case
I've had economics classes in college and I swear you explain many concepts way better than my professors did
You are absolutely right👍
Most college professors don’t teach you how to learn, they just teach you a portion of *what* THEY learned.
Professors are generally hired due to their knowledge and pedigree, not how well they teach
I am in my second year in college, from all professors we had, only one knows how to actually teach and simplifies things. Professors in general don't know how to teach.
I believe your 10,000 just becomes part of the banks 10% reserves... they then create 90,000 out of thin air to loan into the economy in the form of debt. They never actually "loan" depositors money.
Financial services continually demand deregulation, cut corners, get in trouble, and demand a bail out. NO.
Unfortunately corruption breeds corruption.
There is a reason banks and investment companies are one of the top donators to politicians.
It's for moments like this after all
There's another side to this argument where deregulation allows new competitors into the market, and the increase in competition ensures that no single bank gets too big and the risk is spread out. If a small-medium bank collapses, the system won't go down with it.
@@James-gm9cs If everyone weren't so corrupt maybe this could work.
@@James-gm9cs I respect your point of view, it is a valid one. But the priority has to be stability of the system. At the end of the day, an executive's recklessness should not destroy someone's financial wellbeing.
@@ZachBobBob exactly. Too many of these systems rely on good faith which we all know is impossible
As a second year economics student I've studied this bank run and money multiplier effect extensively; but I've never been able to explain it as well as you have here. Thank you!
You're probably not gonna believe a random TH-cam commenter about this, but both this video and what you've been taught about the 'money multiplier' at undergrad are wrong. The Bank of England explain here: www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy.pdf?la=en&hash=9A8788FD44A62D8BB927123544205CE476E01654
Ha same
LMFAO its funny how people call crypto a ponzi scheme but when banks run a literal ponzi scheme y'all call it "multiplier effect" and praise it🤣🤣🤣
@@alexalex66666 What do you expect from sheep that think they aren't sheep? I am a sheep.
damn now ill step my game up for my next video on this
This was pretty well done tbh. I think it would’ve been more complete if it was mentioned that a few years back banks lobbied to have weaker regulation for stress testing (testing to see if they could handle not easy economic situations, like high inflation) and it let them to be not as careful as they should’ve been
SVB and 1st republic actually had reserves that exceeded those potential regulations so that would not have factored in. The reason for lobbying for the weaker regulations was to give small and mid size banks a little more flexibility to compete with bigger banks. That would help them grow and provide competition with larger banks. Several politicians tried to float this as the cause for the disaster but were quickly corrected and that is why it did not gain any traction. A combination of the unintended consequences of the inflation reduction law, poor bank monitoring by the san francisco fed, a very poorly chosen board of directors and poor executive management is what led to it.
*_"If the American people ever allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of all their property until their children will wake up homeless on the continent their fathers conquered."_*_ - Thomas Jefferson_
*_"I sincerely believe that banking establishments are more dangerous than standing armies, and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale."_*_ - Thomas Jefferson_
Amazing quote!
Thomas Jefferson held a deep-seated distrust of banking institutions, particularly central banks, and this distrust was grounded in his views on individual liberty and the sovereignty of the United States government.
Jefferson believed that banking establishments posed a serious threat to individual liberties, as they had the power to control the issuance of currency and, in doing so, could manipulate the economy in ways that favored the wealthy and powerful. He argued that banks had the power to create inflation and deflation, which could lead to the impoverishment of the masses and the enrichment of the few. Jefferson believed that the people's property was at risk if banks were allowed to control the issuance of currency, as they could use their power to take advantage of the people and enrich themselves.
Moreover, Jefferson was concerned about the potential for central banks to undermine the sovereignty of the United States government. He believed that private central banks issuing public currency would give too much power to a few wealthy individuals, who could then use that power to influence government policy and undermine the principles of democracy. Jefferson argued that the power to issue currency should belong to the people, not private banks, and that allowing private banks to control the issuance of currency was a threat to the sovereignty of the United States government.
In summary, Jefferson's views on banking institutions were grounded in his belief in individual liberty and the sovereignty of the United States government. He believed that private banks, particularly central banks, posed a threat to these values, as they had the power to manipulate the economy and potentially influence government policy in ways that favored the wealthy and powerful. Jefferson argued that the power to issue currency should belong to the people, not private banks, in order to safeguard the liberties and sovereignty of the United States.
Bro it’s too late for that in California, anyone who financed or refinanced after 2008 owns a lien not land.
@@Bombstark Too bad they're bullshit quotes. Jefferson never said those things.
Shame on you for posting these "quotes" without googling for a couple minutes. They're not real; "deflation" wasn't even a word until the 20th century. Don't just believe the authenticity of "quotes" you find online.
Johnny
This was awesome, sent to both my kids who are studying business in college! You make a complex subject very simple to understand. And your editing skills are amazing. I love the last clip that was a brilliant ending!
Not sure the Federal Government raises rates I thinks it's the Federal Reserve.
An interesting fact is that the CEO of Silicon Valley Bank sits on the board of Federal Reserve Bank of San Francisco.
The solution seems obvious, require higher reserve limits for banks. If currently 10%, why not 30 or 40% or even 100%. But moves like this get blocked by the federal reserve because it would essentially reduce their level of control over the economy
Nothing will happen to him, he will just laugh at the plebs
The fact that this is still legal somehow is astounding. Great video as always Johnny!
Why would it be illegal? This is how banking is done 😂the fact people actually give money to a blatant scam should be illegal. Anyone that dumb doesn't need to be amongst society 🤦🏾♂️
What's the alternative though? You can't finance your house unless you saved up the full amount? You can't replace your broken oven to keep your business going? And don't say the government can help, because their money is just as imaginary.
@@Korilian13credit institutions aren’t bad (coops, credit unions, and dare i say it a public bank). But Our banking structure is bad.Very bad. Funnels $ to the wealthy.
@@newagain9964 how do you think those credit institutions work? did you see what just happened to credit suisse? it got bought. by a bank. credit institutions are a mirage.
This is actually an amazing video, I don't usually comment, but the quality of this and level of clarity it has is unmatched. Keep up the great work Johnny!
LMAO. Money doesn't "multiply".
He can't withdraw money until the baker repays the loan.
So. Say the bank closes its doors. A new bank takes over the oven loan (a bond).
The new bank has the oven loan and this guys account balance. In a equilibrium.
Stop spreading ignorance. #TH-cam
Waiting for banning TikTok.
It's done buddy 🎉
It's done buddy 🎉
Sometimes, I’m so scared of the banking system that I realised that in ‘Mary Poppins’, Michael Banks had a point when he refused to give his tuppence to the bank and wanted to give it to feeding the birds.
I give the birds $28 /month. That's how much a 25 lb bag of sunflower seeds cost. (Actually $30...includes the $2 sales tax).
@@JusticeAlways Argh, I hope you are not one of the people who are the reason that pigeons shit all over the place. We have perfectly fine parks nearby, but those birds just stay in the little room for the trash, because they are fed seeds by someone twice a day. The little food they forage for is fast food from the bins. What a life. No wonder they are fat af.
Based on the video "Why Banks Fail," it is important to understand that the reasons behind bank failures can vary, but some common factors include:
Risky lending practices: Banks that lend money to individuals or businesses that are unlikely to repay their loans are at a higher risk of failure.
Poor management: Banks that are poorly managed or lack effective oversight can also be at risk of failure.
Economic downturns: During times of economic recession or depression, many banks may experience financial difficulties.
Fraud or corruption: Banks that engage in fraudulent or corrupt practices, such as money laundering or insider trading, can also face financial and reputational damage.
To avoid these risks, banks should prioritize sound risk management practices, maintain adequate capital reserves, and maintain strong regulatory compliance. Additionally, banks should focus on building trust and strong relationships with their customers and stakeholders to ensure long-term success.
Overall, it is important for banks to balance risk-taking with prudent management and regulatory compliance to ensure their long-term success and avoid the risks that can lead to failure.
Most lucid explanation of what's happening (the core of the problem: the general banking system). No video from any other channel comes close to this... ❤
Johnny,Please can you do the same video but also explain CreditSuisse UBS, and a mention of the other US banks that failed in line with SVB.
If the execs who received those bonuses at the final hour don't at the very least face criminal charges I've lost all faith in our justice system
How about setting up an international lottery; one in which every bank CEO & CFO are the tokens. If their name appears on the 'winning' ticket, they and their families are incinerated. The important question here is: should this lottery be played only once a year or every month? Lottery name: WE DON'T EXIST TO BE SCREWED OVER
u just said it urself, they recieved bonuses in the past, they recieved it now and will recieve in the future
The CEO also sold stock a week before. And whereas most bank exec stock sales are declared months in advance this was not.
People keep saying letting the banks fail will tank the economy, what they don't realize is constantly bailing them out can also tank the economy. This bailout model is unsustainable. The government doesn't have unlimited money. More bailouts encourages more incompetence and riskiness, which in turn leads to more bank runs, which in turn leads to more drain in government budget.
I work at a Bank & most of the things Johnny explained are pretty common knowledge among bankers like me. But these things are actually 'under-the-hood' kind of things that everyone should know to make sound financial decisions. Good Video Though! Love you Johnny Harris!
Question: Is going cashless a good idea...or a bad idea?
@@JusticeAlways good and bad.. don't leave ur entire money in bank.. invest in gold... Property.. good company stocks.. and hope for the best..
@@shahnawazansari119 ultimately it's all hope
@@JusticeAlways bad. If everyone decides to go cashless Banks will start raising charges on everything citing how everyone is utilizing their services so much and you won't be able to change your ways due to everyone collectively being reliant on them.
Use it in moderation . Unless you have way too much money cause then it won't be physically possible to make cash transactions all the time.
That’s scary to hear
Love all your videos, Johnny! May I suggest putting a compressor on the master audio track?
Your voiceover track is slightly lower in volume than the volume of the clips. So when the clips come up, there's a drastic change in volume for which I'm -- or maybe others too -- are having to manually adjust the device's volume.
A compressor will raise the lows and lower the highs to give a more balanced mix. Just a thought.
Great video once again! 🙌🏼
You sir are the only living thing in this universe till now who was successful to make me watch a 21 mins long video related to a bank and not just that but make me understand the whole thing.... I still can't believe that this actually happened.... Boy am i glad to have found you!!!
I loved the apropos movie clip at the end. If you haven’t seen that movie, fellow viewers, you should.
It’s called “The Big Short”. It details the 2008 financial crisis and how it happened. It’s kind of a depressing watch, but it’s a great movie and very informative.
Hey man, like the basis of the video, just wanted to point out the FDIC has less than $130B to insure deposits and the collapse of SVB is $200B+ in deposits that need covering, so the peoples money isn't safe. Also the backstopping of deposits are being framed as "not a bail out", but they are a bailout, because they're using the money from depositors at other banks to bail them out.
This was before FRC collapsed as well, the entire American financial system is rotten to the core because of the Federal Reserve and fractional reserve banking.
If I remember correctly, they're liquidating the assets of SVB to go towards that before dipping into the FDIC fund, but I'm at a loss of what that figure was valued at
The core problem is QE1, QE2, etc that the Federal Reserve did which lower the interest rate.
Congress is gridlock and not in a position to help the economy so the Federal Reserve took greater control of the economy.
Blame Congress for failing to fix themselves and make a more effective government.
@@aviatorsound914 could we also back up a step and blame congress since 2008 for spending too much especially since Covid that resulted in inflation and the reserve keeping interest rates too low?
"It is well enough that people of the nation do not understand our banking and monetary system, for if they did I believe there would be a revolution before tomorrow morning." -Henry Ford
HOW can you and your team create a high quality video so FAST?
I think I have to become a patreon to look behind the scenes :D
Cringe
@@Didnt_ask69shut up
CIA funding 😂
@@razorel can you explain that please?
@@87MasterJ theres a running joke (maybe not) that Johnny is a mouth piece for the government. based on takes in previous videos . especially the one on American involvement in taking down democratic governments around the world and replacing them with dictatorships. Search Johnny Harris CIA on TH-cam and watch the full video form Hasan
That's why it's better to punish individuals responsible for these mistakes, regardless if banks fail or get bail
That awesome moment when the sponsored segment of the video becomes an explainer video in itself. Top stuff, Johnny!
FINALLY! Someone used the clip from It’s a Wonderful Life! It was an eye opener for me as a kid (well, that and the 2008 crash). I don’t know why most videos about bank runs don’t use it!😂
It’s really hard to decide on this channel but this is one of the best useful content of the channel.
Thank you and your wonderful team.
I work in finance - you did a great job summarizing this at an approachable level.
Now this is the kind of thing I've been looking for since the fall of Jake Tran. Johnny, I love your videos, more or less all of them, and this one here has really struck a chord with me. You have a way with words when it comes to macroeconomics. Keep them coming!
Every time I see something on the news, and don't fully understand it, I come to this channel to get the breakdown of it.😂 Keep up the amazing work my friend!
The government will never say "stay calm"
Unless there's a reason to freak out
I am an IT person with an engineering degree, but I've always found economics very fascinating and way more practical than the big and sometimes impractical engineering/science mathematics. And it's even more interesting with your videos....detailed and intuitive. Great work, Johnny!! I have been a long time subscriber to your channel and it's for these reasons!
I'm a Mechanical Engineer with a background in Software Dev. I disagree with you 100%.
Lovely video!! Real question here is what kind of calendar is Johnny using on the background. It looks beautiful😍
Johnny, Parjanya (your editor) is brilliant! You sure have some of the most talented people on your team.
Loved the video johnny .. hope to see more videos on economics.
Johnny, could you talk about quantitative easing? Would love to see how you explain this. It has made a big impact on our economy over the last decade.
th-cam.com/video/EpMLAQbSYAw/w-d-xo.html
He wont, Im quite sure he isnt capable of systematic critique
A bailout is likely an unfair term to use for a bank run, as it isn't a question of is the money there, it is a question of is the money there right now. The government would be covering the money owed to depositors right now, but over the long term the assets that SVB has should still eventually balance it out. Similarly, from what I recall about this whole thing, the investors who own SVB basically still end up with the short end of the stick as the people being protected as the depositors, not the owners of SVB.
19:09 they should nationalize these banks. If they take irresponsible risks or screw up in some other way, the government should just take over the bank.
They do
@@stachowi The US government doesn't, right?
@@DavidJonRandom the government does nationalize the bank... they go out of business and the accounts are transfered to an active bank, but the government makes the depositors whole (e.g. inflation)>
@@stachowi that's not nationalization. That's just the government compensating the depositors and letting the shareholders and CEOs get away with these practices.
The ceos and board should just be held accountable tying their their salary homes to the success or failure
You missed how this "magic money system" contributes to inflation. It's regulated to ensure it is not out of control, but when there are other factors causing inflation, this system doesn't dial down to help offset that inflation. It just continues to contribute to it.
We need to dial this thing back and instead build GDP the honest way without manipulating the money supply.
there is no issue on interest rates as companies disclose under risk management implications of interest rate risk in their financial accounts. The collapse is a liquidity issue driven by having a depositor base that belongs to one risk profile which are tech companies. Additional regulation and disclosures is needed to ensure diversification in the depositor base
If only there was some way that the average citizen could "encourage" some accountability into these bankers
They can’t, that’s why nothing will change… this will keep happening until our system implodes and we go back to the dark ages (I’m not being dramatic)
There is a a way, don't bank with banks, e.g. boycott. Moral hazard works both ways, depositors have just as much responsibility to get their banking services from liquid/solvent/profitable institutions as the institutions have a duty of care to their investors and depositors. This is why I have not banked with banks for over 20 years, and instead keep my funds in a brokerage account. No fractional reserve with my money = no worries.
That is USA banking system. Other countries have much more higher demand than 10%. USA banking system is very unsafe, everyone knows. There are also some banks which keep 100% of your money, but of course you have to pay such services.
This is isn't even inaccurate, no bank runs on this principle (fractional reserve banking) anymore.
The reality is WORSE !!!.
Johnny, your video production and explanations are top-tier. Well done, Sir!. Johnny, your video production and explanations are top-tier. Well done, Sir!.
I just got laid off due to my former company banking solely with them :( thanks for explaining it in a way I can fully comprehend what’s happening
I'm sorry that this happened to you.
@@Splucked thank you
A bank that relies on constant growth from venture capital money sounds like a disaster in slow motion.
The big bank just died 😅
Letting them fail doesn't punish the bank, it punishes the account holders.
They must be expropiated by the State
georhodium Geo - I think we all lose, but if the account holders hadn't done the "bank run" I think even if the bank incurred some losses it would probably have survived and been able to continue to serve it's customers.
Obama/Biden Bank bailouts.
Your topic selection top tier!
If only school taught this way. We'd have a bunch of educated kids. I never knew / understood this. Thanks Johnny. I don't trust the banks at all now. And to think that SVB gave out bonuses with their customers going downhill and losing money is outrageous.
This is scary. Rich people pay politicians to make sure they get access to taxpayer funds first when banks shutter or they're in jeopardy of losing all their money. I feel bad for the lowest paid workers that may be affected, but not CEO's. A lot of them have created this abusive corporate pay structure where they are paid 300 to 400 percent the salary of entry level workers. Most add very little value. They posture and perform with speeches, meetings, and excessive travel to provide the appearance of working hard. It's a con.
It is like crossing the river with the boat sitting on top of the horse.
As an inhabitant of Switzerland I wanted to bring to light a problem that the second largest Swiss bank (USB) had recently 2018 I think so as they operated in US as well they operated with US rules and they have done things that would never happen in Switzerland they used to give loans to people who actually couldn’t pay their loans and then they have confiscated a lot of properties of people who didn’t pay their money without asking about their revenues and all that shit so what did US gouvernement do they simply have given an fine of 4.5 billion dollars or something in that case even though at the time the net worth of UBS was around 90 billion dollars and 4.5 billion was actually nothing for them by nothing I mean not amount that would actually indicate their economy even in that case the Swiss gouvernement has give money to UBS cuz they knew if anything happens to UBS if they would’ve bankrupt or something they would be paying more money to citizens than these 4.5 billion that they have to give to UBS so this is why the Swiss banking is so safe and this is the mistake that US gouvernement keeps doing cuz they should protect their banks and in that case no one loses if that would’ve been done with the SVB no one would’ve lose money and when the SVB would be at a better state they would simply pay back the gouvernement and in the end everyone is happy so basically if we see it deeper the fault why SVB bankrupted is simply the US it self also they haven’t done anything about the panic in Switzerland if anything like that happens news and media can’t talk about that and can’t spread the word to people to encourage them to panic we had several issues like that in Switzerland and actually no one knew it until it was done and yeah I understand the nature of US democracy and transparency and all that shit but sometimes the democracy is not the best way to do things
Johnny didn't say the most important thing, don't put your money under your mattress as its buying power will decrease. As it sits in your account it accrues interest. At the same time, inflation occurs in the economy. If inflation outpaces the interest on your money, then your money will be worth less and have less buying power despite being the same amount.
I've seen many visualizations of banking reserve requirements and their money multiplier effects (it happens when you study economics at university), but the intro here may be the best and easiest to understand version I've seen.
Don’t forget to add the I.O.U’s in that intro. Yes, the initial 10000 dollars is multiplied to 100000 dollars, BUT there is also a total of minus 90000 (in debt) in those same banks. The 100000 dollars is circulating in the economy, and the 90000 dollars that have been created are compensated by debt (so by putting 90000 of “missing” dollars in the accounts). That money needs to be paid back, and when it is, you automatically get back down to the original 10000. There is nothing scary about this system. If you don’t want this, then nobody would be able to loan money to buy a house or start a business. You would have to save up for 25 years and THEN buy a house. As long as everyone trusts this system, there is no problem. Your money is not gone. It has just been lent out, and will return eventually. The bank does “own” all of the money in the deposits. It is just parked somewhere else and it will return to them later. There’s nothing weird or scary going on here…
Information communications are so bad at schools
I'm guessing Johnny has a folder with these "troubled duck face" photos he uses for thumnails 😂
I feel like there's a big difference in bailing out the customers vs bailing out the banks themselves. In this case, the bank still got shut down. SVB stock is now worthless so the investors lost all their money, and all the employees are out of a job (even if they managed to give themselves bonuses on the way out). I think that's the way it should be. The customers aren't responsible for how the bank invests, but the employees and the voting shareholders are. So when the bank fails the employees and shareholders should lose out but the customers should get their money back. (in this case it would make sense for the government to seize all their remaining assets and use them to pay back the customers).
There's more to the story though... banks are
SUPPOSED to hedge their longer-term assets like bond holdings against interest rate fluctuations by matching long assets with interest rate swaps. Swaps are basically mini insurance policy contracts that pay out if interest rates rise to offset realized bond losses.
Minimized losses equal minimized risks
So, why are some banks getting burned if they have a (huge) market for swaps available to them? The answer is Greed... buying swaps is like paying premiums that cut into profit margins. When banks are required to do "stress tests", it's actually to test their hedges against liquidation and customer deposit withdrawal scenarios. Too little hedging (like with swaps) equals stress test FAIL. How do you get around this? Lobby and bribe politicians to dial back Dodd-Frank regs for mid size banks so you don't even have to take the test. Boom, problem solved... until Boom, the problem blows up. Sad.
can you make one video about the global rankings like happiness index, food index.. etc. The process they follow and their authenticity
This is why the word “bubble” is invented. It goes well until it goes bad. It does not create or stimulate a stable economy it finances wealth and capatalism
Banks are allowed to fail. You're allowed to make a "run" on a bank if you want. If the bank fails it was over leveraged. Kinda how it works
Hi Johnny, could you make a video explaining bank bonds ?
“People will be doing what they’re always doing when the economy tanks, they will be blaming immigrants and poor people.” At the end hit hard. Great addition to the already great video
John.. I'm a student of CSE and making documentaries for my university projects. I just wanna say, musics are perfect in every video that you post.
Please let me know where do you get the music from..
Please 🙂
Videos like this one is what they should be showing in schools
You seem so happy with the way the banks work...
you deserve what's coming.
" My daddy was a bank robber
But he never hurt nobody
He just loved to live that way
And he loved to steal your money..."
So FTX wasn't doing anything unusual🤣🤣🤣🤣
So Madoff wasn't doing anything unusual 🤣🤣🤣🤣
The reserve was eliminated in 2020. That blows your money multiplier model. Your old textbook is wrong.
Very true.
When I deposit money, let me choose if I want to have interest on that money by allowing the bank to lend a part of it that I'm comfortable with or not to lend any money at all even if that means I have to pay the bank to keep my money. I could then decide to only allow for (let's say) 10% of the money to be lent out in order to not pay for storing the money. Let me choose what happens, banking isn't free but it should be transparent. The way this is right now allows the bank to maximise profits but keep the most of them for themselves and account holders are only protected until 250k. That's not fair towards the account holders and it obfuscates what the bank does with their money.
kinda scary how much it sounds like a poncy scheme when you describe a bank :P
The amount of monetary expansion because of loan issuance (fractional reserve banking) is absolutely insane. I wonder what the value of the USD will be by 2030. 😢
I love that Lehman Brothers isn't included on this list. . .
Hey, instead of talking about the glorious multiplier effect which basically leads to a crash every decade, how about talking about non profit driven economic models, such as the one suggested in “Less is More” by Jason Hickel?
Awesome video, Johnny! Good job.
The brilliance of fractional reserve banking can be weaponized against banks with the right set of events and speculation. Capitalism can be great when everyone is feeling good. But a bunch of people waking up on the wrong side of their beds can cause entire banking institutions to collapse. It's scary to know that the world economy operates this way. No matter how rich you get, your money can vaporize in an instant for faults that are not your own.
I’m a bank owner and we are looking to take more risk since congress will always bail us out
They should absolutely let SVB fail no bailout whatsoever.
Sure I am fine with bailing them out, as long as they don't get bonuses and act all surprised that it happened, put actual responsible people behind bars. Banks nowadays don't manage money, they have risk management, as long as they make the quick profits, they are happy, its not our interest that is protected, it is sadly, theirs.
“Every excuse in the book is given for inflation. But inflation has a single source --> The Fed and the immoral fractional-reserve banking system.” - Ron Paul
The last clip of the video I thought was an Office and Succession mashup video until realized Steve Carell looks weird 😂❤
Someone needs to educate the Federal Reserve and FDIC on what 'uninsured deposits' mean.
What happened to treasury bonds that they bought from customers deposits. Would not they sort of pay for the deposits when they matured. Did they sell all of them for a loss?
Johnny my dude please tell your editor, the music is too loud and your voice too soft, i find myself turning the volume down when the music is on and turning it up when your talking. please let them know
Important question:
After these banks get bailed out by the FCID what's to stop by them from doing the same song and dance?
Or does the FCID just sell off the bank to the highest bidder so it can then do the same song and dance.
If we have to bail out banks, we should also make bankers responsible for their decisions, to fix the screwed incentives. We will not see responsible bank until then.
Very well explained...plz make more videos related to the finance world and economy
What's crazy is that there are times they don't even have to keep any money in reserve so that REALLY multiplies how much money they make.
can anyone advise stock trading explanation like this guy explains economics , thanks @Johny Harris
The only reason that banks are able to use your money to gamble on the bonds is due to Deregulation that happened during the eighties. The regulations were put in place after the depression.
@@Brian-wy7ui even more reason to keep my money out of the banks. I have noticed the last time I pulled money out, the bank wouldn't let me because I had an expired drivers license. Even though they new who I was. I went and got my checks cashed at Ace check cashing with the expired drivers license. I then payed my electric bill by phone and got my money out without needing current license.
Could you do a similar video on superannuation funds.
They should have created a rule that limit the company to withdraw their money like I think what China did to avoid the bank to collapse.