Banking 5: Introduction to Bank Notes
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- เผยแพร่เมื่อ 30 ก.ย. 2024
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Introduction to bank notes (which you are more familiar with than you realize).
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I assume you're talking about holding bank notes issued by the Federal Reserve (i.e. dollars) that aren't getting interest in which case you are making an astute observation. This is how the Fed has money to operate without taking taxpayer money (in normal times). It gets interest on the loans it makes to banks but pays no interest on the reserves kept with it or the notes (dollars) that it issues.
I just started watching this series of videos on banking. I saw at the end of this video deflation takes place. Keep in mind- between 1913 and 2010 there was about 8,458.10% inflation. And between 2005 and 2010 it was 14.29% inflation. That’s a big difference between this video and the real world.
bank notes? you mean future wallpapers?
Sal this is world class education!! Thank you!
You know everything about everything
4:59 ... 5 gold rings !
Four calling birds, Three French hens, Two turtle doves, And a partridge in a pear tree !
WINNER! You are a Billionare!
Hey Sal, these videos are very interesting and informative. I have one question though.
How do you build Sal's Bank in the first place? Surely you need builders to pay to build it. Where does the money to pay them come from?
He used his starting capital to build the building in his example
The dollar is backed by government securities aka government debt. It was gold or government debt based upon the taxing power of the government and its ability to raise gold. Now its just debt so its technically insolvent . The description of the dollar as backed by goods and services is not correct as a distinction from gold because that is also what backs gold. Thats why primitive societies just used it as jewelry. So the dollar is basically backed by taxing power.
Suppose you lose your banknotes. Will the gold stay with the bank forever because the bank won’t let you claim your gold back?
lol this is a example that he assume everything went good and the wealth is created, assuming no bad accidents happened, yea if the wealth was fake the multiplier would not be working but yea... just a positive example
I wish I had his brain. Someone needs to examine it to find out the secret. Is it what he eats or drinks that makes him so smart? Any neurosurgeons here that can do an MRI of his brain to find out? lol
That's exactly what cryptocurrency is...digital bank notes
This video does not say what will happen when everyone takes out their gold pieces from the bank.
To say that it's unlikely to happen doesn't justify it.
He discusses it in a later video. The possibility of a run on the bank is why a reserve bank comes into existence.
well most cases, people have more loans than savings in with their banks. It's not retail banks that loan out their investments. It's the commercial banks, and normally, investors can't run their investments due to contract terms. Closest example is Term Deposit where you lock your money away for set term and if you withdraw prior, you pay a penalty.
I just want to thank you for all these banking/financial videos. They are VERY useful and VERY appreciated!
Tell me, what have you done with the information?
does this mean that bank notes are the money and check issued by the bank????
Sal is describing a gold certificate with a bank note. This is NOT a bank note. A bank note has no security other than trust and is simply a complex paper.
It's not clear what distinction you're trying to make. A bank note is "a promissory note issued by a bank payable to bearer on demand but without interest and circulating as money". A gold certificate is "a certificate first issued in 1934 by the U.S. Treasury to be held only by Federal Reserve banks and exchanged under treasury license for gold at the rate prevailing at the time of exchange". (MW's law dictionary) Sal is referring to the former, not the latter.
If you used 100 gold to build the building, wouldn't there be more than 1000 gold in the system ? Since you had gold yourself to begin with?
It's not true that only 1 bank per country issues banknotes. In the United Kingdom banknotes are issued by the Bank of England, the Bank of Scotland, the Royal Bank of Scotland, Cydesdale Bank, Ulster Bank, Northern Bank, the Bank of Ireland and First Trust Bank.
@bruincafe00 let's say you have 0 "GP" as you put it. You borrow 100GP from a bank, but must pay 10% interest, and start a business building houses by yourself. By the time you complete one you've spent 50GP on whatever. You then sell the house to someone else for 100GP and now have 150GP. So after you pay the bank back 100 plus 10GP (10% interest) you have 40GP and you didn't have to borrow from anyone else.
In your example on the last video. If all the transactions unwind, from where is the interest coming from. It seems you always have to create interest from nowhere and that number will continue to increase into perpetuity
@cv45fg56hg83sd91
As long as the currency is not backed by anything the government can always adjust its value. If they wanted to increase the value of the dollar they could, but it might have worse consequences economically than letting it shrink (for example, the Chinese government deliberately keeps their currency less valuable than the dollar to keep their exports cheap.)
On the gold standard, the value of the dollar is tied to the availability of gold, which is harder to control.
@cv45fg56hg83sd91
No, if you owe someone money or buy something from them you can pay off the debt using gold - if they agree to accept gold. If you offer them cash to settle the debt, though, they have to accept it, as it is "legal tender". It's up to them whether they accept payment in gold, or chickens, or any other form.
How does this explain our current fiat system. Our economy is no longer based on the gold standard. As far as I can tell this video has no relevance to our current situation.
@dsglop It's true it's wealth backing our dollars. However, the Fed has the power to print more dollars then real wealth created(inflation). In that case, the dollar's actual value begins to diminish relative to gold. That's why people buy gold.
all well and good, in the end of the day this is a theoretical fantasy, in practice wealth does not expand at the same rate as the currency supply and therefore there is inflation, the inflation is inherent from a debt based currency of paper, and the bull market will always win. this is especially the case when wealth starts decreasing and collapsing and the money supply is left at an extraordinary massive amount, your theory is fundamentally flawed.
People who constantly point out the Fed is privately owned also constantly fail to notice the profits of the Fed must, by law, be paid to the US treasury.
@dsglop, wrong! The video is nice, but it misses 2 points:
- interest rate: if you assume that the investments went well and wealth is created then the interest rates should grow as well
- It is unrealistic to assume that all the investments will go well (as we have seen in many countries). And, as has been shown, credit expansion policies invariably lead to bubbles and bad investments.
The elimination of central banks and the adoption of gold backing policies are mandatory!
.
@dsglop Yes, but gold is a limited quantity, so we cannot produce it at any rate we want to. Paper money is producible, so the Fed will produce more when it needs it, making it less valuable than gold.
one question; what was the incentive to make bank notes to begin with. I mean, if (originally) one bank note, which I prefer to call an IOU note, is backed by one gold coin, why create this extra step in the process of owning money. why not just deal with gold and be done with it?
PS. I know this can't be applied today but let's assume we're in 1776 for now.
can some please answer?
@seany282 Sal is using gold in his examples, but in this context the gold is immaterial: he could be using salt, or plastic, or glass, or pieces of paper, or whatever. It doesn't matter. It's what those things represent which is important (that thing being "value").
ironically you theoretically need to pay .99 cents to buy this video but you can copy the link on the right and put any of these videos on to any website you like... just some food for thought...
Also VERY nice work man. This clears up a lot of confusion i had with fractional reserve banking
@seeinggreendevils It was created to make carrying money less risky, look up the original purpose of the knights templar, ignore the conspiracy stuff about them.
@ivanleo lol yes I discovered this in my research. The average person does not THINK enough about topics they are discussing. Thinking always leads more questions and more answers and more complexity and, in my opinion, more satisfaction.
Doesn't the 100 gold coins used to construct the bank have a velocity to it aswell?
"Not only is your gold safe, but you have something that you can transact with."
Well, no. The gold is only as safe as the note is, and the note is probably easier to steal.
i have a question. Necesarily, if the Fed prints money there will be more inflation?
Bank of George Bush 😂
excellent point. perfect ivanleo. these are people who have problems in thinking in systems.
Frankly no, the current system works a lot better than any alternatives I've seen
Then please send me all your worthless banknotes, I'm sure I can find some use for them
id like to see a video on if the business loans FAIL
You are just the best teacher ! SImple !
isn't inflation somewhat of a hidden "tax"?
so is there an actual vault full of gold in the us?
What if the bank lend notes on gold they don't have and receive interest on them?
Watch the last video he talks about that
I wonder if Sal is voting for Ron Paul
??? why u reply me for dude? wtf?
I really appreciate that I can watch such videos, but you really shouldn't waste that much time with drawing. I.e. writing down 500 four times on the bank note. Doing so once would have sufficed ... I think people will grasp the either that way, too ... Still, I appreciate your effort, I really enjoy learning more and I find this really useful (Hoping it's correct though :D)
idea instead of either*
keep them up!!!!
maybe he can lol
great!!