The History of Global Banking: A Broken System?

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The 2008 Global Financial crisis was kicked off by major structural issues in the global banking system and exacerbated by record levels of household debt.
Today the world is on the brink of yet another major financial downturn, and yet again household debts are at record levels.
So is banking really to blame?
⭐️ Be sure to check out BC's incredible documentary about John Pierpont Morgan if you're interested in learning more about the origins of the U.S. banking system!
👉 • J.P. Morgan Documentar...
#MoneyPrinter #QuantatiativeEasing #Economics
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[@EconomicsExplained]

Thanks as always for watching :D This video was requested by the team over on Patreon. If you want to have your say on what video is produced next please consider supporting the channel. www.patreon.com/EconomicsExplained

[@GEO_________________________24]

Would you make video like cold fusion did on Money. Who controls our money. Basically how banks formed and controlled every one

[@HowMoneyWorks]

Someone explain this one to me. Economics Explained posted this video less than 30 minutes ago, but it says this comment is from 4 hours ago. Conspiracy?

[@ChirpywaraTofu86]

@@HowMoneyWorks EE made it private, after 5 hours EE made it public. It's simple :D

[@HowMoneyWorks]

​@@ChirpywaraTofu86 my tinfoil hat disagrees!

[@robertmazurowski5974]

So basically what you are saying in this video is that criticizing this system and being against it means somebody is a conspiracy theorist? Do you know that being a debt slave is not a conspiracy but a reality for a lot of people? Also I don't know if you noticed but prices don't come down (except in the tech hardware sector).

[@collinslagat3458]

"There isn't enough cash in existence to payoff all the debt in existence." That hit different.

[@stefannnnn97]

Yes, but you can use money multiple times to payoff debt. For example A owes $200 to B, B owes 200$ to C So A pays 200 $ to B and B pays those same 200$ to C. 400$ of debt are gone. The dangerous thing is if there isn't enough money circullating to do so...

[@brunomaia2902]

Mingfei Wang so B isn’t debt free, just because A owes him $200 doesn’t mean he can pay C yet, he needs A to pay off his debt. If for example me, an individual owed $200 to my bank, yet my bank owes $200 to a bigger bank (like JP Morgan), then there’s $400 debt to be paid, there’s $400 debt sitting in banks.

[@codex8085]

@@stefannnnn97 Its all fiat money, the deficit is meaningless use block chain hard money.

[@stefannnnn97]

@Mingfei Wang Mingfai Wang Exactly

[@stefannnnn97]

@@codex8085 That has not really something to do whith each other. As I said the debt problem can be solved with fast circulating money. But Bitcoin is hoarded by holders. So it will just increase this problem...

[@samuelmitchell5937]

It seems like the financial system is a gigantic Dungeons and Dragons game, where people agree that others playing the game have certain powers and agree on a set of rules.

[@Peoples_Republic_of_Cotati]

additionally, in this 'Game' of G&G Governments and Goldsmiths, Murder Hobos and Creepy-Perv players/DMs are just as prevalent.

[@StarSage66]

And don't get me started on powergamers, G&G was way more fun in 1st Edition. The goldsmith was a very balanced no nonsense class and everyone knew what was going on.

[@Dragonblood94]

Human life and society in general is. so it just makes sense.

[@ThatGuyDownInThe]

@@Peoples_Republic_of_Cotati LOLLLLLLLLL

[@SKKaelth]

feels like society

[@alifinley9156]

I never considered “interest” or “taxes” as mechanisms for compelling people to believe that money has value. Thank you. 14:30

[@Scr3amer42]

It is actually how ancient Empires work. The emperor prints the money, gives it to the people and asks people to pay him back only with that money.

[@megrocks3026]

@@Scr3amer42 wow

[@saqibzaman1476]

@@Scr3amer42 yeh exactly money or currency does not work without force especially in large societies. Another example if one of the mongol or Chinese emperors were the first to use paper money by forcing the population to hand him the gold and he wrote 9ut the worth on paper and the people traded that paper however they weren't ever allowed to get their gold back thosmelaper receipts were the currency

[@Scr3amer42]

@@saqibzaman1476 What a scam xDDDD

[@CoolMan-ig1ol]

@@megrocks3026 And, also Modern Banks dont give the loans from deposits, they create the money out of thin air, give it to you and ask you to pay it back so that hyperinflation doesn't happen with an interest that is set by central banks...

[@customersupport9055]

MY MAN REALLY USED RUNESCAPE GOLD FOR HIS ILLUSTRATION

[@cheesecake4301]

knew it. those max cash stacks though

[@nunyabusiness5977]

I knew it by the way they were stacked and arranged, like in inventory haha

[@davebdot6713]

DO YOU HAVE TO SHOUT?

[@trige000]

Laugh all you want people sell GP for real USD.

[@silver_colonel]

@Amber Wolf WHY ARE WE YELLING?

[@FinanceOptimum]

*"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

[@stevencooper4422]

Henry Ford called ((them out well before we saw the effects of fractional reserve lending

[@apc9714]

There is a probability of 100% to find this comment under any bank related video

[@ihl0700677525]

Meh. You and I, and million others (e.g. those who work for financial industry and supporting industry like those who develop software for banks) know how it works and we're cool with it. Nobody force you to use banking system, you can pay your taxes in coins if you want, or just live off the grid.

[@SurmaSampo]

@@ihl0700677525 In most developed countries you are actually forced to use the banking system. I can't use cash to pay taxes or receive tax refunds in Australia and in most of northern Europe your bank account is used as your digital identity for government transactions. There are also limits in in place here for cash transactions.

[@ihl0700677525]

@@SurmaSampo So what's the problem? You can deposit and withdraw as you need (to pay taxes or otherwise) and leave the account virtually empty (ofc not "empty" empty, but with minimal amount as to maintain it). Or you could just go to Siberia or Canada and live off the grid.

[@EconomicsExplained]

The lizard people will be very disappointed.

[@maksymrudek759]

Mark Zuckerberg dislikes it

[@thedoruk6324]

+Economics Explained Elon Musks cyborg reptilian son X Æ 12 wont be *pleased!*

[@sheep.herder]

its why politicians don't wear masks for the coronavirus. .it only affects humans 🦎

[@danielb.4817]

HOHOHOHO LiZaRd PeOpLe Kids, right???? The banks are ur fRiEnD

[@KathyXie]

Did you already get your Rothschild check for making this video?

[@davidmalawey]

Love your channel and I’ve watched dozens of hours. As an engineer seeking understanding of the economy I think gross domestic “output” is a measure that lies near the answer to many of my biggest questions. I’m a little sad this is the first time I heard “output” specified in your videos. Hope to see it come up more, along with the implications it has, as they differ from GDP.

[@LUSKAWITT_Apocalipse19_em_2O24]

GDP growing nominally does not mean increasing wealth. Generally, it demonstrates an increase in poverty, as the monetary expansion is implicit in this current system, which is inflation, in other words, loss of purchasing power that will increase GDP, but not wealth. Without demographic growth there will be no increase in sales. Most countries are in demographic decline.

[@subilasikwese5459]

Am studying engineering also but this channel really opens my eyes and ear on how the world operates

[@Alex-fl2yh]

This channel taught me so much and is still improving! Thanks!

[@INMisi-bt9wk]

Economics Explained: Conspiracy free Me: We get to hear conspiracies for free???

[@EconomicsExplained]

let me tell you about these 5G towers my man.

[@amedicabg]

@@EconomicsExplained 5 gold towers? Sign me up, even in a typical strategy game it costs at least 100 gold to build one

[@INMisi-bt9wk]

@@EconomicsExplained 5G is actually Latin for alien lizard 😂

[@joshreddy4278]

Economics Explained haha

[@ThatGuyDownInThe]

Ok, let's be fair, central banking is not a conspiracy.

[@LibertyScholar]

16:28 "Money Printer GO BRRRRRR" Execellent memeing.

[@sleepycritical6950]

I'm sorry but I'm the 112 like. I'm the one who ruined the nice number 111 but as a memer, it is my duty to give it a like.

[@sterlinglapratt2855]

Thank you for structuring your videos so it just gets straight to the point without 5 minutes of ads

[@NinjaNuggets21]

Truly one of the best and yet underrated channel on KZbin. Keep it up guys!

[@this_is_japes7409]

so basically it all goes back to the housing sector being an unproductive "industry" that for some reason keeps growing in value, primarily due to mortgages still being handed out like hotcakes, causing most of our economic unrest. kinda like the diamond industry trying to keep its artificially high value.

[@importantculturalarchive]

To be fair to banking, there's good economic rational behind handing out mortages like hotcakes. The first think you learn in economics 101 is that land is one of the safest investments because assuming a growing population is is destined to become scarcer and therefore more valuable as time goes on. It'll be interesting to see what happens to the financial system once global demographics start to change that equation. For western countries the solution to their demographic problems is to allow more migration into their countries however the trend towards global birthrates becoming stable and even negative is a global one, by the end of our life time I would not be surprised if we start hitting a global RNI below 1. That being said as long as nationalist revanchism doesn't continue to hamper global freedom of movement I suspect the international housing market will remain stable for much of our lifetimes

[@dickhertz6405]

This_is_JP It’s also a good loan because you can always seize the house you can’t leave land

[@antonyandrewson5803]

@@importantculturalarchive lol so it wont

[@jghifiversveiws8729]

@@importantculturalarchive Yeah minus the pandemic that's occurring as we speak that's literally torpedoing the real estate market.

[@henryjubeda7617]

"reason" being mass immigration of third worlders. Normally you'd have a pullback in the population when the competition for living space becomes too harsh. Some will move to new areas entirely, others will simply not be able to afford kids. Now we can't afford kids but our population keeps swelling regardless. This is really, really bad.

[@1316Salva]

I feel like you touched on something important at the end that you could go more into "banks shouldn't be massive speculation machines" This sounds like a critique of the system, are you planning to make a video about it? Thanks for all the videos, I'm learning a lot

[@sheep.herder]

speculation works well if you have control of the value ie print money at will or not

[@eehoweong6746]

yep im interested in a video about real vs speculative growth

[@kosatochca]

@@eehoweong6746 Well it's totally not popular opinion but I still think that speculation is too vilified. Speculation is what makes the system sometimes more reliable then without it

[@virtualtools_3021]

@@kosatochca im interested to hear how gambling with other peoples money is more reliable than not gambling with other peoples money

[@wdwayne1312]

@@virtualtools_3021 Dude you just nailed it

[@keiths5252]

I enjoyed that take, this is akin to something you would hear from the Heartland Institute, gaslighting and all. It's effective because it does sound like you genuinely believe yourself when you claim that there's nothing to worry about and that, in fact, fiat currency and derivatives are perfectly fine. When in truth, it is this assumption and the general paradigm that we have of growth, that has always been our fatal flaw in our basic understanding of the world that our idea of economics exists within. We live in a metaphorical petri dish, a world with concrete, finite, and inflexible values and boundaries. Unchecked growth has the same end result for us as it does for bacteria in an actual petri dish. This is especially true now that we have confirmed that, just like the bacteria that grows exponentially until it literally runs out of oxygen and crushes itself when it runs out of room to grow, we humans don't recognize the limits when we hit them either. Therefore, there is no such thing as a 'linear' economy. All economies are ultimately circular. A true understanding of economy doesn't exist without a complete understanding of ecology. The difference between ecology and economy being that one of those things is very real and tangible, and the other is... something we made up.

[@calebread6966]

Well said.

[@mikeyoung00]

Good video. In the discussion of the history of banking, you might have mentioned the Knights Templar and the financial services they provided to Christian crusaders and pilgrims. In describing modern banking institutions, what about credit unions? Or are these simply small banks under another name?

[@raymondwalters3417]

Yes the very act of being able to control who gets loans and who doesn't, what businesses can exist and which ones cannot, who gets bailed out and who does not, is, again, one of the primary criticisms of the central banking system.

[@Nasrudith]

Oww that is painfully uninformed.

[@saisaiverba7658]

To be honest you can’t go through 1960s-1990s without conspiracies. The world bank did some wild stuff in those days.

[@caorusso4926]

Yeah a lot happen in this years, hippies, vietnam, drugs, banks slaving the world, computers, etc

[@ashestates]

and I doubt they just woke up one day and stopped.

[@eoghan.5003]

The world bank and IMF used their power to force developing countries to adopt austerity and sell off their assets, which hurts their development and puts them in debt - all for the benefit of rich western corporations

[@salokin3087]

@@eoghan.5003 considering that developing countries, like Botswana or Taiwan, actually made captialist reforms and succeed, shows that its sometimes nessecary

[@fizzyboy08]

@@eoghan.5003 I don't think that us true at all, In that era Singapore, South Korea, and Japan we're all still developing countries and now they're developed. If those countries can do it there is no reason other countries can't follow the same model.

[@maibster]

Absolutely awesome video! Really gave me the ability to tie my concept of banking together, thank you!

[@Tuppoo94]

20:19 So the only thing keeping Deutsche Bank afloat is basically nostalgia.

[@lefabe2190]

Deutsche Bank is not a German bank anymore... and it's not part of the German Volksbanken system.... Nevertheless banking in Germany has became more and more challenging and the system is far from stable... 😬

[@melthrandir]

So you’re basically saying the system is ok since it could work out. That’s the same as if you were saying a suspension bridge without a road deck is ok since one could be added later. While the fact the system could work with some tweaking might sound comforting, it doesn’t change the fact that the system as it is, because it is what it is and not what it could be, is faulty.

[@wdwayne1312]

@ Simplerick Excellent point

[@jai-kk5uu]

You black people cry when you don't get loans we believe you can't handle and then when get them and go under debt trap along with good working people you say bank should not have given it to you

[@bingbong7912]

@@jai-kk5uu OK boomer

[@quentinkueppers3403]

Looking at human civilisation, i don't see much hope though. On a mass scale, human tendency is to be greedy more than it is to act rightly. I guess we will see some time in the future.

[@epsilon3821]

@@jai-kk5uu honest question but why are u bringing race here when the guy is just talking about a flaw in the banking system

[@Shingen036]

It's only broken for the people who don't benefit. It's been designed this way.

[@virtualtools_3021]

@End The Fed correct!

[@jai-kk5uu]

You black people cry when you don't get loans we believe you can't handle and then when get them and go under debt trap along with good working people you say bank should not have given it to you

[@NCRonrad]

Jai Parwani same with the farming home/land ownership denials/thefts/murder via public lynching?

[@djinn666]

@@jai-kk5uu Ignoring the blatant racism in your post, the problem is the fact that the banks loan to everyone else, which drives up asset prices to the point that nobody can afford to buy a house with money in a savings account.

[@nonyabiz9340]

@@djinn666 Exactly, soon as interest rates go back up the music will stop because people will actually have to have money to purchase a home. Personally, I'm looking forward to asset prices correcting.

[@ivankudinov4153]

The amount of times I've paused the video and scratched my head is staggering. Thanks a lot for the video.

[@moralityofeverydaythings5804]

One of the best channels for everyday learning, love this as a former Econ undergrad :) sure we're not the only ones

[@concertedreaction]

Hey, just wanted to say I really appreciate your videos. Currently working through an econ major in Canada, and it's kinda cool to have a video pop up covering a topic I just learned in class.You do a great job applying economic principles to current events , and the videos provide a welcome refresher from the hours of algebra and acronyms in foundational economics classes.

[@diarmuidfaherty9458]

Lol, the industry was forged with gold smiths,

[@EconomicsExplained]

glad someone picked up on that.

[@ddobefaest9334]

1690s London, Earl of Halifax and Isaac Newton oooh

[@morgangriffitts5272]

@@EconomicsExplained honest question: is this a pun I'm missing or an antisemtic dogwhistle or both or....what?

[@explicit6400]

Morgan Griffitts - a pun. “Forged” “gold smith”. Smiths forge materials.

[@AP-yx1mm]

Morgan Griffitts The malice is in the eye of beholder, sort it for yourself! An explanation would’t change your mind...

[@PRWilson88]

This was super informative, thank you. It would be great to hear how doughnut economics could work in our current system.

[@godspeedhustler4741]

Thank you so much for this. I'm 19 and learning a LOT. I will remember this for life.

[@unintentionallydramatic]

Next video: The conspiracy free history of international arms trade.

[@unintentionallydramatic]

@@jellyfishi_ That's the joke. 😐

[@-haclong2366]

It is an economic topic.

[@AleksandarBosakov]

I'm I the only one, who sees a big part of the "growth" as consisting of more efficient converting of resources to garbage, through reinventing the wheel with different count of angles and in a different color than the last year's fashion?

[@garethbaus5471]

To an extent, but there does appear to be a global net increase in the average quality of life of the population so there is some genuine growth as well.

[@garethbaus5471]

@@jellyfishi_ all of those things have been around for centuries and many of them especially war, hungar, and unethical labor appear to be effecting a smaller fraction of the world's population than was historically the case. The current system is definitely flawed but that doesn't mean it isn't significantly better than what preceded it.

[@wingsofpurityofficial4031]

@@garethbaus5471 but what is the mode of the quality of life?

[@denisl2760]

@@garethbaus5471 That's debatable. Before globalization most communities, even really poor ones were relatively self sufficient. Sure there were natural disasters and wars that caused famines, but barring a huge disaster almost everyone had enough food and water to survive. Population growth was limited due to availability of local resources. Now with globalization we have huge populations wholly dependent on imported resources. If trade breaks down and that importation stops, that huge population is doomed. Now we have hundreds of millions of people in inescapable poverty, being propped up by U.N. and WHO food aid, and that number keeps rising.

[@SoulTransient]

@@jellyfishi_ unproductive thinker here. Probably a commie

[@johnalvitre3154]

A great presentation with new information compared to other videos I have watched. I thank you for this. And yes, I did subscribe and will consider Patreon Membership if I find I am with your channel for a period of time.

[@jalioswilinghart]

I'm so glad you mentioned the financial stability of cooperative banks. Like how cooperatively owned buissneses (consumer, flat, or representative), generally lower salleries, rather than fire off employees and departments, during economic downturns. Keeping more people in the economy, rather than toss people onto the streets, while theres the least chance to get off of it again. The fact coops geberally have higher worker satesfaction, is just another added bonus.

[@apfelxyz2152]

"Germanys banking sector is rock solid" Die Deutsche Bank trat dem Spiel bei

[@mattipra]

"Deutsche Bank ist die Vergangenheit, wir sind die Zukunft" - Wirecard

[@SethMethCS]

They’re setting up Deutsche bank to fall in the next crisis.

[@anshuman2089]

He lost me at that statement. German banks and rock solid , lol Deutsche bank and commerze bank have lost nearly 99% of their share price in last 10 years.

[@ClimateKiller]

@@anshuman2089 That is true, however it should be noted that ALL european banks stock prices tanked during that time period

[@alangivre2474]

IKR, what a buffoon. Deutsche Bank has a lifetime of what... 6 months? It is about to go bankrupt.

[@quefreemind5698]

This is one of the beat videos explaining banking that I have every watched

[@mrashford122]

It’s a fluffy take on the truth

[@ErikPT]

It’s the textbook explanation from macroeconomics he did left out the cost of money is interest

[@kenchoie3593]

An individual bank has a limit (the reserve requirement) on how much money/credit it can create, while the Federal Reserve has no limit on how much money/credit it can create. As such, whenever the banking industry as a whole gets into a financial mess, the Fed would bail it out in much the same way an indulgent father would his spendthrift child. Therein lies the moral hazard of the banking industry, and the high price the rest of the economy must pay for bankers' folly.

[@Newlinjim]

Ken Choie it’s not just the bankers it bails out but government treasury budgets as well.

[@tomgillette3714]

what's the alternative?

[@BigWoodzCBCL]

Might you have a Macroeconomics course that can be purchased??? You explain economics so well. I have been trying to learn Macroeconomics but it's so much to understand!

[@TheDecree93]

A really cool idea that I would love to see you guys do in the future would be a history of economics channel that would dig into either specific events in history or the advent of new concepts in economics. Love the video as usual! ❤️

[@InternetLaser]

Hey I believe you misrepresented the science re:GDP at around 18:40, GDP measurements don't count reselling, they only count the initial selling of finished goods.

[@hdkepon]

This is the video that introduced me to this channel. Great explanation as I was just beginning to learn about the modern financial system, exactly what I was looking for. Dr. Werner also was a great mention, I watched a lot of his lectures and interviews. How surprising to learn the reality of banking at age 30, now I see why they don't teach this in school lol, people would not be happy and the power of the elites would be threatened.

[@RealityCheck6969]

This video was made for me! It was exactly at my level of understanding these issues.

[@legodude19999]

Man I remember getting your first video on Norway recommended to me a year ago and been dubbed since, congrats on your amazing success man!

[@aidenmacdonald2329]

I don’t believe most GDP figures include the trade of used goods or sum “ all transactions” in an economy. (The table analogy). GDP accounting techniques use value added or final output aggregates specifically to avoid the double counting problem.

[@michaewelina7983]

They have to use some king of indicator, otherwise it would be to obvious to see that they created economic slavery system much more sophisticated than anything before.

[@johnpoliniak5683]

Yes there are 3 main ways to calculate GDP: 1) value added to the economy. If I buy $10 worth of steel then sell a steel table for $15, that adds $5 to GDP and the original steel manufacturer added $10, for a total of $15 2) final output. Skip all intermediary products, such as steel, and sum only final products. Using the same example, you only count the sale of the steel table, totaling $15 3) wages + profits. If you take a look at the last two methods, you can see by moving some numbers around that these two methods are also equal to wages + profits (steel manufacturer got profit of $5, I got profit of $10 => $15). This is how GDP in real life is calculated. If you make a transaction back and forth 10 times, you don't increase GDP because you haven't increased any wages or profits. TL;DR. GDP IS a measure of final goods produced and not of transactions.

[@Anonymity4LDAF]

Yes, I believe the table example over estimates the hypothetical GDP in that example.

[@Weightingtablesafter]

Exactly my thought! Im like did this guy just say output and gdp are not the same? The definition for gdp was off too.

[@ChristopherJing]

GDP *is* the measure of output. In the table example, the GDP would be $10, not $100

[@galaxce8989]

Wow you explained this way better than my economics teacher ever could

[@Lun337]

Infinite growth in a finite world, great

[@arnaldo8681]

Have you seen the size of our universe? It is so big that for all intents and porpuses it is the same as if it was infinite

[@marcusreinking4397]

@@arnaldo8681 As soon as we mine the first asteroid and have basically unlimited recources we will expand endlessly!!!

[@TwistyTrav]

Correction: the universe is relative, not finite.

[@dieptrieu6564]

@@arnaldo8681 Not to mention it keep on growing, too. So yeah, it's infinite for all intents and purposes

[@arnaldo8681]

@@dieptrieu6564 not really. Because it is only the space between stuf that is increasing, not the amount of stuf. The universe expansion actually makes it harder for us to access the resources

[@supernumex]

6:24 haha nice, runescape gold!

[@fabcorp5174]

I wish this economics page was available when I was studying economics!! The best economics teacher I’ve ever had! Thank you for making life make sense ✊🏾 brilliant channel

[@fabcorp5174]

Economics channel *

[@carlosvivani3570]

Love your videos...would love to see more virtual economy videos and like different scenarios

[@YoYo-gt5iq]

The table exchange example helped me understand things better. Thanks.

[@ThatGuyDownInThe]

it is MOST definitely, a broken system. And broken on purpose might I add, to benefit the few over the whole.

[@ihl0700677525]

Lol. You can live off the grid if you want. I know how banks operate and I (like millions other people) am okay with it. Modern banking is not "broken system", it's way better than during the time when "the state" control all the currencies. Roman senate, medieval princes, and even the papacy once control their respective state/nation's finances, and they did (much) worse than modern banking.

[@priceless2353]

Immanuel Herman bullshit. This one school of thought of Keynesian economics have convinced poor people like you into thinking this system makes any lick of sense. This game is rigged for you to lose and to sink your self into a whole bunch of debt and make you feel rich by inflating the debt away over time. Government needs to get their hands out of money.

[@juch3]

@@priceless2353 how much control do you think the government has on money, since it is more or less issued by a central bank?

[@omshree901]

@@priceless2353 what makes you think you are rich enough to comment "poor people like you". The last time I checked people so rich and powerful didn't have the spare time to waste on KZbin comments.

[@priceless2353]

@@omshree901 presumptuous for you to think that I’m also not apart of the club, the game is rigged bud

[@Mrdefa1]

Oh no, the lizard people have gotten to Economics Explained.

[@tedtan6449]

Great RESET, explained by NYStv kzbin.info/www/bejne/hnTanoGOqqqGrM0

[@shikharamar1647]

U produce great videos keep up the good work!

[@PixelArchitect]

Love the use of the Runescape gold icon

[@Nightstalker314]

There is also another reason why 8/10 of the leading companies are in tech. They almost run a monopoly in their field.

[@volbla]

Mono means one, though. Not eight.

[@astrumespanol]

Derivatives: money that don't exist. If you want to commit the perfect crime, just use fancy words

[@altrag]

Yeah. but we do that all the time in many sectors of the economy. Say if you're a screenwriter and you pitch a movie to a studio. They'll give you a big stack of cash (if they like it) for a movie that "doesn't exist." Because they trust that it _will_ exist at some point in the future, and allow them to regain their money with some level of profit. But of course sometimes movies don't get completed for one reason or another. Derivatives are similar. You're buying a promise that something (stock value in this case) will be delivered at a future date. And sometimes that fails. The difference is that we've been making movies (and plenty of other works-for-hire) for a long, long time and we have ways to limit the damage of a failure -- for example, a movie will have milestones in the sense that the studio will pay you in chunks and you have to show a certain amount of progress before each chunk is given to you. Derivatives are still so new that we haven't really developed those kinds of fail-safes on them yet.

[@ErikPT]

So like contracts

[@altrag]

@@ErikPT Sort of, I suppose. But you won't always know who your "contract" is with or how likely they are to fulfill it. Kind of the structure of a contract built on top of the inherent gamble of the stock market.

[@vornamenachname1069]

@@altrag I think what botheres most people is that if you as a person don't deliver or don't keep your promise, you'll get punished in some way. But if a Bank messes up it'll get rescued by the taxpayers' money. It's as if i would violate a contract, but you would have to pay for my mistakes.

[@Newlinjim]

Astrum Español Derivatives: assets that don’t exist.

[@zodiacfml]

i saw a few videos of Werner which started from Princes of Yen, while all of it is agreeable, I realized the true reason why his suggestion of smaller local banks works vs large banks. It reduces the risk and size of corruption in the banking system.

[@annnee6818]

Thank you for explaining all this. As a person with "average knowledge" about the economy it IS all starting to look very wobbly and shady so I'm starting myself off on a knowledge quest to see if that helps

[@fartface8918]

The economy is going to crash soon because that's what makes corporations especially the banks that get bailout from the government every time if that happened more money the system is unstable on purpose because capitalism is neglectful and cannibalistic of everything by necessity

[@HowMoneyWorks]

You mean to say the central bank isn't run by an a secret group of lizard people?

[@EconomicsExplained]

oh no no the lizard people are real!

[@toastytoast9800]

Lizard peole run the government, not the bank

[@danstaifer2028]

No. The Central Bank is controlled by 🦀 people

[@apc9714]

@Hakim Habib Imagine her changing her external skin and be young again haha

[@wasimhashmi446]

Murphy's golden rule "he who has the gold makes the rules" hits different after this vid

[@gregoryvasilyev9675]

They now no longer have the need to have gold or any real asset to back up the rule making part. Effectively each bank has a money printer, which is perfectly explained in this vid☹️

[@magnontaur]

The concept of banking started in Mesopotamia, just to clear that out, I know you've said "banking as we know today" but still, it's important to know that banking had started much earlier than gold, but as you've said, banking we know of today started with gold as security.

[@Optimal_Production]

The glass steagall legislation certanly had a major impact on international banking

[@caorusso4926]

Bank are like this since ww2

[@salokin3087]

@Neocon Ingsoctrination G-S covered commerical banks, the GFC was brought on by investment banks, G-S would not have stopped it

[@domenicfieldhouse5644]

@@salokin3087 GS stopped investing banks and commercial banks being the same entity, it did have an effect on GFC

[@aquilatempestate9527]

@Neocon Ingsoctrination Can a republic built atop abstract post-enlightenment liberalism ever be truly conservative? Moot question; the current transition from neo-liberal consumerism into technocratic serfdom has not a single element of conservatism about it. Though as the saying goes "what have conservatives ever conserved?".

[@andrasbiro3007]

@@Fx_- You got this totally wrong, dude. I don't have time to go into too much detail, but we have real world examples of both, so we have facts and don't have to guess. In practice your trickle down economy was a failure since start and just getting the US into deeper and deeper mess. For example the 2008 clusterfuck was a direct consequence of deregulation. Meanwhile the "leftist" system seems to be working very well in many European countries. You can find the details on this channel. I strongly recommend the video about the Swedish economy. And for understanding how deeply flawed the American system is, I recommend these movies : www.imdb.com/title/tt1596363/ www.imdb.com/title/tt1016268/ www.imdb.com/title/tt7909184/?ref_=ttep_ep3

[@macberry4048]

GOLD IS THE MONEY OF KINGS, SILVER IS THE MONEY OF GENTLEMEN, BARTER IS THE MONEY OF PEASANTS - BUT DEBT IS THE MONEY OF SLAVES. - NORM FRANZ

[@josephjoestar275]

WHY ARE YOU SCREAMING

[@josephvanname3377]

And the USD has the faces of slave owners on it who raped their slaves over and over again. How do people not realize this?

[@user-rn3rn6nl3h]

@@josephvanname3377 China had slaves today, made in China is made by slaves. That phone you are on was made by slaves.

[@Blais3]

@Jean Arenas point out a nation or any civilization in history to this date that didnt use slaves of some sort? Or at least benefit from working class

[@alazarouen6947]

I love how you consistently point out how wild and crazy people's conspiracies are

[@cho4d]

but he didn't. he cherry picked an obviously insane theory and used that to dismiss all theories. that is just plain intellectually dishonest.

[@alazarouen6947]

@@cho4d i was being sarcastic and badly apparently

[@sigvardbjorkman]

This is so well explained that I had to let out a very satisfied laughter 🤣

[@wojciechg9498]

I LOLed at some point also

[@Optimal_Production]

Great video as always, keep up the good work

[@gid2601]

Give a man a gun he can rob a bank. Give a man a bank he can rob the world.

[@josephjoestar275]

*MMMM yes, an overused quote that completely lost all meaning*

[@1000xGLOBAL]

Today it's not about return ON capital. Today it is about return OF capital.

[@boyjohn9647]

Excellent clear and informative

[@graham1034]

The main issues that I have with modern banking and the wider economic system in general are: - for being middlemen, banks accumulate far too much wealth. They're an important industry, but the amount of money they make is far outsized to their contribution to society - modern economic systems are increasing accumulating wealth into the pockets of a small percentage of society. I don't think anyone, even the uber wealthy, wants to live in a world where 0.1% of the population controls virtually all of the wealth. The concept of using money to make money makes sense, but again, it is rewarded at a massive disproportion to it's contribution. I'm not sure what the solution to these problems is but I bet there are a truckload of Nobel prized for anyone that figures it out. As the saying goes, capitalism is terrible, it's just better than everything else.

[@PjPjPaul]

Banks are no longer the middle men though. Because of fractional reserve banking, modern banks create money by issuing loans from peoples deposits. They invent the money they loan out and collect interest on the made up money. You deposit 100K, your bank loans out 90k which is then deposited in another bank or account. Now when you look at your account, it still has the 100k in it and the person they loaned your money to has 90k in their account. 190K are now in the two collective bank accounts. 90k just materialized out of thin air that has to be paid back plus interest. As long and both parties don't try to withdraw more than 100k out of the 190k, the system continues to function and bank collects those monthly payments. That is why banks are so rich. That is why the money supply is exploding. Now couple that with the fact some people have obscene amounts of money, a lot of it in banks, Its almost an impossibility that a large portion of the extremely weathly withdraws all their money at once. They don't need to. They don't need all that money. Now couple that with the fact the wealthy tend to get perpetually wealthier year after year. It becomes even less likely that this scheme implodes. All it needs is an ever increasing amount of debt and money.

[@gilbertkurnia6384]

Essentially the reward that banks earned also correlated with the degree of risk they are willing to take. That is why they put higher interest rate for unsecured loan than secured loan. The higher interest rate also needed to cover up default risk and higher insurance fee. This is also further emphasized within both secured and unsecured loan. Banks that known to accept riskier loan (client with low quality collateral, bad credit score, obscure company, etc) often have higher net income from their interest, and also higher risk of default. Just like investing, in banking, reward will be positively correlated with risks.

[@termitreter6545]

​@@gilbertkurnia6384 Nah man, the kind of money modern banks are throwing around have long moved beyond feasable concepts like risk. Thats like saying billionaires inherently deserve the money (and power) they own, that they are just that much more valuable persons. When in reality, their wealth has grown to absurd levels and they are "too big to fail". Bankers and banks itself also are too much self-serving institutoins, which you see with the mentioned focus on housing, which doesnt really help society. And the bigger they get, the worse it becomes. Big banks have less risk, more profit and are worse to society.

[@badoiuecristian]

@@PjPjPaul Correction there is not longer a requirement to have 10% security deposit on a loan therefor now banks can get 100k deposit and loan 100k again and again and again.

[@badoiuecristian]

@@gilbertkurnia6384 in theory that is the case, but banks default all the time and are saved by governments, they also own the insurance sector so.. at the top there are the same people running and insuring money.

[@consciouscactus]

haha money printer go BRRRRRRR

[@joshuaabraham7308]

Haha clichéd KZbin comment go ting

[@yanikq]

Lizard people go BRRRRRRR

[@matheenarif8645]

Weimar reference

[@cernos7230]

You can say that it's cliched but it's quite true

[@guydreamr]

One of the most succinct encapsulations of the history and function of banking I've ever viewed.

[@martinblake2278]

Bravo sir! This is really good.

[@1greenMitsi]

13:57 - those dollars in the bank are created by the treasury borrowing from future prosperity to issue bonds - a glorified IOU with interest payable = the National debt. The banks purchase the bonds and sell to the fed who pay for them with bogus cheques from 0 balance accounts. So yes, the banks still act as middle men in the modern economy

[@gabrielesbensen5046]

How are you putting out high quality videos so fast and so often?

[@DanNguyen2021]

Very thorough data. Thank you.

[@SevenStopGaming]

Fun drinking game: take a sip every time he says “gold” or “bank”

[@Optimal_Production]

you should make a video on whether or not financial jobs, such as accounts or CFA's would be subject to automation or AI in the near/distant future

[@rafaelvazquez7465]

Once the roles that generate the inputs for those financial jobs become automated, I can't imagine automating the accounting would be far off. It helps having human accountants because typically businesses are sloppy in the way their accounts are structured, tracked, sorted, verified etc. But if all the spending is done by computers, the accounting of it becomes a lot easier to code.

[@ricohernandez3204]

I mean.. it obviously is. It would just be a 10 second video saying “yes”

[@JamieDigitalArt]

let's hope they are

[@somnorila9913]

I don't know, but just thinking at that good part where businesses would compete more fiercely for a smaller return seems like the proper reason to suspect foul play. I mean, it's not necessarily lizard people from outer space to see that people are perfectly capable of creating this kind of environments on their own and without much cooperation and scheming also. Like it's a cultural approach where you don't really have to talk and come to an agreement, same approaches are taken by default and multiplied to the number of people you can perceive it as a system when in fact it's not. But when we have precedence of price rigging, monopolies, long time efforts to influence politics like with the Koch brothers and so on. I'd say it's pretty safe to assume that when taking in to account those precedents and the whole culture around money and business, we can say that we shouldn't dismiss the possibility of bad results in spite of any good intentions as long we don't address the cultural matter. Just think at a situation of endless wealth. Continuing on this direction we know are right now, is there any possibility to reach a conclusion similar to the Earth situation in Star Trek universe? Where money doesn't exists anymore and people have other more deeper, back to basis kind of thing incentives? As i would say no. Like how shifting from a debt based economy seems pretty impossible right now without a lot of sacrifice, shifting direction to something like that utopia seems totally fantasy even if wealth would be in an unlimited supply. And i think that's a bit of an issue.

[@fartface8918]

I don't think it's a conspiracy theory to say people with power are responsible for repeated fuckups directly caused by their actions Which they have an incentive to do and will see no consequence Also it's not really about reaching that fantasy but about doing it we have many hundreds of millions more empty houses than the tens of millions homeless in this country more food is produced than there are hungry Worldwide and most jobs are not neutral or net negative on production And those that are positive overwork their employees and make them needlessly sick through lack of healthcare and lack of pay It's not just Utopia is possible it's Utopia has purposely been denied beaten back in the name of more profit For people who couldn't spend their wealth in a hundred lifetimes

[@somnorila9913]

@@fartface8918 Yes, i agree that what you say is or has happened. But at the same time i don't see it as a coordinated effort towards this but more an effect of human culture. In general terms, when people are put in similar positions they tend to behave similarly. So the part where we should maybe focus more would be about how we are acting and reacting on emotion rather than on sense and logic. How we are too individualistic in our behavior. We all are born good, want to be good all our lives. So in many circumstances we invent different lies to lie ourselves that our behavior is good. Pretty much how killing in the name of religion has worked for ages. As a group we should be able to cut the gangrenous limb in order for the body to survive and as an individual we should be able to commit self sacrifice, to accept that if part of that limb you need to be cut out. Like you should be able to submit to being poor if your way of making money is not benefic for society. Wars should not exist in our social vocabulary. No matter how difficult it would be you should not look to kill and steal in order to survive. At the same time others should not sit passively and let you die because that would mean a harder time for them either. These aspects are like how they are now are a result of evolution. We pretty much need to learn to behave against that, against of what is natural really. With more automation and more wealth available if and when we would begin to exploit extra planetary sources, would really seem stupid to continue on a path we had until now, emotional and reactive. Going back to Star Trek, be more Vulcan than Terran, act logically not emotionally.

[@FootageFactory]

Thanks man, I need a whole nerded out history to understand where we are to day! I need that education to decide where to go in the future!!

[@FootageFactory]

@Economics Explained Ahh thats interesting. It appears your view is shifting from your last bitcoin vid. Maybe the confidence is growing.

[@kevinu.k.7042]

Great video thanks The big problem is that the system only stays viable with increased consumption. We are becoming increasingly aware that the planet is finite and this is not viable. Your assumption that competition works in the consumers is an old discredited idea. Just look at the way big companies swallow up their emerging competition. A video on how competition fails to work would be good. Great videos. Thanks.

[@l-joldfield4709]

why would we want a situation where economies are meant to grow indefinitely? how is that even feasible when our global resources are finite? is this system doomed to collapse?

[@Newlinjim]

L-J Oldfield that’s how the monopoly game is played.

[@arnaldo8681]

Well, maybe we cant grow forever, but there are enough resources around to keep growing at least for the next few centuries. We can colonize the oceans and the solar system. If it isnt enough we can turn the planets and asteroids into rotating living spaces and then colonize the galaxy And growth isnt just about using more resources, it is also about using them more efficiently. My phone uses way less resources than the giant computers of 100 years ago, and is much more useful

[@l-joldfield4709]

Instead of moving to a new galaxy because we pillaged this one wouldnt it be easier and far more likely to enable our survival if we start giving resources back and aid natural cycles replenish what we have?

[@arnaldo8681]

@@l-joldfield4709 what you mean? Give resources back to where? It is not pillaging. It is turning into useful stuff. Food, housing, computers, etc

[@Nasrudith]

Learn what growth means in first place, please. It isn't just in 'more goats in a herd' it is also in the advancement.

[@raymondwalters3417]

"Idle capital" its others peoples money, it's betting with others peoples money, and if the banks lose it all, they're insured by the federal government. that i also 23 trillion in debt to the banks. if i wanted my money invested i'd go to a stock broker, or just invest it myself so -> I

[@zeekf.3839]

Lol the insurance banks have has almost no deposits backing it. If the banks collapse they literally will just print trillions of dollars and hand it out to their buddies again.

[@jai-kk5uu]

You black people cry when you don't get loans we believe you can't handle and then when get them and go under debt trap along with good working people you say bank should not have given it to you

[@VIctorAbicalil]

Do you expect banks to keep your cash stored and not charge anything for it? Also, banks aren't betting with it. Betting implies zero or negative expected returns. When banks lend money, they set interest rates at a level which gives positive expected returns plus a safety margin. Besides, just leaving money sitting idly in a bank account is pretty dumb.

[@raymondwalters3417]

@@VIctorAbicalil i expect them not commit fraud as a business model

[@teerificbitch]

@@raymondwalters3417 The ones who are betting aren't primarily your retail commercial or savings banks though? It's your investment banks, hedge funds, retail investors and risk-taking corporations. Banks have a minimum capital requirement set by law. That is also reflective of the model in which they borrow from people low, and lend to corporations at a higher rate. This is a very essential model in moving capital flow throughout the economy and is the only reason you're even capable of such industralization and innovation in this modern era. When you complain and cry about fraud, that's the fraud of corruption and inept government laws. How is that to do with the banking system that literally brought millions out of poverty and helped created millions of jobs? The bank is not there just to be your piggy bank. You put your money in willingly to trade for financial services and convenience like internet banking, credit cards and debit cards. Whatever they do with your savings on the other hand is what keeps their business running. Or do you think they owe you a living?

[@martinpennington4429]

I love your illustrations 'gold smiths lending money on gold they don't have' and 'tables that explain difference between GDP and output' but I think even output is not enough i think the output must be innovative even disruptive to work.

[@upupuptheziggurat.liketysplit]

I love it, as always. My personal take is yes, it's all very much based on belief or more, confidence... Right now world-wide confidence feels at an all time low... However, conversely, we honestly could all pull together at a new random world project, which would factor economically regardless and i fail to see any reason why that shouldn't become real too... Pull people, no more apathy.

[@oliver_siegel]

Great video, I really enjoyed it

[@AntonWongVideo]

As soon as you said "they don't add value; they make up value", I got an ad for Quibi...Lol

[@vaxen805]

TL:DR Mr."Goldsmith" scammed us at the start and it continues to this day.

[@wanitooo]

Goldman Sachs, Goldsmith... coincidence?? I think not!

[@anonimanonim2710]

"The banks are boring. Yup! Nothing to see here! And certainly no conspiracies afoot!" What a relief😅! (they got to him)

[@anthonyyawtwumasimensah197]

They definitely got him or he's afraid of antisemitism that a proper video might cause.

[@sergest-amand1164]

Since there are so many bank conspiracy videos on youtube, this one (plus the one on the roman banking system) is unique and so refreshing, a big thank you for this!

[@viscountav]

I love you, Economics Explained.

[@EconomicsExplained]

Wow, thanks! I love me too!

[@alessandrovittoria6676]

Economics Explained yeah, I love you too.

[@yuvrajcharan5387]

A video like this is the complete lecture of an hour on central banking thanks for this love from 🇮🇳

[@sdmugabe]

Excellent work sir!

[@Energya01]

While Extra History went into a bit more detail about the history of (paper) money, this really clarified the current state of affairs and tied up some loose ends regarding the whole fractional reserve banking system. So thank you, good job! Extra History: The History of Paper Money Playlist: kzbin.info/aero/PLhyKYa0YJ_5CL-krstYn532QY1Ayo27s1

[@raymondwalters3417]

17:35 debt isn't bad so long as output matches, but we keep sending jobs over seas and the over all productivity of the west has been flat lined for years, hence why prices have gone up while losing quaality

[@shottskies]

This is an interesting point and something that could be discussed further

[@kiik_poye5019]

Lol that’s why there is the global free market capitalism system.....debt shouldn’t matter as long a there is a good global system. Things like the facade of sovereignty, nationality, culture lowkey slow this down. The world needs to be more united . Almost all country’s are in debt and trade with US dollars, which means one way or the other, the money should end up back in the us treasury hence the single currency for global trade

[@mr.knowitall5019]

Be happy that you can speak abd buy whatever you want because it can always be worse.

[@jghifiversveiws8729]

@@kiik_poye5019 I don't think you understand this system as well as you think you do.

[@cryp-rekt8871]

Fabulous video!

[@dariogomes3598]

Ty for the clarity.

I find the section explaining why an ever-increasing debt pool can be ok very interesting. I didn't quite understand it though. Is it ok, or even desirable, in the same sense inflation is? Are these two concepts related? What would be a healthy amount of debt? Are recessions a necessary evil in this monetary system? I'd love an in-depth video on these.

[@sis1296]

Did he mention ever increasing debt with an ever increasing output? I have listened elsewhere that debts may go up as long as productivity follows, the system will hold. Great video in any case.

[@valentinstoyanov304]

The money printing has nothing to do with "wealth creation"! It's a twisted world we are living in...

[@majacovic5141]

wealth is created by labor, always was, always will be.

[@claudiamejias5414]

This is so insane.. I'm officially eager to know more about banks

[@pranjalpatil9659]

Wonderful explanation!