Misconceptions around Banking - Banking 101 (Part 1 of 6)

[@sobtrdeszl7806]

I can't believe the whole Banking101 playlist is free to watch. Others would have put 99$ price tag on this playlist lmao. I can't thank you enough for explaining this complex process in easy words so people can understand. Keep up the good work!

[@warmth80]

Perfect. You have managed to explain in a series of concise videos, what took me around two years to research on my own. Not only is the information spot on, it is also presented in an objective and straightforward manner. This is exactly the sort of material that I have waiting for to present to all the people I know. Thank you so much for your effort - please continue with this important work!

[@simondixon6814]

I believe that in the not to distant future, people will look back at what we taught students of economics about banking and think we were apes. Positive Money is doing a great service by creating these educational videos. Keep up the great work. Simon Dixon

[@OudeStempel]

Better than most videos I've seen before, it only lacks one thing. It doesn't explain why the bankers have these mood shifts. Their mood is a function of the boom bust cycle, which is part of this money creating system. Search for "adam smith lecture detlev schlichter paper money collapse" on youtube, watch the lecture, and you'll have a complete picture of our system.

[@BlackFlag2012a]

They do not have a "mood" shift. When banks create money to fund debt, *unlike the savers to borrowers scenario*, there is NO delayed consumption. With the savers to borrowers, savers delay consumption so that the borrowers can consume today. One group does not consume, and another does. Repayment reverses this. Borrowers repay and do not consume, and ex-lenders now have the money pay to consume. A natural balance of one group not consuming and another group consuming instead. Bank created money has no party delaying consumption. There is no saver delaying his consumption into the future. Since now, both the borrower and the "non" saver are active consumers, the market place is flush with a massive number of consumers. It responds by producing more goods to buy. Two groups consuming, one their future, one their present, creates a boom. When the borrowers have to repay, they are not providing funds to savers to consume. There are no such savers. Suddenly, the economy sees a huge contraction. One whole group stops consuming, without the any one else increasing their consumption, as with savers and borrowers model above. The economy "crashes" into a recession. The boom/bust cycle is due to the creation of money for loans without any delay of consumption.

[@BlackFlag2012a]

***** That is what I said. Since there is no saver being repaid, there is net consumption loss in the economy - a recession. It is not a matter of "optimism". It is a matter that when you borrow money, you will spend it - consume. Without another party delaying consumption (the missing saver), there is an upsurge in immediate consumption without a balance of someone else delaying consumption (a boom) The lack of a saver is the cause of the boom/bust economic wave. Consumption without savers (boom), repayment without savers consuming.(bust)

[@BlackFlag2012a]

***** I would say that this could be true *if the credit facilities were static*, that is, there was a fixed amount of credit that would be depleted then restored. As the credit was being depleted, the price would rise (interest rate), creating a incentive to repay. But that is not the case generally. The Fed pumped up the production of money, and kept the interest rates so low, that created a credit boom. When that bubble burst, and the people are deleveraging their debt, tightening up their spending, even at low interest rates, forcing a recession, big time.

[@BlackFlag2012a]

***** And one other point. In evaluating the consequences of no saver, borrower scenario, we can reduce the effect to 1:1 .... microeconomics, that is one borrower, and (lack of) one saver, to understand the consequences. Adding a large population does not average out the principle; though it may be true there will be borrowers and repayers, it will never be even 50/50. It will tend to follow Paerto's Law, 20/80, then 80/20, that is weighted heavily one way or the other, flipping the other way solely dependent on the Fed's decisions of loose credit or tight credit.

[@alluparantha]

Keep up the good word. Positive Money are doing us all a profound public service

[@InstTaxSolutionsLLC]

That's a good point in that most college courses are still teaching economic theory that applied many years ago. They simply have failed to keep up with current trends.

[@kentheengineer592]

1:50 why would a bank have a liability for a security it purchased with a bank deposit of newly invented credit as an asset plus what is the problem or need for reserve banking

[@Manish-ec3rv]

An amazing video series on money. It is so simple and so beautiful. It delivers. It is awesome.

[@freespeechmatters583]

Just dropping in on episode one to say this looks good so far. Hopefully somewhere down the line it might explain that the notes we carry around with us are fiat currency, not money. A slowly melting ice cube.

[@nittyjee]

you guys need to add ("x" of 6) to all the videos, and include the video [5 of 6] in the playlist!!

[@Erez.Levi.Stocks]

Hello and thank you for this amazing information, but you have a really important question that I did not understand so much from your video: You said it was a closed system the central bank and the 46 banks with which they have a joint account and you said that if there was ever a bank that would end the day with a lack of cash there would be another bank that could lend to it. If I understand correctly from you then we will take an example that there are 10 banks and a million dollars in the system which means that at the end of the day they will transfer between them what is needed but there will still be a million dollars left. You also said that the bank can lend money to the public without having a reserve because it knows that at the end of the day there will be someone to lend it, but if that bank lent "other" money to the public it causes it to make more money than there is in the system. Will not be worth and will not have enough money for another bank to lend to him, I would be happy to help please ??

[@severerevenge8575]

ARABIC TRANSLATION PLEASE. MILLIONS WILL WATCH YOUR VIDEOS IN ARABIC.

[@Soundwave-F7Z]

Thanks for the vids, man! I appreciate you informing people. Where could I read about how derivative stocks work without too much complex writing?

[@mjmomalley8071]

If a new bank is formed and has a $1.5M balance with the Central Bank and reserve requirements of 15%, how much credit can the new bank create? What happens when the funds that are loaned to customers are transferred to other banks?

[@bitcoinjobe3938]

Good video, well made. Hopefully more people will watch this.

[@estebana7892]

Saludos desde América, más especificando desde Arg, (Argentina)

[@TheJoshtheboss]

Where does the difference (their profit) between interests come from? Since the loan is repaid then the money is destroyed, so where does the money to cover the interest come from? Is it from M1? Thanks

[@amineaboutalib]

If I understand correctly it's from M2, other banks, or M1

[@receparslan6577]

It comes from the other one's deposit that you aim to get by selling goods and services. That's why some people or company fails.

[@nyamutota]

That's why the total debt in the economy keeps on increasing. Every dollar borrowed much be returned with interest which is higher than what depositors get, so there's a positive cashflow towards bank, and increasing amounts of debt for everyone else!

[@maryamelb4918]

Hmm interesting channel! Great content!

[@bruiseraa]

If the bank creates money with every loan, just by typing numbers into an account, does the bank also create money every time it pays employees and other expenses?. Does the bank just type numbers into an account?

[@bruiseraa]

***** In the case of an expense, the bank would be creating money to cancel a liability. Outright purchase of assets like bonds and real estate could be effected by typing numbers into the BOND PURCHASE account or the BUY REAL ESTATE account.

[@tuurelonnroth7964]

Yes it does (create new money with every payment to a non-bank entity)! And the bank does not need a corresponding asset. This increase in liabilities with each payment, reduces its shareholder equity - like any expense (:

[@MsJim70]

The employee's bank account will increase by the value of his/ hers salary. Thus an increase in the money supply (M4)(New money created). If the employee has their bank account with the paying Bank then the Bank just types the numbers in creating a new liability for the bank. As there is no corresponding asset then shareholder equity will decrease. If the employee has his / her account with another bank then the bank will have to transfer the salary value from their Reserve/Transaction account at the Central Bank to the employee's Bank's Reserve/Transaction account who intern will increment the employee's account by the transfer value hence creating new money. The receiving Bank's assets and liabilities have increased by an equal amount so no change in shareholder for them. The paying Bank suffers a decrease in reserves (asset), so again decrease in shareholder equity.

[@claratrevlyn5304]

You have received several incorrect replies on this. A bank's ability to create new money is limited to its own balance sheet. When it makes external payments, i.e. to other banks, including its employees' salaries and payments requested by its customers, it uses its own money to settle those payments. By its own money, I refer to the money it holds with the central bank. Ultimately (and this is a critical point that's ignored by this and other similar videos and articles) a bank's ability to create money is constrained by its ability to settle cash withdrawals and other payments instructed by its customers. If it doesn't have the money at the central bank to settle those payments, if faces a liquidity insolvency. This should be obvious, as otherwise banks wouldn't need bailing out when in such a situation - they could bail themselves out.

[@blirk99999]

No, legally speaking it IS your money, that is why it is a liability of the bank. But yea, technically its banks asset.

[@Alkhayyaal]

Fiat cash is known as a "liquid asset" for both the depositor and the bank and everyone else. The bank does certainly own the deposited cash, whether u wish to call it money or asset. Ownership of the bank is established in both case-law jurisdictions as well as civil law.

[@kikiperry4924]

LEGALLY, it is a grey area, hence the phenomena of the runs on banks.

[@TheDavidlloydjones]

@blirk99999 "But technically..." is always and everywhere the beginning of a lie. Any liability of a bank is a liability of a bank. I.e. it is *not* an asset. The asset which matches the bank's liability is initially "cash on hand" or "teller cash." From there it migrates into other asset forms, e.g. loans (money the bank expects to get back with interest from some borrower, i.e. clients for loans.)

[@sylwesterbogusiak2334]

Let's create millions for everyone...;) electronically. Hyperinflation of electronic money is not the same phenomenon that occurs in the case of hyper-inflation resulting from the printing of banknotes. First of all, no state in the history of this world has yet experienced it. Does anyone want to be first?

[@ВенциславПетров-х2й]

BOUND TO WIN !

[@MrMuckymouse]

so if the money in my account is legally the property of the bank does that mean i am unable to pay any of my bills as i technically or "legally" do not own any money as the bank does?

[@amineaboutalib]

No, when you pay, then you've payed using your money, the money that the bank owed you but now gave you back

[@nyamutota]

The bank is legally obliged to give you back your money on demand, and they do that most times, until they can't (banking crisis).

[@MensRifleAssociation]

awesome

[@mclightime]

never have and never will you can bank on that fact

[@Hogepriesteres]

Geen ondertiteling, zoals beloofd........... :(

[@Batman-nz2ue]

Bank is dank.

[@bameno6641]

its not true the bank rents the money

[@daviddesalamanca]

he publicado yo un audio sobre el modelo natural de los patrones deuda: si buscas en google: "las monedas deuda y la economia" ivoox te saldra.

[@estebana7892]

De acuerdo gracias

[@jordanienbereit]

So, all the banks work on the same way?, I mean even foreign banks?

[@Entropy3ko]

Since the banks are all doing business together all the time the banking system is pretty much uniform.

[@nyamutota]

And they are owned by the same people but in different countries like multinationals.

[@warriorforpeace99]

Disappointingly low number of views!

[@ВенциславПетров-х2й]

LUCKY BASTARDS!!!!!!!

[@toblerusseta]

What happens when a flu stops the entire world for 5 months?

[@TheDavidlloydjones]

This series of videos is nonsense based on a lot of misconceptions and resulting in another lot of inaccuracies. It's a fairly typical piece of cult-think. I don't know how much of it is deliberate lies and how much of it is idle dreaming based on empty hopes, but net-net it's all dangerous and silly. And wrong. One clue to this comes at 2:22 when the gentle-voiced narrator says, "This concept of a liability is actually very simple." Um, yeah. But then gravity is very simple -- but Einstein and Planck went to their deaths not knowing what it means or how it works, so maybe there's more to this concept "simple" than meets the eye. Liability is not "very simple." The word has many meanings, which the narrator here confuses with gay abandon, and most of them are subtle and complicated. The sentence "A owes B money for the dish he broke, and this liability is a barrier between them," illustrates just about the simplest meaning of "liability," and it's plenty complicated. It involves owing, duty, emotion, and debt. When you get to banks and lending and contracts and laws and police and... and... well, it's more complicated than owing your neighbour ten bucks for dropping their furshlugginer plate.

[@googlegulag7750]

You just ranted with no succinct critique, and no counter argument was put forth. Nonsense.