Banking 1 | Money, banking and central banks | Finance & Capital Markets | Khan Academy
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- Опубликовано: 14 июл 2024
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Introduction to how banks make money and the value they (potentially) add to society. Created by Sal Khan.
Watch the next lesson:
www.khanacademy.org/economics...
Finance and capital markets on Khan Academy: We all use money and most of us use banks. Despite this, the actual working of the banking system is a bit of a mystery to most (especially fractional reserve banking). This older tutorial (bad handwriting and resolution) starts from a basic society looking to do more than barter and incrementally builds to a modern society with fraction reserve banking. Through this process, you will hopefully gain a deep understanding of how money and banking works in our modern world.
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its nice to have someone who knows how to explain all this confusion, i mean the fractional banking system and how it really works in lay mans terms
Sal Kahn is bright and knowledgeable -- but what really counts is, he has ver-ree sound judgement.
It's not a fractional banking "system". Fractional reserve lending is simply how banks work. There aren't really two (or multiple) ways it can work. That's sort of like calling breathing a "system" of respiration. What would be the alternative?
@@shushanto there is only one organism that doesn't respirate at all, but it's out there
@@shushanto do you need guidance and this?
Full Reserve Banking System@@shushanto
Bank 🏦
0:20 Savings
1:04 Entrepreneurs (projects/investments)
2:18 Gold “it’s pretty”
3:18 Goods and services and payment for those.
5:30 Balance Sheet
1 million to build a bank (solid safe Greek Temple looking building)
10 million invested
9 million in loans (charge interest to bring in more money as interest income)
1 million left on hand in case people want their money back
Gold is actually used in many computers, and is very good as transporting electric currents!
I was just about to say that gold is used for Tech
Cool fact
Never knew this🤯
But the industrial demand doesn't justify the current inflated prices, most of the price of gold is based on speculation.
Yup. Also iron, lead, silicon. Lots of other elements, too...
I just saw the site of khanacademy and watched this video by accident,and I really wanna say it's brilliant!
This way of teaching is clearly and easy to understand, I love this video at the first glance.
I watched the first lesson then I can't wait to see the next lesson now.
When I was in school I think the learning of banking is so boring, because I don't like it.
But now I found I just enjoy your lesson so much that I wanna learn more.
Thank you! Thank you very much!
It's always great to watch these videos as they are always an educational experience. Many people only have experience with their banks through checking, savings, or some retail investment products. This video shows that there is so much more to banking.
Sal khan is the most extraordinary teacher that I've ever seen
Khan, I admire what you have done so far. How kind you are.
Go, Sal, go! If only Congress had viewed your Finance and Credit Crisis series, that bailout bill would never have been passed. Are you taking requests? If so: Programming and Vector Analysis! Hell, just teach us a whole g0ggdammed engineering curriculum!
Thanks for the clear and easy explanation. Many people probably never thought about why a bank gets started.
This is great! Happy Holidays!
This helps! Keep them education a flowing!
Thanks.
Taking this class now and want to just get a B at this point and move on. Like that you keep it basic, I don't necessarily want to be an economist, but the entrepreneur example did peak my interest.
Geeeez! Is there anything you dont teach!? You are the man!
شكراً على شرحك وننتظر منك المزيد في تخصص التسويق
it's a incredible video, how can you put all this complicated definitions into quite simple things. Thanks u a lot Khanacademy
Great tutorial, thank you for this video.
its 2021 and i still watch these videos
What an explanation. Thanks
Just stumbled upon this through your imaginary numbers vid, great stuff, keep it up =)
great stuff!
Thank you
blown away.
Amazing bro and to the point. thanks alot for this easy explanation
Thank you Sal
i swear this guy knows everything
MBA professor will explain this so hard in one month. Here in just 11min I just understand how banks work
Very impressive. Manythanks.
I agree with all the positives -- this is what the world needs above all else. And then he annoys the listeners to the point of violence by blowing into the microphone again and again and again. Why does what might be the best thing on the web have to be so trivially ruined?
There are much better videos out there explaining how banking works. I would recommend searching on 'Money as Debt' and 'Money as Debt II"
So far I have found these videos help reaffirm current knowledge and in some cases to learn something new but this video clearly needs to be updated. It provides the romantic FANTASY version of how banks operate. In reality:
1) loans create deposits not the other way around
2) ***banks issue new money (i.e. credit also known as magic digital keyboard money) when loans are issued... this is how the vast majority of money in the economy is created. Among other obvious benefits, like controlling where money is allocated, banks are the primary beneficiary of the nations seignorage
3) ***banks destroy money when loans are repaid
4) Technically bank "deposits" are loans to the bank
5) Technically bank "loans" are securities purchases by the bank in the form of a promissory note
The lions share of loans by large banks today (over 80%) are NOT used for productive things like manufacturing improvements and new factories etc they are used to purchase of existing assets... i.e. real estate and securities and often for the banks own purposes. The large banks serve their respective head offices not the communities in which they operate and they rarely provide financing to small or medium size companies.
Please consider using a small regional bank or credit union in your area as most of them still serve their respective communities i.e. the money they manage generally stays in and circulates within the community they operate in.
thank you for basic idea for financial instruments and institutions
"The money we use now is not so easy to counterfeit"
Except by the central bank, that is...
Rafael,
That's slightly funny -- but don't give up your day job quite yet. You should maybe look up the word "counterfeit" in a dictionary just so you don't start believing your own joke. The stuff created out of thin air by central banks is not counterfeit.
It's the real thing and it has real value. not "merely because people believe in it" but because it performs genuinely useful functions, enabling the creation of wealth and security for real people in the real world.
David Lloyd-Jones “Wealth”, “Security” lol
@@brettolson9544 ??
@@TheDavidlloydjones No, no, I wouldn't dare to call myself funny in your presence.
Argument from dictionary is bottom of the barrel of bad arguments. In fact, it's not an argument at all, unless you literally only want to discuss semantics, maybe. Otherwise you're literally saying you'll let some institution arbitrate what thoughts are correct and which are wrong.
Words exist to convey meaning. As long as you understood what I meant, it served its purpose just fine. Even if some person disagrees with my usage or understanding of it, they can stuff it for all I care. Honestly I'm just beating a dead horse here, for how bad of an 'argument' that is.
As for whether the USD is useful or not, so what? Counterfeited notes are useful too (wink, I'm using your favorite definition here). That is, until it collapses due to the rampant expansion of the monetary base. What's your point? That literally means nothing.
By the way, when the Roman empire debased their own coins again and again, that wasn't counterfeit either right? After all, they were the authorities then, so who'd use critical thinking to look past silly titles and call things for what they are. When the empire does it, it's standard, fair coinage, foolish peasants!
Hahaha, sorry, for the essay, I just had too much fun here.
By all means, do split hairs and call upon definitions to try and draw distinctions that don't exist or matter.
@@Rafael-rn6hn
I don't intend any "argument from dictionary." There's nothing to argue about: you're using the word "counterfeit" incorrectly. Money made by central banks or treasury departments is money in the respective countries where that's how money is created.
You might also want to look up "inflation," a useful concept -- about which your ranting may sometimes be justified.
Lovely video..great work Salman..
Hi Sal, would you do a video on the logic behind increasing oil prices in the west in relation to turmoil in the middle east. It's extremely relevant today and would be an asset in your video collection.
Thanks.
Thanks a lot! I really learned much of this of video( I usually feel an idiot when it comes to money&math)
Yay for green pieces of paper!
Thank you🙏
I think that everything has a price and that money can be very deceptive. Over time, money has become the driving force behind our decision-making, but is just a mirage that we think is more valuable than it actually is. It's really interesting to think about how money has evolved over time from things with a practical purpose to the digital currency that we have today. If people truly knew the true purpose of money, then I think they could possible change their approach to life. I recently released a video that examines the evolution of money, its creation and true purpose on my channel. It expands on some of the ideas that you talk about here. Great job and keep up the good work!
Nice lecture.
hmmm.......
Now i got it.
Well,you explained me better than Khan did.
Now here's the interesting thing about that quote... it comes from Ben explaining to the Bank of England directors his ideas on why the colonies were so PROSPEROUS!!!!!!!
Gold has some usage in microprocessors and medicine, but it is true - gold is mostly used to make vanity items. So we have a pricey, but overvalued gold.
I am about to watch whole series, to refine my time bank idea. TY for sharing the knowledge.
In Japan they once used RICE as money. Like Britain, Japan was small, isolated and working with limited metal resources. So people used to trade with notes called "koku" that promised the bearer one years supply of rice from the lord's store. These notes were usually issued to soldiers as payment for their services but quickly came to be used as money by anyone who trusted the lord. Now I'm sure you see the opportunity to promise rice that hasn't been harvested yet. Let us pray for fair weather.
Idk if it has already been mentioned but there's definitely a difference between gold and dollars. Gold is far more stable as a substance than paper meaning it will last much longer before deteriorating into nothing, also gold is one of the best conductors so it actually has practicality.
That's one thing I definitely agreed on with the Occupiers. The Emergency Economic Stabilization Act was toxic to the free market.
Another...
"The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks." - Lord Acton
Gold is also used in computer hardware and electronics. Just so you know
I have an idea for fixing congress. I think we should have a system where the candidates for congress spend a term or two as evangelists in a structured forum where they compete with each other to explain the issues before the actual congress to us and recommend how much we should care about them. We are given points to spend supporting or opposing the issues we care about. The candidates could then be rated on how well their lobbing efforts corresponded to the way we spent our points.
I thought you were going over fraction reserve banking in a different video? I wouldn't have watched the whole thing if I'd known you were discussing it now.
Gold is only pretty and hard to counterfeit? A flower is pretty and hard to counterfeit too, but those are not the only properties of gold, not even the most interesting ones. Gold is stable, does not spoil, it has multiple uses including jewelry, electronics, medicine, optics, etc. It is arguably the most useful metal of all. One important factor in favor of gold as money is the scarcity which gives it the high value. If gold was as common as some other metals, you would see it used everywhere.
And remember that they lend out much more than that. Wall street derivatives allow people to bet on markets falling, the people who have the power to collapse those markets are their biggest investors. Increase money supply = boom. Decrease money supply = recession. All recessions are deliberately caused by the big banks. This is basic economics.
There is an error in this video. The bank is not lending its customer's deposit its creating new money as loans and adding it to its deposits.
He explicitly said they are using gold. The bank cannot create gold.
Gyula Vörös It doesn't matter if it gold or paper or dog shit with paprika. The bank doesn't lend any money, only claim checks on money (promises to pay, IOUs) who basiclly work like actual money.
There is no fundamental difference between "actual money" and "IOUs that work like money", because anyone can redeem the IOU any time. In fact, fractional reserve banking works the same when they do not use IOUs, only actual gold. Have a look at the another video from this channel on the subject, "Banking 3: Fractional Reserve Banking".
Not everyone can redeem their IOUs at the same time, because there is not enough fiat money.
That is correct.
Nice one. It reminds me of the wizard's first rule... People are stupid!
Here's a similar quote (from a banker)...
"I am afraid that the ordinary citizen will not like to be told that banks can and do create money. And they who control the credit of the nation direct the policy of governments and hold in the hollow of their hands the destiny of the people." - Reginald McKenna, Chairman of the Board, Midland Bank
COMPLETE AGREEMENT WITH THE STATEMENTS STARTING AT 2:30. Both gold and fiat have their strengths and weaknesses. I hear a lot of the same fallacies.
:) Gold is a great conductor in electronic
support!!!!!! bring this to school and might get students a lot of help!! cuz i am fucking tired of the boring learning style we have right now!!!! i cant learning anything from those boring teachers!!!!!!
Agreed.
The main thing about gold is that people agree that has value and you cannot print gold out of nowhere that is why is so valuable with respect to paper money. You could mine gold, but the amount you can mine is limited which is not true of paper or digital money.
I think he's showing a simplified structure to give a foundation or edifice to further topics. He's mentioned this bank is a theoretical "first bank" for a "primitive culture." Therefore, no electronics, dental, space, medical or other industries use it for this demonstration.
ppl are complaining about the errors while i just want to say thank you!
@MsAllahhuakhbar You're right. Islamic banking has became the largest growing financial industry since years
For ListenTOOthers :
Of courses you need deposits for create money ... but the creation of the money is allow by the initial deposit of "bankers" in the central bank.
Fractional Reserve System works with the this initial deposit ... not with the customers deposits.
Capitalism brilliantly explained
Great video, Sal! Simple explanation of banking even my young son can understand.
Because the investment banks were convinced that their models were based on "predictable" events therefore lowered their regulatory equity (or artificially increased its value). This is solely an indication of a simple banking model. When you mix the different types of banks it is nearly impossible to understand the risks. Wall Street resembled more of a (dark) hedge fund than a traditional bank, which could be acceptable but much more volatile - and riskier for the depositors.
I'm with you all the way but gold is used in a lot of gadgets and modern/advanced technology. It really might end up being our most valuable resource in the future in more than one way.
He is trying to illustrate the concept of banking in general. Doesn't have to be current banking system. This is the first video. Later on he will get into details.
The thing is, the US's dollar is no longer backed by money, and I don't think we can keep using paper money because there will never be enough gold in relationship to the number of people. What will people do?
Gold is very useful, it used in electronics and has many other industrial uses.
Which is true, but that does not mean that that money is worthless. When one makes a loan, the newly created money represents either the value of the collateral or the value of the goods and services produced with the loaned money.
Not merely electrons: One must change the NUCLEUS, i.e., the proton-neutron structure---which takes considerably even MORE energy than merely "changing" the electrons!
the 9 million to lend out wouldn't come out of the 10 million, 9 million dollars is created out of thin air on top of the existing 10 billion. This is how commercial banks expand the money supply. Lending is one of the two ways in which new money is created.
Perhaps you could make a video on the Labour Theory of Value, it is a far more logical way of analyzing these things.
What He says is true and very true about gold. Gold have value because made it to be... beside that it's nothing, nothing at all.
***** www.kickstarter.com/projects/99signs/99-signs-you-are-not-in-the-1?ref=nav_search
"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
Actually, it's almost certain that the banker under those conditions would charge depositors for the service of storing their money, just like you would pay for any other type of warehouse storage. So he wouldn't pay interest (7:29). He faces contraints like overhead (durable building+vault, security, capable accountants and lawyers) and must avoid a bank run at all costs, unless he has some side deal with politicians to protect him from irate creditors. The idea of getting paid by the bank to hold your money appears to be a phenomenon of a fiat currency systems (which use funny money) with fractional reserves and government bailout schemes.
Notice that the banker could give out receipts for deposits of money metals (gold, silver, copper). These would be traded in the public as paper money.
Gold is useful actually woth electronics in the modern world.
Wonder how you feel about gold as compared to the dollar today?
knowledge should be shared, not labored and enslaved for.
Unfortunately there isn't such a village in which everyone benefits. In this example, those who benefit are the owner of the bank and the owners of the productive investments. The workers who make the production are the creators of the riches and theones who get nothing except for the money that enables him to be in condition to come to the factory the next day. Good video though. Thanks for this.
Gold is useful for electronics and electronics research. I'd personally prefer if aluminum replaced gold for currency and jewelry.
What is the program he;s using? I can't figure it out.
im starting a bank :)
thats a great way to make 300k and help the world and myself
While I think the video's as a learning curb are fantastic there are a couple of point's I feel should be made.
Firstly gold is not just pretty that's is not what gives it value. Gold is desirable it is a commodity that one person will provide a service to another person in return for an amount of that commodity.
Hey sal, where can i pay my contribution to this lecture?... great work!
@kristopheraugust what exactly did you think was rubbish? he described it in layman terms very proficiently, to understand banking the way he described gold and money was enough to get the idea. Gold is valued by supply and demand, money is valued by supply and demand also (free floating currencies like the US dollar). This is all you need to know to understand this simple concept, he did an excellent job.
how do you write so well with a mouse?
"In the Colonies we issue our own money. It is called Colonial Scrip. We issue it in proper proportion to the demands of trade and industry to make the products pass easily from the producers to the consumers. In this manner, creating for ourselves our own paper money, we control its purchasing power, and we have no interest to pay no one." - Benjamin Franklin
Here's how to fix fractional reserve banking:
Require that banks remain more than 50% owned by their officers and make them, and their immediate families, personally responsible for all banks liabilities.
This is fair because we (wisely I think) hold the public personally liable for bank failures. The fact that banks are a natural monopoly that enjoys such an extraordinary backing make it essential that its officers accept an extraordinary personal responsibility for that privilege.
ya
@mikefattyk Agreed, money is a BIG problem.
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Good to know Khan had $1 million 13 years ago
I want to set up a web site that provides all the banking topics in order, Is there a shortcut to do that?
@yaqubali Not necessarily. It usually serves as a buffer against deflation.
I'm not saying I'm a pro or anything but gold is more then "pretty" its steadily goes up in value and is a good resource to build wealth and back up currencies.
Also countries buy most all of the gold produced in their region bc it helps them build wealth
could be using a stylus ^^
"When a government is dependent upon bankers for money, they and not the leaders of the government control the situation, since the hand that gives is above the hand that takes. Money has no motherland; financiers are without patriotism and without decency; their sole object is gain." - Napoleon Bonaparte
Good point otherwise but "art" falls into the "Looks pretty" category
He doesn't write with a mouse, he uses a type of touch pad that reads the movements of a pencil so he's making drawing motions on something that looks like a touch pad that regular laptops have but then bigger.