This should be mandatory viewing in every school, college, university, for all students to get some real world understanding of how banking finance and money really works.
Professor - your analysis is spot on. Milton Friedman was correct when he said that inflation is a monetary phenomenon in the sense that it can only be sustained by a mire increase in money than in real output. Your spot on about the recent inflation problems we have experienced. The economics profession is in a right muddle
Dr Werner has become, through practice, quite adept at explaining the source of new money. I studied economics at university in 1972, in Queensland. The text book for basic theory was written by Paul Samuelson. In it, he explained the then current orthodoxy , the fractional reserve theory, namely , that while no one bank alone can create money, the banking system as a whole could. I could not understand it then but you didn't need to understand it to pass the course ! It is wrong.The prof has provided wonderful clarity. A terrific insight that should be the corner-stone of any economic theory
The recent example of SVB showed that customer "deposits" were used to purchase long term bonds that lost value because interest rates were being raised by Powell. Nobody wanted low interest rate bonds when you could buy current vehicles at much higher returns. The deposits were not lent out as a commercial loan, they would not have to because they can make up money out of thin air. It was the problem of liquidity that was the problem.
This is a partial retelling of Ludwig von Mises' Theory of Money and Credit from 1912. A few confusing points in this, but generally a good summary. I would, too, recommend Murray Rothbard's The Mystery of Banking.
Thanks, Professor Werner for your presentation I believe that you have described and summarized the banking industries properly. In my opinion, those people who are working in the banking industry should learn more from you.
can you elaborate please and thank you? how can one start looking around banking from a trust law perspective? it sounds interesting and educational lol if you can point me in the right direction to google or read something, it would be greatly appreciated
Great presentation. Where can one get the data on the amount of credit created in a country? I couldn't find anything on the profit research center website.
What a great presentation by Prof. Werner. I wonder where I can find the ppt slides of this presentation, and the slides of other presentations of his.
I have a few questions. Can funding university research be a form of productive investment? Can student loans be a form of productive investment if there existed a functioning debt market for these loans? For credit growth, do you use the total credit issued by the banking system? I'm a fan of your work. Thank you for providing me with these interesting ideas.
Of course it can! Its all a question of teaching the right things. Children are the future so investing in their education is an investment in the future... IF you do it right.
I believe education and research would be considered consumption, and so not reccomended for credit creation, as they would result in inflation. namely, the increase in cost of education and research. However, non-bank entities could certainly provide loans for these endeavours, without any negative consequences...
Its really hard to say, given that so much credit is derived via the off-shore banking system, outside of the national authorities and jurisdiction... But there is no question that expansion is slowing due to tightening by central banks. But... long term, economic expansion needs to continue for the system to function. We can have credit contraction short term, but if it continues, the system breaks down.
Debit Loans Receivable Credit Customer Deposit Liabilities All done electronically. Cannot be done with cash. Cash entries would be as follows : Debit Loans Receivable Credit Cash removed from bank
used to buy long term treasuries with crappy interest rates, which plummeted in value during the recent rate hike cycle. Hence their insolvency when too many people tried to withdraw...
Money is liability of the banking system. However these liabilities of the banks aren't created out of nothing. Technically speaking, these bank liabilities are created out of assets (IOUs of the borrower like mortgage etc,.)
A wrong perspective. What money represents to banks, doesn't concern the rest of society at all. That's their problem! If they were transparent and honest from the very beginning, money wouldn't be a liability for them. Essentially, they had to cover unauthorized money creation with fraudulent bookkeeping. Now, what is money? Simply put, money is a CLAIM, the special kind of claim universally accepted in some country or territory. With money in our possession, we can claim all the goods and services available. You can test this definition for yourself. If money would be a liability or some kind of debt by its nature, no one would accept it in return.
@@mgnm2013 Money is and always has been the liability of the banking system. It's a fact. Money creation was always "authorized"; they called it fractional reserve banking in the earlier days to hide the credit creation process. Money is a medium of exchange. Money is liability of the banking system. Banks conduct all of our transactions in their liabilities.
@@KimetsuNoYaiba100 Let's test your "fact". Fiat money is a much older concept than banks. Rulers and monarchs coined money long before any bank, or double-entry bookkeeping. So, money by itself cannot be defined as the liability of a bank or banking system. This "definition" doesn't explain anything. Technically, it's perfectly manageable to have money without banks, or even double-entry bookkeeping, especially in today's corrupt form (using fictitious deposits). So, please don't attach the existence of money to a banking system. Ask yourself, how does a banknote or a coin represent a liability for a single (commercial) bank? Or from another angle, if they manage to abolish cash, how would then money be a liability for a bank? Lastly, who authorized money creation by commercial banks? Do you have a source, a paper, a law, anything?
@@mgnm2013 If cash is abolished, the banks still own liability to the public but that liability can only be redeemed by transferring it another bank. One can't withdraw physical manifestations of that liability like notes or coins. I dont' know if there is such a law but given that Fed exists primarily to bail out the financial system and the government bails them out at times of crisis, it is presumed to have been authorized by the government.
@@KimetsuNoYaiba100 , "but that liability can only be redeemed by transferring it to another bank" The problem is, there was no liability in the first place because they literally invented fictitious deposits out of thin air. Saying that cash is a "physical manifestation" of so-called banker's money i.e. liability as you call it, (client's current accounts basically), is like saying that coins are the physical manifestation of banknotes. No, all 3 forms of money co-exist simultaneously and comprise the money in circulation. If banker's money would be a legal and transparent form of money as banknotes and coins are, bankers wouldn't have to redeem or convert anything. It would be optional, just the same as banks don't have an obligation to change banknotes to coins. Because of the huge implications, there has to be a WRITTEN authorization, not to mention a prior debate. Both are lacking, I assure you. Creating money (that serves as national currency) without permission is called counterfeiting.
Brilliant economist, not sure how much he's influenced by his faith. I do agree with him that you can create a free lunch (for the people) via banks. NYC knows well...
He doesn't recommend free lunches though, he's more into productive credit creation, credit that puts people to work. About NYC, my worry is that if it's already there, it's coming soon to your neighborhood 😢😂
True alchemy is converting all of life's experiences (the seemingly good or bad) and converting them into one output, love, or as common folk were led to believe, gold 😂
because each asset is balanced by a liability: they purchase your "security" as their asset, and they create a corresponding liability which looks like a (fictional) deposit into your bank account: I think I understand it
This should be mandatory viewing in every school, college, university, for all students to get some real world understanding of how banking finance and money really works.
it's not an accident this is not taught in schools.
Professor - your analysis is spot on. Milton Friedman was correct when he said that inflation is a monetary phenomenon in the sense that it can only be sustained by a mire increase in money than in real output. Your spot on about the recent inflation problems we have experienced. The economics profession is in a right muddle
Dr Werner has become, through practice, quite adept at explaining the source of new money. I studied economics at university in 1972, in Queensland. The text book for basic theory was written by Paul Samuelson. In it, he explained the then current orthodoxy , the fractional reserve theory, namely , that while no one bank alone can create money, the banking system as a whole could. I could not understand it then but you didn't need to understand it to pass the course ! It is wrong.The prof has provided wonderful clarity. A terrific insight that should be the corner-stone of any economic theory
Keep at it, very appreciative of the work and its massive importance. Thanks Richard. You're the man!
The recent example of SVB showed that customer "deposits" were used to purchase long term bonds that lost value because interest rates were being raised by Powell.
Nobody wanted low interest rate bonds when you could buy current vehicles at much higher returns.
The deposits were not lent out as a commercial loan, they would not have to because they can make up money out of thin air.
It was the problem of liquidity that was the problem.
God bless you, prof. Richard, for your utterly professional approach!
Such a great mind and man of Truth !
This is a partial retelling of Ludwig von Mises' Theory of Money and Credit from 1912. A few confusing points in this, but generally a good summary. I would, too, recommend Murray Rothbard's The Mystery of Banking.
Exposing the game. And that on the day of She mita. What an absolute savage.
Thanks, Professor Werner for your presentation I believe that you have described and summarized the banking industries properly. In my opinion, those people who are working in the banking industry should learn more from you.
Peter Schiff needs to watch this
He's not going to change his mind
Peter Schiff is a grifter and a blow hard idiot.
@@TheIdealGasLaw what part of this would he disagree with?
Looking at banking from the perspective of trust law is very different than an economic perspective.
can you elaborate please and thank you? how can one start looking around banking from a trust law perspective? it sounds interesting and educational lol if you can point me in the right direction to google or read something, it would be greatly appreciated
Great presentation. Where can one get the data on the amount of credit created in a country? I couldn't find anything on the profit research center website.
What a great presentation by Prof. Werner.
I wonder where I can find the ppt slides of this presentation, and the slides of other presentations of his.
Very straightforward 👍
Thank you Richard!
I have a few questions. Can funding university research be a form of productive investment? Can student loans be a form of productive investment if there existed a functioning debt market for these loans? For credit growth, do you use the total credit issued by the banking system?
I'm a fan of your work. Thank you for providing me with these interesting ideas.
Of course it can! Its all a question of teaching the right things. Children are the future so investing in their education is an investment in the future... IF you do it right.
I believe education and research would be considered consumption, and so not reccomended for credit creation, as they would result in inflation. namely, the increase in cost of education and research. However, non-bank entities could certainly provide loans for these endeavours, without any negative consequences...
Which measure of aggregate money do you use for bank credit?
Excellent !!!
Double entry book keeping...... A wonderful thing
It's not a fault of double-entry bookkeeping when the financial auditors do not do their jobs.
@@mgnm2013 credit creation is a legal benfit of having a banking license, so what's your point?
@@GamezGuru1
Benefit yes, legal and ethical no.
Excellent
I was TOLD to not share this intel with the likes of my customers as a' Gagged' adviser.....
How do Banks create money where money issued by Central Banks? Fractional Reserve does not mean money ctration rather than a part of Reserve money.
helpful info thanks
A guide for the next decade(s)...
Too bad he's Professor Richard Werner and not King Richard.
Is bank credit still growing as of September?
Its really hard to say, given that so much credit is derived via the off-shore banking system, outside of the national authorities and jurisdiction... But there is no question that expansion is slowing due to tightening by central banks. But... long term, economic expansion needs to continue for the system to function. We can have credit contraction short term, but if it continues, the system breaks down.
Debit Loans Receivable
Credit Customer Deposit Liabilities
All done electronically.
Cannot be done with cash.
Cash entries would be as follows :
Debit Loans Receivable
Credit Cash removed from bank
Banks also pay in cash to enterprises. Guys availing loan do not keep money idle with banks.
What happened to svbs deposits?
used to buy long term treasuries with crappy interest rates, which plummeted in value during the recent rate hike cycle. Hence their insolvency when too many people tried to withdraw...
@3:50 here here 💥
BOOM!
I need to understand why some banks go out of business when they can just create more money.
I think legalities still apply: they must buy "securities", else it is fraud
they can only 'create' money in the form of a loan. They cannot print their own money to settle their own obligations.
Money is liability of the banking system. However these liabilities of the banks aren't created out of nothing. Technically speaking, these bank liabilities are created out of assets (IOUs of the borrower like mortgage etc,.)
A wrong perspective. What money represents to banks, doesn't concern the rest of society at all. That's their problem! If they were transparent and honest from the very beginning, money wouldn't be a liability for them. Essentially, they had to cover unauthorized money creation with fraudulent bookkeeping.
Now, what is money? Simply put, money is a CLAIM, the special kind of claim universally accepted in some country or territory. With money in our possession, we can claim all the goods and services available. You can test this definition for yourself. If money would be a liability or some kind of debt by its nature, no one would accept it in return.
@@mgnm2013 Money is and always has been the liability of the banking system. It's a fact.
Money creation was always "authorized"; they called it fractional reserve banking in the earlier days to hide the credit creation process.
Money is a medium of exchange. Money is liability of the banking system. Banks conduct all of our transactions in their liabilities.
@@KimetsuNoYaiba100
Let's test your "fact". Fiat money is a much older concept than banks. Rulers and monarchs coined money long before any bank, or double-entry bookkeeping. So, money by itself cannot be defined as the liability of a bank or banking system. This "definition" doesn't explain anything.
Technically, it's perfectly manageable to have money without banks, or even double-entry bookkeeping, especially in today's corrupt form (using fictitious deposits). So, please don't attach the existence of money to a banking system.
Ask yourself, how does a banknote or a coin represent a liability for a single (commercial) bank? Or from another angle, if they manage to abolish cash, how would then money be a liability for a bank?
Lastly, who authorized money creation by commercial banks? Do you have a source, a paper, a law, anything?
@@mgnm2013 If cash is abolished, the banks still own liability to the public but that liability can only be redeemed by transferring it another bank. One can't withdraw physical manifestations of that liability like notes or coins.
I dont' know if there is such a law but given that Fed exists primarily to bail out the financial system and the government bails them out at times of crisis, it is presumed to have been authorized by the government.
@@KimetsuNoYaiba100 ,
"but that liability can only be redeemed by transferring it to another bank"
The problem is, there was no liability in the first place because they literally invented fictitious deposits out of thin air.
Saying that cash is a "physical manifestation" of so-called banker's money i.e. liability as you call it, (client's current accounts basically), is like saying that coins are the physical manifestation of banknotes. No, all 3 forms of money co-exist simultaneously and comprise the money in circulation.
If banker's money would be a legal and transparent form of money as banknotes and coins are, bankers wouldn't have to redeem or convert anything. It would be optional, just the same as banks don't have an obligation to change banknotes to coins.
Because of the huge implications, there has to be a WRITTEN authorization, not to mention a prior debate. Both are lacking, I assure you. Creating money (that serves as national currency) without permission is called counterfeiting.
Professor Werner is correct but the banks do not created loans out nothing. the promissory amount amount favour of the baks is money.
Brilliant economist, not sure how much he's influenced by his faith. I do agree with him that you can create a free lunch (for the people) via banks. NYC knows well...
He doesn't recommend free lunches though, he's more into productive credit creation, credit that puts people to work. About NYC, my worry is that if it's already there, it's coming soon to your neighborhood 😢😂
Creating money out of nothing sounds a little bit like alchemy. From lead to gold. ;)
Its like handing out privileges. Like when someone is knighted by the Royals :)
It's worse than alchemy, at least the raw material in alchemy is actually worth something, unlike *nothing*
True alchemy is converting all of life's experiences (the seemingly good or bad) and converting them into one output, love, or as common folk were led to believe, gold 😂
why arent banks balance sheets just blowing up?
because each asset is balanced by a liability: they purchase your "security" as their asset, and they create a corresponding liability which looks like a (fictional) deposit into your bank account: I think I understand it
The most important force in economics is the Sun.
It is not so secret though
☀️☀️☀️💯💯💯👍👍👍
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Just downloaded it, just in case it goes “missing” 😬😅😅 brilliant work as usual sir 👏👏🫡