I’ve come across this information before but your video and explanation made me better comprehend this fraud/deception fuckery so much easier. Thankyou so much 🙏🏻
Ha Here i find myself back here after a year of being stuck down this freakshow bunny hole. Mind is blown on the daily that this entire illusion is based upon a believe it exists. Money of account (deposit accounts guaranteed by the government, otherwise backed by nothing) Still challenging my mortgage after 2 years & no sign of me budging one bit. Show me the ledger !!!!
Fractional reserve banking did occur during the period where currencies were back by gold. This ceased to operate when the currencies became fully fiat.
Michael Hudson economist is correct on the jubilee debt repudiation but he is not informing the viewers that there is not lending and borrowing in modern fractional reserve system, and all debt are a fraud of epic proportion. Banks do not create money, the customer's promissory note creates the new amount of money. When anyone needs what they believe is a loan they are actually lending the bank money, the bank coverts the customer's promissory note into computer digits. if the banks are authorized by the constitution to be in the private then they can only charge service fees not interest chargers. In the USA Canada the banks cannot be in the private. Banks should never be private they must be owned 100% by all the people as non profit. In Germany 70% of all banks are non-profit. Interest charges destroy the economy and the nation.
Stop lendong to banks and instrad reduce debt at the HM treasury ..the Crown is the franchisor of all nations that run the debt syatem ... So become credotor to the Crown and set up a debt reduction system ..instead of creditor to a debt system..which is a debt franchose afminsotrative unit for the Crown ..
Yes, that's one limitation. See more in another presentation of mine: "Exactly How Do Banks Create Money?", at 17:00 ruclips.net/video/eM1S6RiIJis/видео.html Some of those limitations: 1. The customer's creditworthiness. Since banks have to pay up themselves when loans go bad, they are loath to lend to dubious customers. At least in normal times. When markets are red hot, all banks need to lend more and thus loosen their credit criteria. 2. National regulators may have imposed more rules on banks' lending, like: "Only 50% of your portfolio must be to your ten biggest customers" or "You can't expand your lending more than 30% per year". 3. Some countries may have reserve requirements (that is, a minimum amount in the reserve accounts with the central bank), but that's not so common any more.
ruclips.net/video/iiKr-i022mY/видео.html The Progressive Growth of the Money Supply Principle (year 2013) tells us the exact quantity of new money the economy needs to works correctly, driving us to the Wicksell interest rate or natural interest. This principle will force central banks to change monetary policy.
When the government spends into the economy, money is created. The government is the only issuer of money. Banks create money out of credit. Once the loan is paid back the credit money doesn’t exist. There is no net asset created from bank lending.
@@JohnnyJr396 it doesn't cancel out because of interest rates. Every dollar created through credit has to be paid back with interest, and where is the interest coming from?
@@nigelcarter7740 You are neither right nor left, those are directions in reference to a central plane. Now as to your being correct or incorrect; well, you know my perspective. You poor thing. You have my pity.
@@nigelcarter7740 Oh, I know, Pumpkin, I know. And as I'm getting ready to head off to work here in an hour or so.... As CFO of a bank, that is.... I'll make certain to let my CEO and board of directors know all about it. We'll be discussing Q3-2024 performance on Wednesday; and I'm preparing all the packs today. I'm make 100% certain to tell them all about this website. Oh, the laughter. The laughter. Normally I just stick with the dumbest Sov-Cit letter/story we received in our Collections Dept; but this is just pure, sheer Comedy Gold. You will be the laughingstock of our board meeting !
It is important to stress when people argue against the fact that banks don't lend out their customers deposits that they can't because the deposit is a debt they owe the customer and nobody could argue that anyone could lend out their debts.
That is a good point. I should include it. Of course, one has to explain in the first place that people's money in the bank are really debts owed them by the bank. In this presentation I don't dwell on that, but that is important. And the corollary, as you put it, that debts can't be lent - so true.
@@ibravn1 Hold up hand instead.. And use the labour credit to reduce debt at the US treasury.. This reduces US obligatiins...by ur hand..and this acknowledges ur surety rights over the US treasury. They will thus set off our bills or any charge in our name... Google : surety rights We already do this at natiinal banks.. The debit card is a record of our reduction of debt owed to us by the bank... In return the bank discharges a bill in ur name.. U as international sovereign can do this at the US treasury.. I have emailed the treasurer.. And they accept anyones currency .. The Crown treasurer in london also gives that choice..they haveban example of a lady whondonated her house at the Crown treasury to reduce its debt.. in return for the maintenence of the property and living for free at her previous house
Thank you for taking time and creating this video for us mate As I can understand fractional reserve theory and credit creation theory are both just ways that a bank creates credit money today, fractional theory assumes that bank A always needs reserves to cover there loans as if the borrower would use the loan to buy from someone at bank B farfar away (probaly at another state) and by this bank B would acept only centralbank money (becuase those bank costumers dont buy much from eachother), by this bank A creates credit noney wich the original bank A depositor could use as money as a type of compensation. And credit creation theory is the other way banks create credit money wich it assumes that borrowers will most likely use there money in the same geographical area and those credit money created by banks will be acepted by those banks in this area and only a small amount of central bank money will be transfered after neting , so is it correct to say that those 2 are just 2 ways a bank today operates and creates credit money? Of course on the creit creation theory it creates much more as I can see! And i saw yesterday 2 organisations one called ourmoney the other positivemoney they had a similar probaly the same idea for a new banking system, if you have knowledge about this do you know is that proposal of them similar to any of those 3 banking theories or it is a 4th and diferent system?
Thanks for your question; though I'm not sure I quite follow you. May I clarify that the banking system works as it works, and it works in one way today and somewhat differently 400 years ago and in non-Western countries 100 years ago and so on. That's one thing. Then there are different understandings or interpretations or THEORIES about how the system works; how to explain and render comprehensible what is going on in the system? That's the other thing. You seem to mix up the two things. Banks operate as they do; what is at stake in my video is how we EXPLAIN what they do. Today, in modern economies, banks all do the same. But do we explain that as "Banks take one customer's deposits and lend them to someone else" (says the intermediation theory) or as "Banks retain 10% of all deposits as a fractional reserve and on-lend the 90% to other customers" (says the fractional reserve theory) or as "Banks create money during lending by writing the relevant digits into the borrower's deposit account and opening a loan account in the borrower's name and entering corresponding digits there, which record the borrower's debt to the bank" (says the credit creation theory). I hope that clears up something. If not, ask again, my friend.
I know Positive Money, great organization. I am very much inspired by their work. Champions of the credit creation theory (although they don't necessarily call it that; the term is due to Richard A. Werner). Highly recommended. Excellent web site. Our Money I didn't know; thanks for the tip. They are, however, based on a somewhat competing theory, as you suggest, called Modern Monetary Theory (MMT). It argues that the government creates money when it spends money, and taxes are a way of deleting that money again. MMT agrees that banks create money, but (unlike Positive Money, and myself) sees no major problem with that.
@@ibravn1 what i wanted to say is the moneymultiplier model that is used to describe fractional reserve of banking that explains how bank money is created is very simple one, and it always assumes that when a borrower takes a loan from bank A and buys something from someone at bank B , bank A always has to transfer reserves to bank B, and by this only a small amount of bank money is created for depositors of bank A to use to buy as a compensation, but banks rarely have to transfer reserves becuase most loans are used on same geographical area from banks of the same area or state and this is why banks accept eachothers bank money,and can create more bank money than on moneymultiplier model, so what i wanted to say both moneymultiplier explanation and credit creation theory are part of the same banking system it just depends how much money will be created, based on where will the borrower buy from, and the main diference of fractional reserve theory and credit creation theory explanation is that the first one asumes that a bank cant create bank money without having reserves first, and second one assumes that banks create money forst and then borrow reserves somewhere to netout with other banks, am i correct?
@@ibravn1 as i can understand PositiveMoney proposal is somehow like the financial intermidation theory, both theories say that banks could not create bank money and they must only have reserves to be able to lend, only that PositiveMoneys proposal is that banks cant even lend the demand deposits only locked deposits that are locked for a long time and cant create money so this is the diference. Both systems would be more fair and morally correct but as i can see the circulation of money would be alot more slower for example if a billionare dosent want to spend or buy anything that money will just stay there and banks cant keep that money circulating.
Hello! Great presentation! I have two questions though. First of all, when we draw money with our debit card from our bank account, where does this cash come from? Form the capital of the bank, from the central bank reserves the commercial banks have or from their settlements accounts, the ones you mentioned in your other video "Exactly how do banks create money"? Secondly, if I got it right, the western banks in the past used a combination of all three theories of lending/banking systems but relied primarily in the third type? And all these mean that every time a customer opens a bank account, the bank actually owes them the money that they deposit or not? Because you said in a previous comment that people's money in the bank are in fact money owed them by the bank. Thank you!
Very good questions! Before I answer, remember this very important distinction: CASH (notes and coin) is one thing, ACCOUNT MONEY is another. They are interchangeable (the bank will give you one for the other), but they are not the same. Your first question: "...when we draw money with our debit card from our bank account, where does this cash come from? Form the capital of the bank, from the central bank reserves the commercial banks have or from their settlements accounts..." Answer: Neither. All those three that you mention are account money, but you are asking about cash. When you get a $100 bill from an ATM or from a bank teller, it comes from the bank vault. It is cash they have "lying around" (well accounted for, of course). However, to track that they gave the bill to you, they deduct a corresponding amount ($100) from your bank account. Okay? If you really meant to ask how you can transfer money from your account to other people's accounts, in payment, ask again. Your second question: "..western banks in the past used a combination of all three theories of lending/banking systems but relied primarily in the third type?" My answer: Well, that 's sort of a scientific question. The bankers at the time generally had no idea how the money and banking system could be understood whole cloth. Everyone just sat in their corner and tried to score a buck. The three theories Werner identifies are helicopter abstractions ("scientific" theories) that I consider more or less relevant to different time periods, as I detail in this paper: www.tandfonline.com/doi/full/10.1080/07360932.2019.1668286 . Since most money today is account money, the credit creation theory works best today. Third question: "...all these mean that every time a customer opens a bank account, the bank actually owes them the money that they deposit or not?" My answer: When you open an account and deposit $500 in cash, the bank takes that cash, puts it in vault (or rather, in the register at the till) and you never see that particular $500 bill again. However, to track that you actually gave the bank that large bill, the bank clerk records the amount in your account by adding it to zero. Now there is $500 in your account. This is money the bank owes you. It's called a liability, the bank's liability to you. Consider it an exchange: You gave the bank your bill, it gives you a promise to pay you the same amount when you ask for it (withdraw it). When you want the $500 in cash, the bank has to give it to you, and they will. If they can. Your bank may have gone bust five minutes before you entered the front door to withdraw your cash, and you won't get it. This is what happened in the US during the 1929-33 crisis. I hope this is all clear. If not, let me know.
@@ibravn1 Thank you for your very helpful answers! Just one more thing I have to ask about your answer to my first question. In another economics video which describes how central banks "control" the total money supply and price (interest rate) it is said that every commercial bank has a certain type of "money", the central bank reserves. These reserves are needed from commecial banks for two things: 1) To make transactions with other banks 2) To exchange them with cash that is printed from the central bank. If these are true, then there is also another way for commercial banks to get coins and notes, except from the deposits of their customers that end up in the banks' vaults, right? And lastly, the video described that commercial banks get these reserves through borrowing from the central banks, borrowing other commercial ones' reserves or creating more loans, hence money. Because banks always borrow reserves from central banks and they lend them with a particular interest rate each time, this is ultimately the mechanism that controls the supply and price of money in the economy, from the perspective of the central ones. As the interest rate of the latter influences the interest rates of loans of commercial banks that give to clients. Are these all true or the video wasn't right? Thank you again!
@@tomastsiatsios3399 Your first point, summarized by you: "there is also another way for commercial banks to get coins and notes..". Correct. Above, I omitted that for brevity. If a bank is short on cash it buys a couple hundred thousand more in small bills/notes from the central bank (the CB). The bank pays the CB by letting the CB subtract that amount from the bank's reserve account with the CB. So, you are right. The amount of cash (notes and coins) in circulation in most countries has probably increased 100-fold over the past hundred years, and it has all been by purchased by the banks by that method. The CB prints this paper money and stamps the coins. As to your second question, you really should watch my other video, "Exactly how do banks create money?": ruclips.net/video/eM1S6RiIJis/видео.html. The account you give is the standard one, and it is half-way correct, only banks do not lend reserves. Google this short paper from Standard and Poor's: "Repeat after me: Banks cannot (and do not) lend out reserves." It clears up the rampant confusion here. Some CB's want to maintain the fiction that they control the money supply (they don't, banks create money as they please). So, they support the erroneous story you reproduce; that the interest rate on reserves dictate/influence the interest rate banks charge on their customer loans, hence spurs/slows economic activity. Richard A. Werner has shown in published research that this link barely exists. If anything, the causality between CB interest rates and economic activity is backwards and the association is positive, not negative. In any case, banks lend (and thus create money and thus stimulate economic activity) largely as they see fit, and CB's follow suit. A disgrace, but that's pretty much the picture.
@@ibravn1 Hello again! I've already seen your other video and it was very thorough! I understand what you say that the CB's story is pure fiction. I've thought it myself too. Still, why do central banks support this myth? And not only these but also various economists and academics? I get that, as you argue in your videos, many economists do not know how commercial banks really work and produce money out of nothing but how can they not understand that the interest rates of CBs don't matter in the real economy? Why many financial newspapers inform and foresee how the economy will proceed every time the CB announces an increase or decrease of its interest rates? Is it plain ignorance? Or just a theory without proof just to support a view of how the banking system functions? All in all, if what you say about CB's interest rates is true, then they are just like the interest rates the commercial banks impose on their customers and they serve the same purpose. The only difference is that these interest rates come from the CB and and are imposed only on commercial ones. Thank you!
The Intermediary Theory was developed because in 1933 Glass Steagal was enacted which separated commercial bank money creation from finance establishments. It was recognized that bank credit creation pumped up the stock market.
Interesting. But I'm pretty sure that the intermediation (intermediary? Never heard that term before) theory is older than that. Do you have a reference? Also, I've never heard commercial bank money creation mentioned as motivating the Glass-Stegall Act. I rather think that what motivated Glass-Steagall was the erroneous intermediation theory. They believed (or argued) that large banks should not be able to invest or speculate with ordinary customers' money, a notion taken straight out of the intermediation theory. In reality, when banks buy securities, etc. (that is, invest/speculate), they create money, and if they need liquidity (digits in their reserve accounts with the central bank), they borrow it from other banks, the so-called overnight loans, at very low interest.
@@ibravn1 yes, reality versus the general view. Henry Ford said if the public knew how banks operate there would be a revolution. Credit creation. That is the key to so many things! The eight hundred and fifty percent margin lending pumping up the stock market in the Twenties did not come from savings. Just look at how the cat was let out of the bag regarding SVB! Customer deposits were parked in long term instruments, not "lent" out!
@@ibravn1 I have read the hearing records from the Pecora investigation and it is true credit creation is not mentioned but again, reality counts, it is credit creation that is dangerous and the entire scenario caused a tremendous upheaval called the "New Deal" Far more profound than the Japanese crisis of the Nineties that Professor Werner speaks of in the "Princes of the Yen"
What's destroyed (or, rather, retired or extinguished) is only the money that was created as a loan, that is, your repayment. Interest is money that goes from you to the bank, which spends it on salaries, computers, bonuses and dividends to its shareholders. So, interest stays in circulation; the money involved is not retired.
History question: Everything you pointed out in the presentation makes me wonder, was all this legitimised by the kings (during the early days of banking) to fund the wars and conquests.
@@shouryasharma4150 Absolutely. Kings were in control of coin (cf The Royal Mint), but bank notes and other forms of amply supplied paper money were invented by merchants (and goldsmiths) who, in that process, turned into bankers. So, courts turned to bankers to fund wars and stuff, not really knowing where bankers got all that paper (or account) money from.
Question: What are deposits used for then? Like if I deposit 10$ at a bank. And how do reserves work and why do banks take deposits at all. In practice banks lend out a lot less than their deposits.
May I refer you to this video I just made? "Exactly how do banks create money?" ruclips.net/video/eM1S6RiIJis/видео.html. There I explain reserves, payments, loans and money creation. But to answer your question, banks take deposits from customers as a service to them, and so that the customers can make payments by book transfer (and electronically, today). The banks' reserves are the medium through payments (money transfers) are made, and most deposits. This I explain in the other video.
@@ibravn1referencing the recent banking problem experienced by SVB it was said that money that was put in the bank by various customers including businesses were used to purchase long term instruments such as thirty year T-bills. The liquidity of these were hampered by the rise in interest rates because why would anyone buy two percent bonds when current offers of bonds were much higher. The real issue is the cat was let out of the bag. Customer placement of funds into banks were not lent out as loans. They were parked in various instruments to make money. Lesson, keep money entrusted to the bank liquid! Notice I don't use the word deposit, legally no such thing.
But when someone open a deposit account, letsay 10 dollars, doesn't the bank also add 10 dollars at the asset side of balance sheet beside adding 10 dollar at the liabilities side of balance sheet.
@@ibravn1 Another question regarding money creation by the bank. Let say there's a bank that has just opened. This bank has nothing in its assets, liabilities, and equities side of its balance sheet. Let say the government doesn't impose any rule regarding bannking. According to Credit creation theory, If a person walk to this bank and ask for $10 loan, the bank will just put $10 on both assets and liabilities side of its balance sheet. Given that this person always do cashless transaction and no one will open a deposita account until this person pay back his loan, can the bank keep operating?
@@mbrp5107 That's a little strange. If no one else has an account, with whom will this person transact? What point are you getting at? What's your interest here? For one thing, the bank needs money in its settlement account at the central bank, so that its customers (like this borrower) can make payments to customers of other banks.
@@ibravn1 Sorry for the silly question. I'm just trying to understand how credit creation theory works. I still don't understand if bank can create credit by giving loan, then what are limiting factors on number of loan issued by banks? It seems the only thing limiting them are government regulation. I'm trying to find natural limiting factors.
I didn't totally understand everything in this video. If they can create "money" out of thin air and get interest from it, what's to stop them from loaning to everybody? Secondly, I didn't fully understand the part about clearing. If they don't actually have any cash, when they make a loan to someone and that person tries to withdraw in cash the amount of the loan it would ruin the bank. Third, why would banks even need deposits since according to the 3rd money creation theory they don't actually need any deposits from customers because they aren't loaning out money from those deposits anyway.
They create IOUs. If you default they will be liable for the loan. That’s because banks can’t really create money only the fed government can. The loan when created , creates credit money. When you pay the loan back , that credit money doesn’t exist anymore. The bank made a profit by the interest you paid. Banks do not create dollars floating around in the economy. Many things stop them from lending, your credit worthiness, how much debt you’re in etc The biggest confusion when people learn this is the difference between money and currency
Quick question do banks have to destroy the money they lend after the loan has been repaid if yes then why can't banks simply cash in 100% of the money exampl: I borrow 1M from the bank I go do my business and repay my loans does the bank now has 1M cash that they can keep
@@aiothedat3102 When you repay a 1M loan to the bank, you don't pay cash, remember. It's all account money, bank money, digits in accounts. You repay a loan by transferring 1M from your credit account to your loan account (your loan account was where the debt arising from the your loan was recorded when you took the loan originally; recorded as minus 1M). Now your credit account is less 1M, and since the money supply in your country is largely made up by the balances in everybody's bank accounts, that sum is now 1M smaller = money has been deleted or destroyed from the total economy. Meanwhile, at the bank, your loan account goes from minus 1M to zero; you're debt-free, and the bank has 1M in assets less. The bank's balance has decreased. As per your question, there's no 1M that the bank can "keep". Money is created out of thin air (during lending) and vanishes into thin air again (during repayment). That's just how banks work.
Well, for one thing, when a borrower doesn't repay his loan, the bank's books are so arranged that the missing repayment is subtracted from its equity. Since a bank's outstanding loans often equals 10 or 20 times its equity, you can see it doesn't take many defaults (bad loans) to wipe out the bank. That's why it's so stingy, at times, really careful about whom it lends to. Unless of course we're in a boom. Then banks want to grab market shares and lend left and right. Until some major borrower (class) can't repay, and the boom-bust rolls on.
When there is a 'run on the bank'. When a greater than expected number of depositors require their money back. Nicely covered in the film, It's a Wonderful Life
I am the CFO at a mid-sized financial firm. I "Created" $10 billion just this morning !!!!! I'll do the same tomorrow, It's Glorious !!!! Laughing, we're all LAUGHING HERE !!!!! IT'S MAGNIFICENT !!!!!!!!!!!
@@ibravn1 Yes, it is a bank. And yes, ten-billion this AM alone. That's awfully high, but once I got my mind around the "Secret" you let me in on... We reached out to all our borrowers and offered to loan them huge amounts of money, with the only caveat being that they had to "Gift" us back 50% of the newly created money. My God, they took to it like ducks to water. We loaned out more in four hours than we normally would in 4 weeks. It was utterly magnificent. From Noon to 1pm we decided to cut out the middle man, and loaned $100B to ourselves. Worked like a charm in that while we as the bank did not create money for ourselves, we created $ for the lender; who just happened to be ourselves. All 9 board members rushed down to eat lunch with myself and the CEO. They were absolutely stunned and amazed at our progress; so the bank loaned me $1T just this afternoon, and I split the newly created money with them. $50B a pop for each of all ten (counting the CEO). I'm elated to share the newly created money with them. I mean, I personally made $500 billion today. Out plan is to do this every single business day going forward. I mean, why not ? We are CREATING MONEY !!!!!!!!!!!
13:39 physical ledgers not just electronic ledger accounts 14:24 all money is account money so why not go Quantum Electronic Infrastructure to Make Business Transactions Exponentially Faster and More Efficient
So good. With a zero fractional reserve requirement in the US now, why the heck do we have to pay any interest on bank loans. If banks don’t have to borrow from each other each night to cover this, then the base rate is zero. Maybe there should just be like $50 processing fee or something to do the paperwork on the “loan” and have no interest charge. Also, why need a credit check to see if you’re likely to pay it back? If you don’t, it’s not like the bank is out any money.
Good point about the processing fee--should be sufficient! But banks have to answer for every penny not repaid by a borrower; it gets deducted from their equity. So there's every reason for them to do credit checks. Still, the money they do lend is created out of nothing. But accounting rules are such that this money-on-account (digits written into the borrowers account) has to be retired when repaid. Money is created through lending and disappears when repaid. The system does not allow newly created money just to stay out there in circulation. That would inflate the money supply dramatically every year, causing massive inflation. Debts have to be repaid (but of course, aren't always: If non-repayment is massive, we have a financial crisis).
Gotcha, good point about the inflation risk. I understand that now, thanks for the reply! The 0% interest rate though seems like a good idea though. Just think of all the new jobs and businesses that would be created by the increased buying power of all the folks who would have their mortgage payments cut by a third or more from 0% loans. It would massively grow the economy. I don’t think it would cause much inflation either since output would increase to meet demand.
Is this more acurate than sayong out of nothing? From an economic viewpoint, commercial banks create private money by transforming an illiquid asset (the borrower’s future ability to repay) into a liquid one (bank deposits); they would quickly be insolvent otherwise. In addition to bank solvency representing a constraint on private money creation, banks require access to liquid reserves in order to be able to engage in money creation.
Well, that’s the traditional banker’s and economist’s circumlocution, the notion of maturity transformation: A bank transforms a customer’s promise to (re)pay a loan over the next twenty years (a long maturity) into money now (a short maturity). That’s one way of explaining (away) what banks do when they lend. But notice that people who give you this spiel never, never, EVER as much as intimate that banks creates money in this process. The maturity transformation explanation is a smoke screen that obscures the fact of money creation by banks. Bankers and their lackeys, neo-classical economists, will never let on that the real game is: banks have illegitimately and under the radar, over the past couple of centuries, captured the money-creation privilege that so obviously belongs to the community, to the population, or its representative, the central bank, which has been asleep at the wheel. Besides, who’s saying that money is created out of nothing? There needs to be banks, loan applications, bank officers accepting them, loan documents, computers systems running the accounts and the digits in them, etc., etc. The point is that in the bank lending process, money is created, new money, money that wasn’t there before but now has been brought into existence. When a baby is born, is that just a dead guy that has been “intermediated” into a new body? No, the baby was created afresh, it’s not recycled. But of course it was not created out of nothing. We need intercourse, conception, pregnancy, birth etc., etc.
No. A bank does not intermediate funds (or securities) between savers and borrowers. It creates money by extending a "loan" that takes the shape of a "deposit" entered into the borrower's bank account. This "deposit" represents the bank's promise to pay the borrower this amount, this payment normally happening in the form of a transfer to another customer's account. When receiving the loan, the borrower signs a promise to pay the bank the amount loaned plus interest. This is the loan document. So, the borrower buys a promise to pay (the bank's promise) using his promise to repay the bank. In this sense, two promises to pay, two IOUs, two promissory notes, which you may call securities, are traded by the bank. These "securities" are created by the bank, with the collaboration of the borrower.
This is how Modern Money Theory ( MMT ) starts out. Pointing out how exactly how the system works is the first step in fixing it. As of now, 622 thumbs up, 🥴Are folks truly not interested ?
Appreciated. Though this is strictly not an intro to MMT. The MMT folks would agree with my presentation, but they have no beef with the banks, as I understand MMT. Banks can go on printing money as long as we realize that the government does the same, as it spends. This realization is MMT's major point, not reform of system that lets banks create money. Correct me if I'm wrong.
A bank doesn't deposit cash into your account. Your account (your "deposits", as they are called, but they are nothing of the kind) is simply a list of numbers, and the last number (the balance) is the amount that the bank currently owes you. If you want some of that money out, in cash, the bank has to give it to you. As you can ascertain when you walk up to the till, the clerk takes that cash out of a drawer and gives it to you. It is not "cash taken from your account." None of those bills in the till is associated with or belongs to your account. But as the clerk hands you the money, she subtracts that amount from your account. The bank now owes you less than it did before. Every bank has cash in vault, that is, a suitable amount of dollar bills in a safe, enough to meet customer demand. If it needs cash, it buys some from the central bank, or waits for other customers to deposit it. A bank's cash amounts are peanuts compared to the huge sums of money transferred by book (digits in accounts) every day between accounts in and out of bank. These account digits are the primary tools of the trade, not cash. (In my native Denmark, banks transfer an amount corresponding to 6-7% of the annual GDP every DAY. This money is mainly used for "investments", that is, speculation in securities, stocks and bonds, currency, derivatives etc.) Getting a loan is allowing the bank to write the corresponding digits into your regular (checking) account (this is the money you can spend) and a corresponding amount, with a minus in front, into a new account, your loan account, which records your debt to the bank (and the interest accruing, as the years pass). Are you with me?
@@ibravn1 You said " If it needs cash, it buys some from the central bank, or waits for other customers to deposit it." Which leads me to ask 2 questions 1)What does it buy the cash from the central bank with? 2)Or if its taking the cash from other customers to give you , how do they replace that cash when its demanded from that customer? ......Thankyou
1. Every (larger) bank has an account with the central bank called a reserve or settlement account. When a bank buys fifty thousand dollars in cash from the central bank and has it shipped over in an armored van, the central bank deducts US$15,000 from that account. 2. A bank doesn't "replace" cash that one customer has given to it, when it gives cash to another customer. Remember, deposited cash is not associated with any account, so there's no "replacing" it. Cash deposited by a customer does not go to a little box in the basement, from whence the clerk picks up the same dollar bill when the customer demands it back. Cash is fungible, as it's called - one ten-dollar bill is as good as any other. Cash deposited by any customer stays in the drawer at the counter or goes to the common safe in the basement overnight, and it does not have the customer's name on it. The bank acknowledges receipt of a hundred-dollar-bill from a customer by adding that amount, US$100, to the customer's (checking) account. "Thanks for the bill! We're putting it in our safe. Now we owe you a hundred dollars more! Come and cash it when you need it, or ask us to transfer that amount to another person's account in our bank or some other bank. We're at your service!" That's called a payments system, and banks have been at it for 800 years, perfecting it under the public and academic radars, so few people really understand it today. Check out my explanation of how payments work: ruclips.net/video/eM1S6RiIJis/видео.html, and how banks create money when they lend.
@@ibravn1 thankyou sir for taking time to respond I am new subscriber and look forward to your future content 🙂 i mighy add Artificial inteligence site gave me this if youd like to comment on "The source of the funds for loans can come from various places, including the bank's reserves, other customer deposits, and even funds borrowed from other institutions. It's important to note that banks are required to maintain a certain level of reserves to support their lending activities, based on regulations and monetary policies."
Then why are banks just non profits that make a debit and credit for money creation. Like why then do they charge interest if they are just making an accounting entry
You're asking why don't banks offer their services for free? Well, because they've developed an extremely lucrative business model, that of creating credit, which a minute later becomes money, out of thin air and charging interest on it that has to be paid by the time the lent money must to be repaid.
Fractional reserve banking is a system in which only a fraction of bank deposits are required to be available for withdrawal. Banks only need to keep a specific amount of cash on hand and can create loans from the money you deposit. Fractional reserves work to expand the economy by freeing capital for lending. Today, most economies' financial systems use fractional reserve banking.
Well, in this video I claim that this is not so and argue for an alternative theory of how banking works, Werner's Creation Creation Theory. Have you seen the video?
@@ibravn1 I appreciate that you think it is wrong. Thats why I posted the truth so you can see how it works. That is how it works and has worked for hundreds of years. It also explains how runs on banks works, when banks don't have enough funds to meet depositors demands. Explained beautifully in the film, Its a Wonderful Life. I am afraid you are going to have to go back and come up with a new theory.
Well, if you have an account with that business, yes. But only if that business is a bank can you use the newly entered credits as money, since only a bank is connected to the clearing and payments system.
So let's say a bank creates some money and puts it in someone's account. What happens if that money is never paid back? I guess interest is supposed to capture not only profit but "risk" of not getting paid back...but if not paid back, what's the actual consequence? What prevents a bank from simply loaning any random person some money, put back in an account, loan more money based on that, etc. and never have it repaid?
The bank has to pay up, out of its own equity, is the short answer. If a borrower defaults on his loan, the bank can no longer list the amount on the assets side of its balance sheet. The corresponding amount that's now missing on the liabilities side has to come from somewhere, and there's only equity to subtract it from (equity is the money the bank owes its shareholders). So equity decreases when a loan is defaulted. This is very painful to the bank (or, rather, its shareholders), and it will go to great lengths to avoid it. Thus it only lends to credit-worthy loan applicants, meaning borrowers that the bank believes will be able to repay the loan. That's why most modern banks will mainly lend to borrowers with collateral (typically real estate) and not to entrepreneurs and small businesses. In case of default, the bank can always grab the house and sell it, but the entrepreneur who has gone broke has often little of value besides her brains.
@@ibravn1 I see, so it has to do with the fact that although money is created out of thin air, the bank still is required (presumably by the government, as a matter of control and part of the deal for it being able to create money) to have an equivalent asset for it on the books (the fact that someone owes money to the bank is an "asset" to the bank). Is that correct? If so, it sounds like there is a risk only b/c the bank is financially responsible for that money once it lends it out, due to the way governments require them to do book keeping. What happens if it's never defaulted but simply not repaid? What types of restrictions are there restrictions to prevent that?
@@cyberjunk2002 Your three paragraphs: 1. Correct. Although it's not called an "equivalent" asset. The amount of the borrower's debt to the bank is simply entered on the assets side of the bank's ledger when the loan is made. It's the borrower's promise to repay. A bank is a machine that allows two parties to enter into debts to each other (the borrower and the bank), and the bank's debt to the borrower (the loan granted) is allowed to circulate in the economy as money, bank money, account money. 2. Precisely. 3. If a borrower does not keep her schedule of repayments, the bank will remind and threaten her and try to recoup the money by various legal means and will eventually give up, writing off the loan, that is, taking the remainder off its books and swallowing the loss, as indicated above. WHEN exactly in this proces this is called a default I'm not sure.
@@ibravn1 thank you! a few more questions based on your last answer: 1. When I asked "What happens if it's never defaulted but simply not repaid?" I was trying to better understand the natural or regulatory restraints on money creation. Here's an example: what if a bank (say, my friend's) "Jiggles some numbers" in my account, increasing it by $10M, but at 0% interest and repaid in a balloon payment in 1000 years (therefore, never defaults). Is there any downside to this for the bank, given that the bank is not actually coughing up any money during the money creation process? Is it purely some form of regulation which prevents this given that they never write it as a loss? 2. If a loan is defaulted, the money is "still out there" an in circulation, meaning that it would still actually cause inflation, yes? I realize that the bank would now have to write it as a loss in its own equity, but equity is not naturally in circulation. I'm trying to better understand the inflationary piece to defaulted, un-repaid loans. 3. Due to inflation, I'm assuming that the asset they have will actually decrease in value, so I assume some amount of interest is needed for banks to at least "break even" (aside from some amount to compensate for risk and some more for some profit) 4. When banks do issue loans, it sounds like in reality they don't limit themselves to existing deposits, but just create the loan then later on can borrow funds from other banks to meet the reserve requirements. is that correct? Many thanks for your time...this is very enlightening!
Its listed as a deficit. When the loan is repaid, then the deficit is removed. Money out, money in, all balanced. Banks make their money on the interest they charge on the loan (amongst other things).
so it sounds ridiculous as I borrow money from the bank and deposit it in the bank, then the bank becomes owing me money! So actually bank lending money to himself without any real money. But I need to pay the bank interest in extra . Is this a scam then
Well, with the invention of bank money (account money, money-on-account), as distinct from cash (coins, notes), some 200-500 years ago, banking became the scam that is under-the-radar money creation; money creation through lending. Nowadays, account money has become so pervasive that it IS real money. You buy a house and pay your taxes with account money. It is real. And it is largely created by banks, and very few people realize this. A scam in broad daylight, undergirding capitalism and the modern economy.
People used to barter for goods and services. People were somehow convinced that system was unfair because for example a loaf of bread is not equal to a brand new house. The money system was created as tool for exchange fairly. But people fail to realize they were giving their power up so that the government could control and own everything. Today money is still in demand because people need and want goods and services. People are convinced that the only method for exchanging goods and services is with money. Even kids realize this at a young age and by the time they become teenagers they are looking for a job so that they can acquire things they want and need. The shift from barter to money was never about exchanging fairly because somebody don’t have as much money as you so they cannot get certain things they want or need. Some solutions I can think of are eliminate the dollar for the people that don’t agree with the system. I think it can be done with a lot of people. Once people rise up the current system will fail. If you take a certain percentage of people out of the current system the government will feel it. People have to work together and agree to create a system that’s not based on money. By using federal reserve notes (money) you own nothing.
That's what "everyone knows", but it's largely wrong. Only cash, which is 4-10% of the money supply in modern economies, is created by central banks. The rest, as I explain in the video, is bank money, account money, digits in bank accounts, and that money is created by banks in the process of lending. Big scam, ongoing for centuries, normalized and hidden from view by everyone except insiders. See also my other video, more detailed: Exactly How Do Banks Create Money? ruclips.net/video/eM1S6RiIJis/видео.html
Because they can get away with it; and they can get away with it because we, their customers, think someone has to part with their money and must be compensated for that loss. And, the bank would add, because there are costs associated with running this operation and banks must recoup them somehow.
Correct. When a loan is repaid, that money is retired (or withdrawn) from the money supply. Money (that is, account money, bank money) is "destroyed." An amount borrowed gets repaid as the borrower subtracts it from his checking account (his deposits) and transfers it to his loan account. It thus disappears from the money supply, the money supply being the sum of deposits in all banks (plus cash in circulation).
The bank I work for is having problems attracting deposits, without paying through the nose, that is. We could us an extra $100M a month. Tell you what...... Show me how we "Create" this $100M... I mean, I was an FDIC Bank Examiner for 35 years; worked all over the U.S. I'm CFO of a good-sized shop right now, and I'd just LOVE to learn how to create money.... Love to. I'll even generously give you half of all the $ we "Create". I mean, why not ? Heck, let's aim for $1B a week. You get HALF ! Deal !?!??!?!?
What your bank needs is not so much deposits as liquidity, that is, "reserves," money in the bank's reserve or settlement account at the central bank. Those reserves are increased whenever money is paid into your bank = "attracting deposits". I explain this in detail in this other, more recent video, "Exactly How Do Banks Create Money?" (ruclips.net/video/eM1S6RiIJis/видео.html). This is where a bank needs money, so that it can make out-of-bank payments for its customers. Also, banks only create money when extending loans. A bank cannot create money for itself. Check out this explainer from the Bank of England, "Money Creation in the Modern Economy" : ruclips.net/video/CvRAqR2pAgw/видео.html. Educate yourself.
@@ibravn1 Fascinating..... My 35 years with the FDIC. Thousands of co-workers..... And no one knew but you, all along. Undergrad and Grad program(s). All the banks I went to. My God. None of them knew either. All the conferences. The Dog & Pony show in front of Congress (I did one in 2011). None of us knew.... Thank you ever so much for enlightening me. I'll march right into the CEO's office tomorrow morning. if he won't listen, I'll go straight to my Board of Directors !!!! This is new, it's fresh, it's Exciting !!!! We'll all be billionaires !!!!!! -As the camera slowly pans to me being thrown into a mental asylum.... Stop the BS, son. You said that banks can create money. Tell me how ! -And no, I don't mean the Central Bank of a given country (e.g., the Bank of England or our Federal Reserve).
@@ibravn1 It's all just so exciting ! I can create money !!!!!!!!!!!!! For myself, for others, for everyone. I mean, even if I create money for others; they'll surely pay me a bit of vig for doing so. This is all just absolutely fascinating. And you say to educate myself. I thought my undergrad in Acctng, Master's in Finance..... CFA Charterholder, CPA. I thought these constituted an education. I mean, these were top tier schools I went to. Meaning Top 25 in the USA for the given field of endeavor. And who knew.... All along, I could have learned vastly more by just cruising around on RUclips for an hour or two. All those wasted years in school. All those decades of experience. All absolutely SHATTERED by the utter brilliance I learned by reading a few paragraphs of your spiel. It is utterly AMAZING.
Well, no, banks do. With a little help from borrowers. Only when someone is borrowing does a bank create money. Labor is unimportant in that regard. You may, with Marx, argue that labor creates value, but value does not create money. Care work is of high value but often carries no monetary reward.
@@ibravn1 My offer still stands. I am a CFO at a bank. Show me how to make $1 Billion a day and half of it is yours ! Heck, let's shoot for $10 Billion a day, you get half !!!!! It's an INCREDIBLE opportunity for you. If what you say is true, which it's not....
@@ibravn1 #1. Marx was a lazy asshole that lived on other people so I don't give a damn about his philosophy. #2. Try borrowing any thing from a bank if you live on government assistance. It ain't gonna happen. #3 You must prove you have the ability to pay what you borrowed from the bank, that requires some kind of labor whether physical or mental. #4 THERE IS NO MONEY... #5 If you did not receive gold or silver from the bank then you received fiat currency which is not MONEY it is promissory notes. #6 If you received Central Bank promissory notes that lets you know your Country is bancrupt. #7 If you want to borrow from a bank you have to sign a promissory note, since you are the one laboring to pay the bank what they say you owe then obviously labor creates the money.
Banks DO NOT CREATE MONEY!!!! What they do is monetize the promissory note because once you sign that promissory note it becomes a negotiable instrument that the bank turns into money ( Exactly how I do not know ) In other words the bank lends you YOUR OWN money or credit ( whatever you want to call it) and then charges you interest for lending you your own money!!!
Well, yes, only when you sign the loan document will the bank lend you money, that's true. But that loan document is precisely NOT money, nor is your promise, stated or written, to pay. You can take neither to a bike shop and purchase a bike (unless you entered a different loan agreement with the shop, but that doesn't involve money creation, only deferred payment). Specifically, a loan document is NOT a negotiable instrument: Negotiable means transferable, in the sense that bearer (the next holder) can use it to pay. Money is a generally accepted means of payment (ultimately: one you can pay your taxes with), and this is exactly what a bank will produce or create for you: Money, nowadays in the form of digits in your bank account. Incidentally, "monetizing" means creating money out of that which may be valuable (or deemed so, maybe foolishly), but is not yet money. Also, if you actually want to know how banks turn your promise to pay into money, go to my RUclips video, "Exactly How Do Banks Create Money?" ruclips.net/video/eM1S6RiIJis/видео.html
@@ibravn1 Yes of course you cannot take a promissory note to a bike shop as per your example. But isn't a promissory note a negotiable instrument like a stock is for example which you also cannot take to a bike shop? If I am misraken then I do have 2 questions.What exactly is a negotiable instrument. 2, When Banks "create" money please do not tell me that they create it out of thin air something has to back it. As we all know in the past that backing value was gold and silver. So what is that backing value today? Oil? for example. Also let's play Devil's advocate. Let's say Banks do create money out of nothing with no backing value. Isn't that fraudulent in some way?
@@jimmym2486 Well, stocks are securities, not negotiable instruments. So a stock is as "not-very-negotiable" as your old car: Somebody has to buy it with money first. A dollar bill is negotiable, the next guy can use it pronto, no questions asked. Check Wiki. As to the backing: The whole banking system, including filled-up reserve accounts at the central bank, is what underlies or "backs" your loan. Go see my RUclips video referenced above. But there is no "backing" per se for every loan granted, that's the whole point. This is what banks do: Create money where there was none (or very little) before. This was the function of credit in the olden days: Extend credit to a producer, so he can purchase raw materials, pay his workers, sell the goods, repay the credit and score a profit. Today, credit in the form of digits in bank accounts are no longer airy stuff; it is real money, what you pay your taxes with. This is the power of the banking system: It has solidified flimsy account digits so that now they are the coin of the realm, real money. Cash is residual money, what you buy a cup of coffee with or give to a homeless person. Your car and your home? You buy them with real money, the numbers in your bank account. Courtesy of the commercial banking system. Banks created 97% of the money in circulation today. Fraudulent? For sure. The whole system stinks to high heaven. But try to take it to the courts, what can they do? Some of us are working hard to change it. But don't wait up nights.
Ok I will have to surrender my point at least for now. But I may or may not reopen this in the future. because I have a book somewhere in my basement ( I have no clue where) called Modern Money Mechanics and if and when I do find it I may have more questions . I am also going to do some research and look up US Codes pertaining to Negotiable Instruments. Securities and etc
@@ibravn1 Hi, I have not had time to look for it. But this little video short 2 and a half minute video I came across not only shows the act part that I would have shown from Modern Momey Mechanics and also I am reminded about a court case that I forgot called the Credit River Decision (Now I have heard that this case was overtuned and I have also heard that also stands in Common Law Court this is also something I need to do research on) I do agree with you that you cannot take the banks to court. They are too big and of course they are not going to admit to their fraudulent ways, But that does not mean that there cannot be small victories. Years ago someone I watched who I can't remember said that financial institutions commit fraud every day and get away with it because of our General Ignorance but if we can learn some Common Law , they can be fined under the FDCPA, Also he said if you ever do take banks to court the goal is NOT to win but instead to settle. I think maybe one thing we can agree on whether you think the promissory note becomes valuable once it is signed by the borrower (aka the REAL original creditor) whether that be okay not a negotiable instrument or a security that is traded like a stock etc or what you say, The fact our banking system as you say is fraudulent and evil!! Here is the video ruclips.net/video/xSqi1N_RrUs/видео.htmlsi=PMg9lj5nPq2ad4Cq
Incorrect. Banks don't create currency... You do with your signature. But you give them the rights to control it and "lend" your own money back to you with interest by how you sign the paperwork
Well, you can write your signature all you want and it won't create you any money, unless you do it at the bottom of a loan document that the bank has agreed to "purchase" from you with the dollar amount "lent." So, sure, the bank creates money for a particular customer, the borrower, as I explain in the video, only when this borrower has negotiated and signed a loan document with the bank. Without the bank no money creation, as I explain.
Banks issue bonds to acquire capital for their equity, typically. Banks cannot create money for their own use. They create it for borrowers, in the process of lending. When banks expand their equity (capital), say, by issuing bonds, they are enabled to lend more, as capital requirements is one of the multiple factors that limit banks' lending (credit creation, money creation, same-same).
Actually no, banks do not create money. They create deposit liabilities (bank debt), denominated in dollars, that people sign a contract agreeing to pay. Because the deposit liability is denominated in dollars, people mistakenly refer to it as dollars or money. There is nothing in fact or law that makes bank deposit liabilities money, that notion is just an ingrained figment of the imagination born from a perception based theoritical fiction.
Well, that may be so in your received dogma, but reality shows that bank deposits are being counted as money everywhere in modern economies, even as taxes, which I suppose is the ultimate test of moneyness. In my native Denmark you cannot pay your taxes in cash anymore; it has to be done by bank transfer. That transforms bank credits into money. "When the facts change, I change my mind. What do you do, Sir?"
Oh nice, "received dogma" because insults are always an affective argument, right? What I've stated is a product of logical analsys, critical thinking and facts in law, a process that you appear to be totally unfamilliar with. You want to talk about "received dogma"? How about you basing your entire argument on a 170 year old perception based theoritical fiction. Now that's "received dogma".
In spite of your "received dogma" and the ongoing gaslighting to the contrary, money is still cash by US law 31 USC 5103, which designates 4 paper notes a US legal tender money. 3 of those notes are no longer produced or in circulation leaving 1, Federal Reserve Notes (FRNs). FRNs, along with US minted coin, constitutes the official legal tender currency of the United States. If it's not FRNs and US coin, it is not US money. There is no other money in use within the US that is designated or recognized as such in US law. Federal Reserve notes are a debt free US legal tender money/currency produced and initially owned by the US government. It is issued through the Federal Reserve banking system for the express purpose of supplying depositor demand for the monetary medium wereupon, it becomes the property of the people in legal possession of the notes. It is against the law (12 USC 411) for the Federal Reserve to use US legal tender notes in any of its market operations or for any other purpose whatsoever. Federal Reserve notes represent a first lien on all the assets of the Federal Reserve banks and on the collateral specifically held against them. As I stated eariler, Bank deposit accounts are liabilities of the bank because they represent the account holder's legal claim to legal tender cash money from the bank, and the banks are required by law to render that cash money to the account holder upon their demand. They (deposit accounts) are bank debt, and there is nothing in fact or law that alters that status. People do not spend their account balances, they assume to spend the cash money the account balence represents. This assumption/perception is reinforced with a constant barrage of visual propaganda in all aspects of media in the form of cash notes being used in verious stages of economic activities to include the activities of the US government, Federal Reserve, the banks and even Wall Street. Now, if you wish to continue to insist that bank debt to account holders is the account holder's money, even though it is not a medium of exchange or a unit of account, does not circulate in the economy, has no denominations of its own, or recognized as money in any US law so it is not a product of sovereign authority, then you're obliged to inform people of who this "money" belongs to and were they derive the authority to create it. *The problem is that your presentation is the product of a fictional abstract rendition of how the system actually works.
Any government that refuses to accept it own currency in payment of taxes, is up to something very shady that's not going to benefit the citizens so, just be aware.
@@dwaindibley4137 Oh, I agree, the government and banks are up to something very shady here, and I wish someone would hold them accountable. However, as the system works now, you can actually pay your taxes with your credit balances. I give you that your account may be more stringent and legally correct, and logival, too, but that's not how the system works. If everybody agreed with you, we wouldn't have had the 2007-08 crisis, because no one would have accepted credit balances in payment of anything. But the banks' current ability to create money through lending is exactly what blows up fixed assets bubbles, like in 2007-08. So in empirical fact, bank credit IS accepted as money all over the place, even though is it wrong ("received dogma"). The new reality is that bank credits function as money and is accepted as such by everybody. Why would that be if everybody agreed with your definitions?
Quick question do banks have to destroy the money they lend after the loan has been repaid if yes then why can't banks simply cash in 100% of the money exampl: I borrow 1M from the bank I go do my business and repay my loans does the bank now has 1M cash that they can keep
It's been TOO long of a journey to get to this video. This should have a BILLION views.
Too long!!!!
Fascinating picture of the clearing clerks going through their process of depositing cheques.
I appreciate that you went through those three historic kinds of banking, warehouse, fractional reserve, credit creation etc.
Who gave this a thumb down? Honestly, how can you downgrade this? It's eye opening and educational! Awesome presentation! Thx
Probably a banker under their veil.....
6 bankers ;)
How do they do this? What forms ? Against our berth bond cusip# ? Dba...in all Caps. Business, name. As you ?
JP MORGAN
Very good, essentially summarizes Werner's thoughts.
I’ve come across this information before but your video and explanation made me better comprehend this fraud/deception fuckery so much easier. Thankyou so much 🙏🏻
Ha
Here i find myself back here after a year of being stuck down this freakshow bunny hole. Mind is blown on the daily that this entire illusion is based upon a believe it exists. Money of account (deposit accounts guaranteed by the government, otherwise backed by nothing)
Still challenging my mortgage after 2 years & no sign of me budging one bit.
Show me the ledger !!!!
Fractional reserve banking did occur during the period where currencies were back by gold. This ceased to operate when the currencies became fully fiat.
No
@@jimmym2486😅...
Very beautiful research! This, literally is thousands of years in the making.
Reallly? Go read The Creature from Jekyll Island , Secrets of
the Federal Reserve,
Modern Money Mechanics
Excellent work. Thank you for posting.
Michael Hudson economist is correct on the jubilee debt repudiation but he is not informing the viewers that there is not lending and borrowing in modern fractional reserve system, and all debt are a fraud of epic proportion.
Banks do not create money, the customer's promissory note creates the new amount of money.
When anyone needs what they believe is a loan they are actually lending the bank money, the bank coverts the customer's promissory note into computer digits. if the banks are authorized by the constitution to be in the private then they can only charge service fees not interest chargers. In the USA Canada the banks cannot be in the private. Banks should never be private they must be owned 100% by all the people as non profit. In Germany 70% of all banks are non-profit. Interest charges destroy the economy and the nation.
Oh my gosh
Did you write a book on securitisation in Australia???
Lady you are so famous it’s not even funny ❤️
@@onewiselady6412 no, my book is not available yet,
Good video Not sure how to fix but great background..
Stop lendong to banks and instrad reduce debt at the HM treasury ..the Crown is the franchisor of all nations that run the debt syatem ...
So become credotor to the Crown and set up a debt reduction system ..instead of creditor to a debt system..which is a debt franchose afminsotrative unit for the Crown ..
Great talk. I only wished you would explain how are the banks limited to making new credits. IIUC they are limited by capital requirements, right?
Yes, that's one limitation. See more in another presentation of mine: "Exactly How Do Banks Create Money?", at 17:00 ruclips.net/video/eM1S6RiIJis/видео.html
Some of those limitations:
1. The customer's creditworthiness. Since banks have to pay up themselves when loans go bad, they are loath to lend to dubious customers. At least in normal times. When markets are red hot, all banks need to lend more and thus loosen their credit criteria.
2. National regulators may have imposed more rules on banks' lending, like: "Only 50% of your portfolio must be to your ten biggest customers" or "You can't expand your lending more than 30% per year".
3. Some countries may have reserve requirements (that is, a minimum amount in the reserve accounts with the central bank), but that's not so common any more.
Back in the GFC Homeowners taking 2nd mortgages were playing a dangerous game
Im begining to think that making our own 'currency' is the . .the solution
Yes, since technically we already are. But how do we gain control is the real conundrum
ruclips.net/video/iiKr-i022mY/видео.html The Progressive Growth of the Money Supply Principle (year 2013) tells us the exact quantity of new money the economy needs to works correctly, driving us to the Wicksell interest rate or natural interest. This principle will force central banks to change monetary policy.
Bitcoin
@@junglejarred6366 हो गई और मैं फोतू
@@देशराजझांभैरा I'm not sure you noticed but I don't communicate in whatever this is
Thank you for this information
Great presentation. Thank you
Excellent video, thank you
When banks lend, they materialize "Credit" out of thin air, not money, in the USA we haven't had real money since 1967 when they took the silver away.
When the government spends into the economy, money is created.
The government is the only issuer of money.
Banks create money out of credit. Once the loan is paid back the credit money doesn’t exist. There is no net asset created from bank lending.
1933
@@JohnnyJr396 it doesn't cancel out because of interest rates. Every dollar created through credit has to be paid back with interest, and where is the interest coming from?
@@JohnnyJr396that is just very stupid from you
I tried telling people this over 12 yrs ago I was laughed at 🤷♀️
You are still being laughed at.
@@ButcherBird-FW190Dwhy cos I’m right 😬🤪
@@nigelcarter7740 You are neither right nor left, those are directions in reference to a central plane. Now as to your being correct or incorrect; well, you know my perspective. You poor thing. You have my pity.
@@ButcherBird-FW190Dbanks still don’t lend money 😅
@@nigelcarter7740 Oh, I know, Pumpkin, I know. And as I'm getting ready to head off to work here in an hour or so.... As CFO of a bank, that is.... I'll make certain to let my CEO and board of directors know all about it. We'll be discussing Q3-2024 performance on Wednesday; and I'm preparing all the packs today. I'm make 100% certain to tell them all about this website. Oh, the laughter. The laughter. Normally I just stick with the dumbest Sov-Cit letter/story we received in our Collections Dept; but this is just pure, sheer Comedy Gold. You will be the laughingstock of our board meeting !
It is important to stress when people argue against the fact that banks don't lend out their customers deposits that they can't because the deposit is a debt they owe the customer and nobody could argue that anyone could lend out their debts.
That is a good point. I should include it. Of course, one has to explain in the first place that people's money in the bank are really debts owed them by the bank. In this presentation I don't dwell on that, but that is important. And the corollary, as you put it, that debts can't be lent - so true.
Thank you! Now, how does one operate with honor within such a dishonorable system?
You hold your nose while you struggle to change the system. Do you know "Positive Money"? Find them online and support them!
@@ibravn1
Hold up hand instead.. And use the labour credit to reduce debt at the US treasury..
This reduces US obligatiins...by ur hand..and this acknowledges ur surety rights over the US treasury.
They will thus set off our bills or any charge in our name...
Google : surety rights
We already do this at natiinal banks.. The debit card is a record of our reduction of debt owed to us by the bank... In return the bank discharges a bill in ur name..
U as international sovereign can do this at the US treasury.. I have emailed the treasurer.. And they accept anyones currency ..
The Crown treasurer in london also gives that choice..they haveban example of a lady whondonated her house at the Crown treasury to reduce its debt.. in return for the maintenence of the property and living for free at her previous house
12 usc 411
@@Wes_5kyph1 thanks but i decided to leave that stupid place and set up an off grid compound in the jungle
@@junglejarred6366 good luck. but I dont think think you can hide from it for long...
Thank you for taking time and creating this video for us mate
As I can understand fractional reserve theory and credit creation theory are both just ways that a bank creates credit money today, fractional theory assumes that bank A always needs reserves to cover there loans as if the borrower would use the loan to buy from someone at bank B farfar away (probaly at another state) and by this bank B would acept only centralbank money (becuase those bank costumers dont buy much from eachother), by this bank A creates credit noney wich the original bank A depositor could use as money as a type of compensation.
And credit creation theory is the other way banks create credit money wich it assumes that borrowers will most likely use there money in the same geographical area and those credit money created by banks will be acepted by those banks in this area and only a small amount of central bank money will be transfered after neting , so is it correct to say that those 2 are just 2 ways a bank today operates and creates credit money? Of course on the creit creation theory it creates much more as I can see!
And i saw yesterday 2 organisations one called ourmoney the other positivemoney they had a similar probaly the same idea for a new banking system, if you have knowledge about this do you know is that proposal of them similar to any of those 3 banking theories or it is a 4th and diferent system?
Thanks for your question; though I'm not sure I quite follow you. May I clarify that the banking system works as it works, and it works in one way today and somewhat differently 400 years ago and in non-Western countries 100 years ago and so on. That's one thing. Then there are different understandings or interpretations or THEORIES about how the system works; how to explain and render comprehensible what is going on in the system? That's the other thing.
You seem to mix up the two things. Banks operate as they do; what is at stake in my video is how we EXPLAIN what they do. Today, in modern economies, banks all do the same. But do we explain that as "Banks take one customer's deposits and lend them to someone else" (says the intermediation theory) or as "Banks retain 10% of all deposits as a fractional reserve and on-lend the 90% to other customers" (says the fractional reserve theory) or as "Banks create money during lending by writing the relevant digits into the borrower's deposit account and opening a loan account in the borrower's name and entering corresponding digits there, which record the borrower's debt to the bank" (says the credit creation theory).
I hope that clears up something. If not, ask again, my friend.
I know Positive Money, great organization. I am very much inspired by their work. Champions of the credit creation theory (although they don't necessarily call it that; the term is due to Richard A. Werner). Highly recommended. Excellent web site.
Our Money I didn't know; thanks for the tip. They are, however, based on a somewhat competing theory, as you suggest, called Modern Monetary Theory (MMT). It argues that the government creates money when it spends money, and taxes are a way of deleting that money again. MMT agrees that banks create money, but (unlike Positive Money, and myself) sees no major problem with that.
@@ibravn1 what i wanted to say is the moneymultiplier model that is used to describe fractional reserve of banking that explains how bank money is created is very simple one, and it always assumes that when a borrower takes a loan from bank A and buys something from someone at bank B , bank A always has to transfer reserves to bank B, and by this only a small amount of bank money is created for depositors of bank A to use to buy as a compensation, but banks rarely have to transfer reserves becuase most loans are used on same geographical area from banks of the same area or state and this is why banks accept eachothers bank money,and can create more bank money than on moneymultiplier model, so what i wanted to say both moneymultiplier explanation and credit creation theory are part of the same banking system it just depends how much money will be created, based on where will the borrower buy from, and the main diference of fractional reserve theory and credit creation theory explanation is that the first one asumes that a bank cant create bank money without having reserves first, and second one assumes that banks create money forst and then borrow reserves somewhere to netout with other banks, am i correct?
@@ibravn1 as i can understand PositiveMoney proposal is somehow like the financial intermidation theory, both theories say that banks could not create bank money and they must only have reserves to be able to lend, only that PositiveMoneys proposal is that banks cant even lend the demand deposits only locked deposits that are locked for a long time and cant create money so this is the diference.
Both systems would be more fair and morally correct but as i can see the circulation of money would be alot more slower for example if a billionare dosent want to spend or buy anything that money will just stay there and banks cant keep that money circulating.
Hello! Great presentation! I have two questions though. First of all, when we draw money with our debit card from our bank account, where does this cash come from? Form the capital of the bank, from the central bank reserves the commercial banks have or from their settlements accounts, the ones you mentioned in your other video "Exactly how do banks create money"? Secondly, if I got it right, the western banks in the past used a combination of all three theories of lending/banking systems but relied primarily in the third type? And all these mean that every time a customer opens a bank account, the bank actually owes them the money that they deposit or not? Because you said in a previous comment that people's money in the bank are in fact money owed them by the bank. Thank you!
Very good questions! Before I answer, remember this very important distinction: CASH (notes and coin) is one thing, ACCOUNT MONEY is another. They are interchangeable (the bank will give you one for the other), but they are not the same.
Your first question: "...when we draw money with our debit card from our bank account, where does this cash come from? Form the capital of the bank, from the central bank reserves the commercial banks have or from their settlements accounts..."
Answer: Neither. All those three that you mention are account money, but you are asking about cash. When you get a $100 bill from an ATM or from a bank teller, it comes from the bank vault. It is cash they have "lying around" (well accounted for, of course). However, to track that they gave the bill to you, they deduct a corresponding amount ($100) from your bank account. Okay? If you really meant to ask how you can transfer money from your account to other people's accounts, in payment, ask again.
Your second question: "..western banks in the past used a combination of all three theories of lending/banking systems but relied primarily in the third type?"
My answer: Well, that 's sort of a scientific question. The bankers at the time generally had no idea how the money and banking system could be understood whole cloth. Everyone just sat in their corner and tried to score a buck. The three theories Werner identifies are helicopter abstractions ("scientific" theories) that I consider more or less relevant to different time periods, as I detail in this paper: www.tandfonline.com/doi/full/10.1080/07360932.2019.1668286 . Since most money today is account money, the credit creation theory works best today.
Third question: "...all these mean that every time a customer opens a bank account, the bank actually owes them the money that they deposit or not?"
My answer: When you open an account and deposit $500 in cash, the bank takes that cash, puts it in vault (or rather, in the register at the till) and you never see that particular $500 bill again. However, to track that you actually gave the bank that large bill, the bank clerk records the amount in your account by adding it to zero. Now there is $500 in your account. This is money the bank owes you. It's called a liability, the bank's liability to you. Consider it an exchange: You gave the bank your bill, it gives you a promise to pay you the same amount when you ask for it (withdraw it).
When you want the $500 in cash, the bank has to give it to you, and they will. If they can. Your bank may have gone bust five minutes before you entered the front door to withdraw your cash, and you won't get it. This is what happened in the US during the 1929-33 crisis.
I hope this is all clear. If not, let me know.
@@ibravn1 Thank you for your very helpful answers! Just one more thing I have to ask about your answer to my first question. In another economics video which describes how central banks "control" the total money supply and price (interest rate) it is said that every commercial bank has a certain type of "money", the central bank reserves. These reserves are needed from commecial banks for two things:
1) To make transactions with other banks
2) To exchange them with cash that is printed from the central bank.
If these are true, then there is also another way for commercial banks to get coins and notes, except from the deposits of their customers that end up in the banks' vaults, right? And lastly, the video described that commercial banks get these reserves through borrowing from the central banks, borrowing other commercial ones' reserves or creating more loans, hence money. Because banks always borrow reserves from central banks and they lend them with a particular interest rate each time, this is ultimately the mechanism that controls the supply and price of money in the economy, from the perspective of the central ones. As the interest rate of the latter influences the interest rates of loans of commercial banks that give to clients. Are these all true or the video wasn't right? Thank you again!
@@tomastsiatsios3399 Your first point, summarized by you: "there is also another way for commercial banks to get coins and notes..". Correct. Above, I omitted that for brevity. If a bank is short on cash it buys a couple hundred thousand more in small bills/notes from the central bank (the CB). The bank pays the CB by letting the CB subtract that amount from the bank's reserve account with the CB. So, you are right. The amount of cash (notes and coins) in circulation in most countries has probably increased 100-fold over the past hundred years, and it has all been by purchased by the banks by that method. The CB prints this paper money and stamps the coins.
As to your second question, you really should watch my other video, "Exactly how do banks create money?": ruclips.net/video/eM1S6RiIJis/видео.html. The account you give is the standard one, and it is half-way correct, only banks do not lend reserves. Google this short paper from Standard and Poor's: "Repeat after me: Banks cannot (and do not) lend out reserves." It clears up the rampant confusion here.
Some CB's want to maintain the fiction that they control the money supply (they don't, banks create money as they please). So, they support the erroneous story you reproduce; that the interest rate on reserves dictate/influence the interest rate banks charge on their customer loans, hence spurs/slows economic activity. Richard A. Werner has shown in published research that this link barely exists. If anything, the causality between CB interest rates and economic activity is backwards and the association is positive, not negative. In any case, banks lend (and thus create money and thus stimulate economic activity) largely as they see fit, and CB's follow suit. A disgrace, but that's pretty much the picture.
@@ibravn1 Hello again! I've already seen your other video and it was very thorough!
I understand what you say that the CB's story is pure fiction. I've thought it myself too. Still, why do central banks support this myth? And not only these but also various economists and academics? I get that, as you argue in your videos, many economists do not know how commercial banks really work and produce money out of nothing but how can they not understand that the interest rates of CBs don't matter in the real economy? Why many financial newspapers inform and foresee how the economy will proceed every time the CB announces an increase or decrease of its interest rates? Is it plain ignorance? Or just a theory without proof just to support a view of how the banking system functions?
All in all, if what you say about CB's interest rates is true, then they are just like the interest rates the commercial banks impose on their customers and they serve the same purpose. The only difference is that these interest rates come from the CB and and are imposed only on commercial ones.
Thank you!
The Intermediary Theory was developed because in 1933 Glass Steagal was enacted which separated commercial bank money creation from finance establishments.
It was recognized that bank credit creation pumped up the stock market.
Interesting. But I'm pretty sure that the intermediation (intermediary? Never heard that term before) theory is older than that. Do you have a reference?
Also, I've never heard commercial bank money creation mentioned as motivating the Glass-Stegall Act. I rather think that what motivated Glass-Steagall was the erroneous intermediation theory. They believed (or argued) that large banks should not be able to invest or speculate with ordinary customers' money, a notion taken straight out of the intermediation theory.
In reality, when banks buy securities, etc. (that is, invest/speculate), they create money, and if they need liquidity (digits in their reserve accounts with the central bank), they borrow it from other banks, the so-called overnight loans, at very low interest.
@@ibravn1 yes, reality versus the general view.
Henry Ford said if the public knew how banks operate there would be a revolution.
Credit creation.
That is the key to so many things!
The eight hundred and fifty percent margin lending pumping up the stock market in the Twenties did not come from savings.
Just look at how the cat was let out of the bag regarding SVB!
Customer deposits were parked in long term instruments, not "lent" out!
@@ibravn1 I have read the hearing records from the Pecora investigation and it is true credit creation is not mentioned but again, reality counts, it is credit creation that is dangerous and the entire scenario caused a tremendous upheaval called the "New Deal"
Far more profound than the Japanese crisis of the Nineties that Professor Werner speaks of in the "Princes of the Yen"
@@ibravn1 also I must add that your video is excellent, thank you!
@@jonswanson7766 I'm with you!
Question: do we destruct more money than created in the first place when we make repayment of the loan + interest.
BTW great presentation !
What's destroyed (or, rather, retired or extinguished) is only the money that was created as a loan, that is, your repayment. Interest is money that goes from you to the bank, which spends it on salaries, computers, bonuses and dividends to its shareholders. So, interest stays in circulation; the money involved is not retired.
History question: Everything you pointed out in the presentation makes me wonder, was all this legitimised by the kings (during the early days of banking) to fund the wars and conquests.
@@shouryasharma4150 Absolutely. Kings were in control of coin (cf The Royal Mint), but bank notes and other forms of amply supplied paper money were invented by merchants (and goldsmiths) who, in that process, turned into bankers. So, courts turned to bankers to fund wars and stuff, not really knowing where bankers got all that paper (or account) money from.
Bank don't lend money. PERIOD.
Brilliant.
Good video
Question: What are deposits used for then? Like if I deposit 10$ at a bank. And how do reserves work and why do banks take deposits at all. In practice banks lend out a lot less than their deposits.
May I refer you to this video I just made? "Exactly how do banks create money?" ruclips.net/video/eM1S6RiIJis/видео.html. There I explain reserves, payments, loans and money creation.
But to answer your question, banks take deposits from customers as a service to them, and so that the customers can make payments by book transfer (and electronically, today).
The banks' reserves are the medium through payments (money transfers) are made, and most deposits. This I explain in the other video.
@@ibravn1referencing the recent banking problem experienced by SVB it was said that money that was put in the bank by various customers including businesses were used to purchase long term instruments such as thirty year T-bills.
The liquidity of these were hampered by the rise in interest rates because why would anyone buy two percent bonds when current offers of bonds were much higher.
The real issue is the cat was let out of the bag.
Customer placement of funds into banks were not lent out as loans.
They were parked in various instruments to make money.
Lesson, keep money entrusted to the bank liquid!
Notice I don't use the word deposit, legally no such thing.
Banks lend out more than their deposits. That is how they 'create money'. Fractional Reserve Banking.
TLDR: you cant create assets out of existing liabilities, and deposits are liabilities
But when someone open a deposit account, letsay 10 dollars, doesn't the bank also add 10 dollars at the asset side of balance sheet beside adding 10 dollar at the liabilities side of balance sheet.
Sure. Opening an account is equivalent to making a payment (into your new account), and this doesn't create money. Only lending does.
@@ibravn1 Another question regarding money creation by the bank.
Let say there's a bank that has just opened. This bank has nothing in its assets, liabilities, and equities side of its balance sheet. Let say the government doesn't impose any rule regarding bannking. According to Credit creation theory, If a person walk to this bank and ask for $10 loan, the bank will just put $10 on both assets and liabilities side of its balance sheet. Given that this person always do cashless transaction and no one will open a deposita account until this person pay back his loan, can the bank keep operating?
@@mbrp5107 That's a little strange. If no one else has an account, with whom will this person transact? What point are you getting at? What's your interest here? For one thing, the bank needs money in its settlement account at the central bank, so that its customers (like this borrower) can make payments to customers of other banks.
@@ibravn1 Sorry for the silly question. I'm just trying to understand how credit creation theory works. I still don't understand if bank can create credit by giving loan, then what are limiting factors on number of loan issued by banks? It seems the only thing limiting them are government regulation. I'm trying to find natural limiting factors.
Because it's not a risk free iou. They don't want to create I o us to someone who won't make that money realized.
would it be possible to have the powerpoint presentation sent to me?
I'll e-mail you a pdf if you ask me: ravn@dpu.dk
@@ibravn1 thank you so much... appreciate it
I didn't totally understand everything in this video. If they can create "money" out of thin air and get interest from it, what's to stop them from loaning to everybody? Secondly, I didn't fully understand the part about clearing. If they don't actually have any cash, when they make a loan to someone and that person tries to withdraw in cash the amount of the loan it would ruin the bank. Third, why would banks even need deposits since according to the 3rd money creation theory they don't actually need any deposits from customers because they aren't loaning out money from those deposits anyway.
They create IOUs. If you default they will be liable for the loan. That’s because banks can’t really create money only the fed government can.
The loan when created , creates credit money. When you pay the loan back , that credit money doesn’t exist anymore. The bank made a profit by the interest you paid.
Banks do not create dollars floating around in the economy.
Many things stop them from lending, your credit worthiness, how much debt you’re in etc
The biggest confusion when people learn this is the difference between money and currency
Quick question do banks have to destroy the money they lend after the loan has been repaid if yes then why can't banks simply cash in 100% of the money exampl: I borrow 1M from the bank I go do my business and repay my loans does the bank now has 1M cash that they can keep
Banks cannot loan money because money is a fiction
@@aiothedat3102 When you repay a 1M loan to the bank, you don't pay cash, remember. It's all account money, bank money, digits in accounts. You repay a loan by transferring 1M from your credit account to your loan account (your loan account was where the debt arising from the your loan was recorded when you took the loan originally; recorded as minus 1M). Now your credit account is less 1M, and since the money supply in your country is largely made up by the balances in everybody's bank accounts, that sum is now 1M smaller = money has been deleted or destroyed from the total economy.
Meanwhile, at the bank, your loan account goes from minus 1M to zero; you're debt-free, and the bank has 1M in assets less. The bank's balance has decreased. As per your question, there's no 1M that the bank can "keep". Money is created out of thin air (during lending) and vanishes into thin air again (during repayment). That's just how banks work.
Banks must keep deposits in order to pay depositors on demand. The percentage kept, is set by the government.
Thanks a lot Ib, well explained! But why can banks then ever go bust?
Well, for one thing, when a borrower doesn't repay his loan, the bank's books are so arranged that the missing repayment is subtracted from its equity. Since a bank's outstanding loans often equals 10 or 20 times its equity, you can see it doesn't take many defaults (bad loans) to wipe out the bank. That's why it's so stingy, at times, really careful about whom it lends to. Unless of course we're in a boom. Then banks want to grab market shares and lend left and right. Until some major borrower (class) can't repay, and the boom-bust rolls on.
@@ibravn1 Thanks for the explanation Ib! I missed the part that missing repayments are subtracted from the banks equity.
When there is a 'run on the bank'. When a greater than expected number of depositors require their money back. Nicely covered in the film, It's a Wonderful Life
I am the CFO at a mid-sized financial firm. I "Created" $10 billion just this morning !!!!! I'll do the same tomorrow, It's Glorious !!!! Laughing, we're all LAUGHING HERE !!!!! IT'S MAGNIFICENT !!!!!!!!!!!
Your "financial firm", is that a bank? Only banks create money. You're in a bank that lent $10Bn this morning? Some mid-sized firm.
@@ibravn1 Yes, it is a bank. And yes, ten-billion this AM alone. That's awfully high, but once I got my mind around the "Secret" you let me in on... We reached out to all our borrowers and offered to loan them huge amounts of money, with the only caveat being that they had to "Gift" us back 50% of the newly created money. My God, they took to it like ducks to water. We loaned out more in four hours than we normally would in 4 weeks. It was utterly magnificent. From Noon to 1pm we decided to cut out the middle man, and loaned $100B to ourselves. Worked like a charm in that while we as the bank did not create money for ourselves, we created $ for the lender; who just happened to be ourselves.
All 9 board members rushed down to eat lunch with myself and the CEO. They were absolutely stunned and amazed at our progress; so the bank loaned me $1T just this afternoon, and I split the newly created money with them. $50B a pop for each of all ten (counting the CEO). I'm elated to share the newly created money with them. I mean, I personally made $500 billion today. Out plan is to do this every single business day going forward. I mean, why not ? We are CREATING MONEY !!!!!!!!!!!
So you application for a loan becomes an asset on the BANKS books means you are the lender.. this is criminal behaviour.
13:39 physical ledgers not just electronic ledger accounts 14:24 all money is account money so why not go Quantum Electronic Infrastructure to Make Business Transactions Exponentially Faster and More Efficient
Not nothing is it created from but from the promisory note asset Also where does the money thats withdrawn by customer come from?
Your krona was deposited to your account from where?
So good. With a zero fractional reserve requirement in the US now, why the heck do we have to pay any interest on bank loans. If banks don’t have to borrow from each other each night to cover this, then the base rate is zero. Maybe there should just be like $50 processing fee or something to do the paperwork on the “loan” and have no interest charge. Also, why need a credit check to see if you’re likely to pay it back? If you don’t, it’s not like the bank is out any money.
Good point about the processing fee--should be sufficient! But banks have to answer for every penny not repaid by a borrower; it gets deducted from their equity. So there's every reason for them to do credit checks. Still, the money they do lend is created out of nothing. But accounting rules are such that this money-on-account (digits written into the borrowers account) has to be retired when repaid. Money is created through lending and disappears when repaid. The system does not allow newly created money just to stay out there in circulation. That would inflate the money supply dramatically every year, causing massive inflation. Debts have to be repaid (but of course, aren't always: If non-repayment is massive, we have a financial crisis).
Gotcha, good point about the inflation risk. I understand that now, thanks for the reply! The 0% interest rate though seems like a good idea though. Just think of all the new jobs and businesses that would be created by the increased buying power of all the folks who would have their mortgage payments cut by a third or more from 0% loans. It would massively grow the economy. I don’t think it would cause much inflation either since output would increase to meet demand.
@@MrMichaeledavis83 Agree! Banks would hate it, tho :)
Interest is there to make money and make it worth their while to make the loan.
Is this more acurate than sayong out of nothing? From an economic viewpoint, commercial banks create private money by transforming an illiquid asset (the borrower’s future ability to repay) into a liquid one (bank deposits); they would quickly be insolvent otherwise. In addition to bank solvency representing a constraint on private money creation, banks require access to liquid reserves in order to be able to engage in money creation.
Well, that’s the traditional banker’s and economist’s circumlocution, the notion of maturity transformation: A bank transforms a customer’s promise to (re)pay a loan over the next twenty years (a long maturity) into money now (a short maturity).
That’s one way of explaining (away) what banks do when they lend. But notice that people who give you this spiel never, never, EVER as much as intimate that banks creates money in this process.
The maturity transformation explanation is a smoke screen that obscures the fact of money creation by banks.
Bankers and their lackeys, neo-classical economists, will never let on that the real game is: banks have illegitimately and under the radar, over the past couple of centuries, captured the money-creation privilege that so obviously belongs to the community, to the population, or its representative, the central bank, which has been asleep at the wheel.
Besides, who’s saying that money is created out of nothing? There needs to be banks, loan applications, bank officers accepting them, loan documents, computers systems running the accounts and the digits in them, etc., etc.
The point is that in the bank lending process, money is created, new money, money that wasn’t there before but now has been brought into existence.
When a baby is born, is that just a dead guy that has been “intermediated” into a new body? No, the baby was created afresh, it’s not recycled. But of course it was not created out of nothing. We need intercourse, conception, pregnancy, birth etc., etc.
the banker is a securities intermediary?
No. A bank does not intermediate funds (or securities) between savers and borrowers. It creates money by extending a "loan" that takes the shape of a "deposit" entered into the borrower's bank account. This "deposit" represents the bank's promise to pay the borrower this amount, this payment normally happening in the form of a transfer to another customer's account.
When receiving the loan, the borrower signs a promise to pay the bank the amount loaned plus interest. This is the loan document. So, the borrower buys a promise to pay (the bank's promise) using his promise to repay the bank. In this sense, two promises to pay, two IOUs, two promissory notes, which you may call securities, are traded by the bank. These "securities" are created by the bank, with the collaboration of the borrower.
This is how Modern Money Theory ( MMT ) starts out. Pointing out how exactly how the system works is the first step in fixing it.
As of now, 622 thumbs up, 🥴Are folks truly not interested ?
Appreciated. Though this is strictly not an intro to MMT. The MMT folks would agree with my presentation, but they have no beef with the banks, as I understand MMT. Banks can go on printing money as long as we realize that the government does the same, as it spends. This realization is MMT's major point, not reform of system that lets banks create money. Correct me if I'm wrong.
Borrower draws cash out of his loan account he takes out money From where if not deposited by bank?
A bank doesn't deposit cash into your account. Your account (your "deposits", as they are called, but they are nothing of the kind) is simply a list of numbers, and the last number (the balance) is the amount that the bank currently owes you. If you want some of that money out, in cash, the bank has to give it to you.
As you can ascertain when you walk up to the till, the clerk takes that cash out of a drawer and gives it to you. It is not "cash taken from your account." None of those bills in the till is associated with or belongs to your account. But as the clerk hands you the money, she subtracts that amount from your account. The bank now owes you less than it did before.
Every bank has cash in vault, that is, a suitable amount of dollar bills in a safe, enough to meet customer demand. If it needs cash, it buys some from the central bank, or waits for other customers to deposit it. A bank's cash amounts are peanuts compared to the huge sums of money transferred by book (digits in accounts) every day between accounts in and out of bank. These account digits are the primary tools of the trade, not cash. (In my native Denmark, banks transfer an amount corresponding to 6-7% of the annual GDP every DAY. This money is mainly used for "investments", that is, speculation in securities, stocks and bonds, currency, derivatives etc.)
Getting a loan is allowing the bank to write the corresponding digits into your regular (checking) account (this is the money you can spend) and a corresponding amount, with a minus in front, into a new account, your loan account, which records your debt to the bank (and the interest accruing, as the years pass). Are you with me?
@@ibravn1 You said " If it needs cash, it buys some from the central bank, or waits for other customers to deposit it." Which leads me to ask 2 questions 1)What does it buy the cash from the central bank with? 2)Or if its taking the cash from other customers to give you , how do they replace that cash when its demanded from that customer? ......Thankyou
1. Every (larger) bank has an account with the central bank called a reserve or settlement account. When a bank buys fifty thousand dollars in cash from the central bank and has it shipped over in an armored van, the central bank deducts US$15,000 from that account.
2. A bank doesn't "replace" cash that one customer has given to it, when it gives cash to another customer. Remember, deposited cash is not associated with any account, so there's no "replacing" it. Cash deposited by a customer does not go to a little box in the basement, from whence the clerk picks up the same dollar bill when the customer demands it back. Cash is fungible, as it's called - one ten-dollar bill is as good as any other.
Cash deposited by any customer stays in the drawer at the counter or goes to the common safe in the basement overnight, and it does not have the customer's name on it. The bank acknowledges receipt of a hundred-dollar-bill from a customer by adding that amount, US$100, to the customer's (checking) account. "Thanks for the bill! We're putting it in our safe. Now we owe you a hundred dollars more! Come and cash it when you need it, or ask us to transfer that amount to another person's account in our bank or some other bank. We're at your service!"
That's called a payments system, and banks have been at it for 800 years, perfecting it under the public and academic radars, so few people really understand it today. Check out my explanation of how payments work: ruclips.net/video/eM1S6RiIJis/видео.html, and how banks create money when they lend.
@@ibravn1 thankyou sir for taking time to respond I am new subscriber and look forward to your future content 🙂 i mighy add Artificial inteligence site gave me this if youd like to comment on "The source of the funds for loans can come from various places, including the bank's reserves, other customer deposits, and even funds borrowed from other institutions. It's important to note that banks are required to maintain a certain level of reserves to support their lending activities, based on regulations and monetary policies."
@@ibravn1when bank bus 50,000 from the central bank you say Buys it with what?
Banks Create Trade Credit Via Underwriting But Technically They Dont Create Money In the Sense of Trade Debts As Deferred Revenue
Then why are banks just non profits that make a debit and credit for money creation. Like why then do they charge interest if they are just making an accounting entry
You're asking why don't banks offer their services for free? Well, because they've developed an extremely lucrative business model, that of creating credit, which a minute later becomes money, out of thin air and charging interest on it that has to be paid by the time the lent money must to be repaid.
More appropriately,banks have got the license to create credit.
Fractional reserve banking is a system in which only a fraction of bank deposits are required to be available for withdrawal. Banks only need to keep a specific amount of cash on hand and can create loans from the money you deposit. Fractional reserves work to expand the economy by freeing capital for lending. Today, most economies' financial systems use fractional reserve banking.
Well, in this video I claim that this is not so and argue for an alternative theory of how banking works, Werner's Creation Creation Theory. Have you seen the video?
@@ibravn1 I appreciate that you think it is wrong. Thats why I posted the truth so you can see how it works. That is how it works and has worked for hundreds of years.
It also explains how runs on banks works, when banks don't have enough funds to meet depositors demands. Explained beautifully in the film, Its a Wonderful Life.
I am afraid you are going to have to go back and come up with a new theory.
@@zedeyejoe I yield to your Hollywood-derived evidence
Now my question I with account money can any business credit someone's account
Well, if you have an account with that business, yes. But only if that business is a bank can you use the newly entered credits as money, since only a bank is connected to the clearing and payments system.
So let's say a bank creates some money and puts it in someone's account. What happens if that money is never paid back? I guess interest is supposed to capture not only profit but "risk" of not getting paid back...but if not paid back, what's the actual consequence? What prevents a bank from simply loaning any random person some money, put back in an account, loan more money based on that, etc. and never have it repaid?
The bank has to pay up, out of its own equity, is the short answer. If a borrower defaults on his loan, the bank can no longer list the amount on the assets side of its balance sheet. The corresponding amount that's now missing on the liabilities side has to come from somewhere, and there's only equity to subtract it from (equity is the money the bank owes its shareholders). So equity decreases when a loan is defaulted. This is very painful to the bank (or, rather, its shareholders), and it will go to great lengths to avoid it. Thus it only lends to credit-worthy loan applicants, meaning borrowers that the bank believes will be able to repay the loan.
That's why most modern banks will mainly lend to borrowers with collateral (typically real estate) and not to entrepreneurs and small businesses. In case of default, the bank can always grab the house and sell it, but the entrepreneur who has gone broke has often little of value besides her brains.
@@ibravn1 I see, so it has to do with the fact that although money is created out of thin air, the bank still is required (presumably by the government, as a matter of control and part of the deal for it being able to create money) to have an equivalent asset for it on the books (the fact that someone owes money to the bank is an "asset" to the bank). Is that correct?
If so, it sounds like there is a risk only b/c the bank is financially responsible for that money once it lends it out, due to the way governments require them to do book keeping.
What happens if it's never defaulted but simply not repaid? What types of restrictions are there restrictions to prevent that?
@@cyberjunk2002 Your three paragraphs:
1. Correct. Although it's not called an "equivalent" asset. The amount of the borrower's debt to the bank is simply entered on the assets side of the bank's ledger when the loan is made. It's the borrower's promise to repay. A bank is a machine that allows two parties to enter into debts to each other (the borrower and the bank), and the bank's debt to the borrower (the loan granted) is allowed to circulate in the economy as money, bank money, account money.
2. Precisely.
3. If a borrower does not keep her schedule of repayments, the bank will remind and threaten her and try to recoup the money by various legal means and will eventually give up, writing off the loan, that is, taking the remainder off its books and swallowing the loss, as indicated above. WHEN exactly in this proces this is called a default I'm not sure.
@@ibravn1 thank you! a few more questions based on your last answer:
1. When I asked "What happens if it's never defaulted but simply not repaid?" I was trying to better understand the natural or regulatory restraints on money creation. Here's an example: what if a bank (say, my friend's) "Jiggles some numbers" in my account, increasing it by $10M, but at 0% interest and repaid in a balloon payment in 1000 years (therefore, never defaults). Is there any downside to this for the bank, given that the bank is not actually coughing up any money during the money creation process? Is it purely some form of regulation which prevents this given that they never write it as a loss?
2. If a loan is defaulted, the money is "still out there" an in circulation, meaning that it would still actually cause inflation, yes? I realize that the bank would now have to write it as a loss in its own equity, but equity is not naturally in circulation. I'm trying to better understand the inflationary piece to defaulted, un-repaid loans.
3. Due to inflation, I'm assuming that the asset they have will actually decrease in value, so I assume some amount of interest is needed for banks to at least "break even" (aside from some amount to compensate for risk and some more for some profit)
4. When banks do issue loans, it sounds like in reality they don't limit themselves to existing deposits, but just create the loan then later on can borrow funds from other banks to meet the reserve requirements. is that correct?
Many thanks for your time...this is very enlightening!
Its listed as a deficit. When the loan is repaid, then the deficit is removed. Money out, money in, all balanced. Banks make their money on the interest they charge on the loan (amongst other things).
so it sounds ridiculous as I borrow money from the bank and deposit it in the bank, then the bank becomes owing me money! So actually bank lending money to himself without any real money. But I need to pay the bank interest in extra . Is this a scam then
Well, with the invention of bank money (account money, money-on-account), as distinct from cash (coins, notes), some 200-500 years ago, banking became the scam that is under-the-radar money creation; money creation through lending.
Nowadays, account money has become so pervasive that it IS real money. You buy a house and pay your taxes with account money. It is real. And it is largely created by banks, and very few people realize this. A scam in broad daylight, undergirding capitalism and the modern economy.
People used to barter for goods and services. People were somehow convinced that system was unfair because for example a loaf of bread is not equal to a brand new house. The money system was created as tool for exchange fairly. But people fail to realize they were giving their power up so that the government could control and own everything. Today money is still in demand because people need and want goods and services. People are convinced that the only method for exchanging goods and services is with money. Even kids realize this at a young age and by the time they become teenagers they are looking for a job so that they can acquire things they want and need. The shift from barter to money was never about exchanging fairly because somebody don’t have as much money as you so they cannot get certain things they want or need. Some solutions I can think of are eliminate the dollar for the people that don’t agree with the system. I think it can be done with a lot of people. Once people rise up the current system will fail. If you take a certain percentage of people out of the current system the government will feel it. People have to work together and agree to create a system that’s not based on money. By using federal reserve notes (money) you own nothing.
CHECKBOOK MONEY
Isn´t it only the Central Banks that create mone?. Private Banks get the money from the Central Banks.
That's what "everyone knows", but it's largely wrong. Only cash, which is 4-10% of the money supply in modern economies, is created by central banks. The rest, as I explain in the video, is bank money, account money, digits in bank accounts, and that money is created by banks in the process of lending. Big scam, ongoing for centuries, normalized and hidden from view by everyone except insiders. See also my other video, more detailed: Exactly How Do Banks Create Money? ruclips.net/video/eM1S6RiIJis/видео.html
Money are gold and silver what banks create is currency, everything else he said is true
No gold and silver are assets, just like a bale of hay. Money is a legal tender which is officially used for paying bills or transactions.
In truth, banks do not lend you anything but through the process "lending", the banks only underwrite your credits for your purchase!
This is the kind of stuff that make you want to go march in the streets. Wow why do banks charge interest on loans SMH.
Because they can get away with it; and they can get away with it because we, their customers, think someone has to part with their money and must be compensated for that loss. And, the bank would add, because there are costs associated with running this operation and banks must recoup them somehow.
Banks also destroys the money they created.
Correct. When a loan is repaid, that money is retired (or withdrawn) from the money supply. Money (that is, account money, bank money) is "destroyed." An amount borrowed gets repaid as the borrower subtracts it from his checking account (his deposits) and transfers it to his loan account. It thus disappears from the money supply, the money supply being the sum of deposits in all banks (plus cash in circulation).
@@ibravn1 Except for the interest. You can destroy the principal but not the interest paid.
@@joem0088 Correct. Interest is ("old") money transferred from borrower to bank.
#Bitcoin brought me here🙏🏼🙌🏼💥🔥🚀🌟
The bank I work for is having problems attracting deposits, without paying through the nose, that is. We could us an extra $100M a month. Tell you what...... Show me how we "Create" this $100M... I mean, I was an FDIC Bank Examiner for 35 years; worked all over the U.S. I'm CFO of a good-sized shop right now, and I'd just LOVE to learn how to create money.... Love to. I'll even generously give you half of all the $ we "Create". I mean, why not ? Heck, let's aim for $1B a week. You get HALF ! Deal !?!??!?!?
What your bank needs is not so much deposits as liquidity, that is, "reserves," money in the bank's reserve or settlement account at the central bank. Those reserves are increased whenever money is paid into your bank = "attracting deposits". I explain this in detail in this other, more recent video, "Exactly How Do Banks Create Money?" (ruclips.net/video/eM1S6RiIJis/видео.html). This is where a bank needs money, so that it can make out-of-bank payments for its customers.
Also, banks only create money when extending loans. A bank cannot create money for itself. Check out this explainer from the Bank of England, "Money Creation in the Modern Economy" : ruclips.net/video/CvRAqR2pAgw/видео.html. Educate yourself.
@@ibravn1 Fascinating..... My 35 years with the FDIC. Thousands of co-workers..... And no one knew but you, all along. Undergrad and Grad program(s). All the banks I went to. My God. None of them knew either. All the conferences. The Dog & Pony show in front of Congress (I did one in 2011). None of us knew.... Thank you ever so much for enlightening me. I'll march right into the CEO's office tomorrow morning. if he won't listen, I'll go straight to my Board of Directors !!!! This is new, it's fresh, it's Exciting !!!! We'll all be billionaires !!!!!! -As the camera slowly pans to me being thrown into a mental asylum.... Stop the BS, son. You said that banks can create money. Tell me how ! -And no, I don't mean the Central Bank of a given country (e.g., the Bank of England or our Federal Reserve).
@@ibravn1 It's all just so exciting ! I can create money !!!!!!!!!!!!! For myself, for others, for everyone. I mean, even if I create money for others; they'll surely pay me a bit of vig for doing so. This is all just absolutely fascinating. And you say to educate myself. I thought my undergrad in Acctng, Master's in Finance..... CFA Charterholder, CPA. I thought these constituted an education. I mean, these were top tier schools I went to. Meaning Top 25 in the USA for the given field of endeavor. And who knew.... All along, I could have learned vastly more by just cruising around on RUclips for an hour or two. All those wasted years in school. All those decades of experience. All absolutely SHATTERED by the utter brilliance I learned by reading a few paragraphs of your spiel. It is utterly AMAZING.
@@ibravn1 My offer still stands. Let's create a Billion a week. You get half !!!!! Deal ?
So your a CFO and never read Modern Money Mechanics? 🤔
They dont create it with out you all has to do with the credit application
Labor creates money...
Well, no, banks do. With a little help from borrowers. Only when someone is borrowing does a bank create money. Labor is unimportant in that regard. You may, with Marx, argue that labor creates value, but value does not create money. Care work is of high value but often carries no monetary reward.
@@ibravn1 My offer still stands. I am a CFO at a bank. Show me how to make $1 Billion a day and half of it is yours ! Heck, let's shoot for $10 Billion a day, you get half !!!!! It's an INCREDIBLE opportunity for you. If what you say is true, which it's not....
@@ibravn1
#1. Marx was a lazy asshole that lived on other people so I don't give a damn about his philosophy.
#2. Try borrowing any thing from a bank if you live on government assistance. It ain't gonna happen.
#3 You must prove you have the ability to pay what you borrowed from the bank, that requires some kind of labor whether physical or mental.
#4 THERE IS NO MONEY...
#5 If you did not receive gold or silver from the bank then you received fiat currency which is not MONEY it is promissory notes.
#6 If you received Central Bank promissory notes that lets you know your Country is bancrupt.
#7 If you want to borrow from a bank you have to sign a promissory note, since you are the one laboring to pay the bank what they say you owe then obviously labor creates the money.
Hmmm? No loan. Hmmm? No such animal as a Foreclosure. WOW! Look at all them empty houses. LOL
Bro where where you 8 years ago… I just found out last year 🤬
Both of those statements were false. And that's the entire problem.
Banks DO NOT CREATE MONEY!!!! What they do is monetize the promissory note because once you sign that promissory note it becomes a negotiable instrument that the bank turns into money ( Exactly how I do not know ) In other words the bank lends you YOUR OWN money or credit ( whatever you want to call it) and then charges you interest for lending you your own money!!!
Well, yes, only when you sign the loan document will the bank lend you money, that's true. But that loan document is precisely NOT money, nor is your promise, stated or written, to pay. You can take neither to a bike shop and purchase a bike (unless you entered a different loan agreement with the shop, but that doesn't involve money creation, only deferred payment). Specifically, a loan document is NOT a negotiable instrument: Negotiable means transferable, in the sense that bearer (the next holder) can use it to pay.
Money is a generally accepted means of payment (ultimately: one you can pay your taxes with), and this is exactly what a bank will produce or create for you: Money, nowadays in the form of digits in your bank account.
Incidentally, "monetizing" means creating money out of that which may be valuable (or deemed so, maybe foolishly), but is not yet money.
Also, if you actually want to know how banks turn your promise to pay into money, go to my RUclips video, "Exactly How Do Banks Create Money?" ruclips.net/video/eM1S6RiIJis/видео.html
@@ibravn1 Yes of course you cannot take a promissory note to a bike shop as per your example. But isn't a promissory note a negotiable instrument like a stock is for example which you also cannot take to a bike shop? If I am misraken then I do have 2 questions.What exactly is a negotiable instrument. 2, When Banks "create" money please do not tell me that they create it out of thin air something has to back it. As we all know in the past that backing value was gold and silver. So what is that backing value today? Oil? for example. Also let's play Devil's advocate. Let's say Banks do create money out of nothing with no backing value. Isn't that fraudulent in some way?
@@jimmym2486 Well, stocks are securities, not negotiable instruments. So a stock is as "not-very-negotiable" as your old car: Somebody has to buy it with money first. A dollar bill is negotiable, the next guy can use it pronto, no questions asked. Check Wiki.
As to the backing: The whole banking system, including filled-up reserve accounts at the central bank, is what underlies or "backs" your loan. Go see my RUclips video referenced above. But there is no "backing" per se for every loan granted, that's the whole point. This is what banks do: Create money where there was none (or very little) before.
This was the function of credit in the olden days: Extend credit to a producer, so he can purchase raw materials, pay his workers, sell the goods, repay the credit and score a profit. Today, credit in the form of digits in bank accounts are no longer airy stuff; it is real money, what you pay your taxes with.
This is the power of the banking system: It has solidified flimsy account digits so that now they are the coin of the realm, real money. Cash is residual money, what you buy a cup of coffee with or give to a homeless person. Your car and your home? You buy them with real money, the numbers in your bank account. Courtesy of the commercial banking system. Banks created 97% of the money in circulation today.
Fraudulent? For sure. The whole system stinks to high heaven. But try to take it to the courts, what can they do? Some of us are working hard to change it. But don't wait up nights.
Ok I will have to surrender my point at least for now. But I may or may not reopen this in the future.
because I have a book somewhere in my basement ( I have no clue where) called Modern Money Mechanics and if and when I do find it I may have more questions . I am also going to do some research and look up
US Codes pertaining to Negotiable Instruments. Securities and etc
@@ibravn1 Hi, I have not had time to look for it. But this little video short 2 and a half minute video I came across not only shows the act part that I would have shown from Modern Momey Mechanics and also I am reminded about a court case that I forgot called the Credit River Decision (Now I have heard that this case was overtuned and I have also heard that also stands in Common Law Court this is also something I need to do research on) I do agree with you that you cannot take the banks to court. They are too big and of course they are not going to admit to their fraudulent ways, But that does not mean that there cannot be small victories. Years ago someone I watched who I can't remember said that financial institutions commit fraud every day and get away with it because of our General Ignorance but if we can learn some Common Law , they can be fined under the FDCPA, Also he said if you ever do take banks to court the goal is NOT to win but instead to settle. I think maybe one thing we can agree on whether you think the promissory note becomes valuable once it is signed by the borrower (aka the REAL original creditor) whether that be okay not a negotiable instrument or a security that is traded like a stock etc or what you say, The fact our banking system as you say is fraudulent and evil!! Here is the video ruclips.net/video/xSqi1N_RrUs/видео.htmlsi=PMg9lj5nPq2ad4Cq
Nothing wrong with the system, as long as it is transparent and owned by the community. That applies to the central banks and big banks.
9:14
Incorrect. Banks don't create currency...
You do with your signature.
But you give them the rights to control it and "lend" your own money back to you with interest by how you sign the paperwork
Well, you can write your signature all you want and it won't create you any money, unless you do it at the bottom of a loan document that the bank has agreed to "purchase" from you with the dollar amount "lent." So, sure, the bank creates money for a particular customer, the borrower, as I explain in the video, only when this borrower has negotiated and signed a loan document with the bank. Without the bank no money creation, as I explain.
jodys balance sheet
mike welchs mcdonalds meat
kaitlin doug eds treat
Norwegian krone
Why do banks issue bonds if u say the money is created 😂
Banks issue bonds to acquire capital for their equity, typically. Banks cannot create money for their own use. They create it for borrowers, in the process of lending. When banks expand their equity (capital), say, by issuing bonds, they are enabled to lend more, as capital requirements is one of the multiple factors that limit banks' lending (credit creation, money creation, same-same).
Actually no, banks do not create money. They create deposit liabilities (bank debt), denominated in dollars, that people sign a contract agreeing to pay. Because the deposit liability is denominated in dollars, people mistakenly refer to it as dollars or money. There is nothing in fact or law that makes bank deposit liabilities money, that notion is just an ingrained figment of the imagination born from a perception based theoritical fiction.
Well, that may be so in your received dogma, but reality shows that bank deposits are being counted as money everywhere in modern economies, even as taxes, which I suppose is the ultimate test of moneyness. In my native Denmark you cannot pay your taxes in cash anymore; it has to be done by bank transfer. That transforms bank credits into money. "When the facts change, I change my mind. What do you do, Sir?"
Oh nice, "received dogma" because insults are always an affective argument, right? What I've stated is a product of logical analsys, critical thinking and facts in law, a process that you appear to be totally unfamilliar with. You want to talk about "received dogma"? How about you basing your entire argument on a 170 year old perception based theoritical fiction. Now that's "received dogma".
In spite of your "received dogma" and the ongoing gaslighting to the contrary, money is still cash by US law 31 USC 5103, which designates 4 paper notes a US legal tender money. 3 of those notes are no longer produced or in circulation leaving 1, Federal Reserve Notes (FRNs). FRNs, along with US minted coin, constitutes the official legal tender currency of the United States. If it's not FRNs and US coin, it is not US money. There is no other money in use within the US that is designated or recognized as such in US law.
Federal Reserve notes are a debt free US legal tender money/currency produced and initially owned by the US government. It is issued through the Federal Reserve banking system for the express purpose of supplying depositor demand for the monetary medium wereupon, it becomes the property of the people in legal possession of the notes. It is against the law (12 USC 411) for the Federal Reserve to use US legal tender notes in any of its market operations or for any other purpose whatsoever. Federal Reserve notes represent a first lien on all the assets of the Federal Reserve banks and on the collateral specifically held against them.
As I stated eariler, Bank deposit accounts are liabilities of the bank because they represent the account holder's legal claim to legal tender cash money from the bank, and the banks are required by law to render that cash money to the account holder upon their demand. They (deposit accounts) are bank debt, and there is nothing in fact or law that alters that status. People do not spend their account balances, they assume to spend the cash money the account balence represents. This assumption/perception is reinforced with a constant barrage of visual propaganda in all aspects of media in the form of cash notes being used in verious stages of economic activities to include the activities of the US government, Federal Reserve, the banks and even Wall Street.
Now, if you wish to continue to insist that bank debt to account holders is the account holder's money, even though it is not a medium of exchange or a unit of account, does not circulate in the economy, has no denominations of its own, or recognized as money in any US law so it is not a product of sovereign authority, then you're obliged to inform people of who this "money" belongs to and were they derive the authority to create it.
*The problem is that your presentation is the product of a fictional abstract rendition of how the system actually works.
Any government that refuses to accept it own currency in payment of taxes, is up to something very shady that's not going to benefit the citizens so, just be aware.
@@dwaindibley4137 Oh, I agree, the government and banks are up to something very shady here, and I wish someone would hold them accountable. However, as the system works now, you can actually pay your taxes with your credit balances.
I give you that your account may be more stringent and legally correct, and logival, too, but that's not how the system works. If everybody agreed with you, we wouldn't have had the 2007-08 crisis, because no one would have accepted credit balances in payment of anything.
But the banks' current ability to create money through lending is exactly what blows up fixed assets bubbles, like in 2007-08. So in empirical fact, bank credit IS accepted as money all over the place, even though is it wrong ("received dogma"). The new reality is that bank credits function as money and is accepted as such by everybody. Why would that be if everybody agreed with your definitions?
Cryptocurrency is real money.
Quick question do banks have to destroy the money they lend after the loan has been repaid if yes then why can't banks simply cash in 100% of the money exampl: I borrow 1M from the bank I go do my business and repay my loans does the bank now has 1M cash that they can keep
Go back and listen again thanks do not lend money
@@robertsmith-cj6gl that's not my question
@@aiothedat3102 Please see my answer to your question elsewhere in the thread