Understanding Money & Banking Pt. 4: Counterfeiter's Motto

[TheUtube4ever]

If the size of the economy grows due to increased productivity etc. but the money supply remains the same, as a result you mention that this puts a downward pressure on prices ie: 50 cents for a chocolate bar/pop. How does this affect the profit margins for the seller of these items? do they make less/more? how does price changes affect profit for sellers?

thanks in advance

(from Brampton, Ontario)

[thinkfree41]

How exactly is an economy to grow if no new money is introduced into the system? Your advice appears to be that we should be locked into a spiral of constant deflation, ie: continuous economic depression, in which those holding the cash (the rich) hoard it rather than investing it and benefit from increasingly cheap goods, whilst everyone else is reduced to penury. The sensible aim is to maintain stable prices over time with a low level of inflation.

[heaty007]

This guy is a friggin genius!

[krislouis5]

Thanks for the video! Could you please not drive while making video? It creates noise in the background which makes your voice less audible.

[CymroGoch]

This is probably a stupid question, but how does inflation work in a services based economy (such as the UK)?

[babapoopoo]

People check out Bill Abram, ty Paul

[tubestick00]

so do lawyers fees which are exorbitent in relation to the actual services provided weaken the economy? genuine query paul

[richardcadbury]

define what you mean by "exorbitent"

[tubestick00]

extremely excessive.

[richardcadbury]

well yes. "exorbitent" and "extremely excessive" are two ways of saying more or less the same thing. what do you actually MEAN, in real terms.

How do you determine the difference between exorbitant and fair?

What is your standard of judging a fair price?

[tubestick00]

i suppose the rate is determined by the market itself. so without becoming a communist state and limiting their fees, i geuss whatever they can get away with charging is whatever they'll charge.

[richardcadbury]

Lawyers do get govt help in that the govt decides who may or may not be your lawyer, and also who may or may not teach law, and inflates the price of law school by grants etc, all of which lower the supply of lawyers and so drive up prices.

If they stop this help (ie have a genuinely free market) lawyers would be able to charge less. I somehow think Paul would welcome such a change; he seems to be very consistent.

[tubestick00]

couldnt have put it better myself. i was quite sure that somehow the whole legal world would be controlled. much like the health and medical world i'd say.

just didnt know exactly how.

[macdaddylorenzo]

Thanks Paul McKeever for your clear explanation!!

Simplest Solution (albeit difficult, yet totally possible) to this problem:

1) Borrow as little as possible. To do so, spend LESS than what you can afford. Otherwise you'll have to finance your excessive expenses with debt, and thus decrease your wealth by increasing the money supply AND by paying interest on our debt

2) ALWAYS LOBBY YOUR GOVERNMENT TO BALANCE BALANCE ITS BUDGET!! Gov't debt = inflation + interest payments.

[bergweg]

No wonder that the ECB (European Central Bank) has a slogan "... to ensure price stability, to keep the yearly inflation rate below 2%".... What a deception

[sonyse2t5]

Federal Reserve are bunch of hoodlums, the US dollar is been hacked to rebbons, the Chinese ae pissed as they have 765 billions of it!!!

Dish the dollar and restore the IMF SDR asset -, be gone with dollar heagemony....

[kingtroll35]

K28robinson they do not teach you this in econimics class. mv=pt is a "theory" and nothing else. Money is a belief used for trade. It can't be explained through math or science becuase it's a psychological illusion created by man. Kinda like magic and we're all under the money spell.

[k28robinson]

He has a basic understanding, BUT he does not mention any of the economic relationships or models he is relaying on.

Ex. Quantity Theory of Money MV=PT

Also, the concepts are not very difficult just enroll in a freshmen level economics class. It is not rocket science.

He sure talks a lot. Typical of a lawyers, they always have nuclear powered mouth.

[walliworld]

Thanks for the informative videos. They have helped me get a better understanding of the subject.

Questions

Can you explain the recent decision of the Central bank to increase the money supply?

What further reading or videos do you recommend for a solid understanding of the monetary system?

[vorbeigehende]

Classical treatise on the matter is

"Money, Banking and the Federal Reserve"

watch?v=iYZM58dulPE

[stachowi]

Obviously the counterfeiter is the Fed. Why does the media portray the Fed as the inflation-fighting organization rather than the cause of inflation.

[PaulMcKeever]

The fed increases the money supply when it increases the currency supply, but it is the private banks who create most of the money suppy, because for every dollar of currency, the banking system creates many dollars of credit.

[MisterBozo]

Thanks for all your videos, they're great. I have 2 questions.

1. When new money is introduced by a counterfeiter into the money supply, the counterfeiter is the owner of that new money. When new money is introduced by a central bank, who is the owner of that new money?

2. With a gold standard, what happens when new goldmines are being exploited and new gold is introduced? Aren't the owners of that new gold playing a similar role as a counterfeiter or a central bank? Isn't that a problem?

[PaulMcKeever]

When a central bank increases the number of dollars of currency (i.e., bank notes), it is the owner of those dollars. Everyone else is merely a borrower of them.

In a gold standard, increasing the amount of gold that is used as money has the same effect as increasing the amount of paper dollars. That said, it is relatively difficult and expensive to mine, purify, and mint gold, so the increase is smaller, and happens more slowly...an improvement, of sorts.

[thinkfree41]

@PaulMcKeever This is not true. When a central bank buys treasuries from private banks, the money then belongs to them. Having your entire monetary system based upon the availability or otherwise of a shiny metal dug from the ground is simply idiotic. The fundamental value of fiat money, beyond all else, lies in the trust people have in the ability of the issuing country to sustain a truly productive economy. Whilst fiat has its issues, this is far more rational than any retrograde gold fetish.

[hermease]

The counterfeiter as described here would have to own of some or all all the newly created dollars to properly be accused of stealing from everyone. Otherwise he is just redistributing wealth. He does own it, through the creation of interest.

[firebat01]

So.. the counterfeiter is the Federal Reserve that puts out more and more money as the economy grows?

[stachowi]

Based on what I've see thus far, yes. What makes it even more sinister, is that since we've been moving to electronic money we don't need to increase the denominations of the bills. Therefore, ten or thirty years from now, we'll probably still have one hundred dollar bills, but the inflation caused by loose governmental fiscal policy will not only not be visible to the untrained eye, they will be stealing our buying power for the owners of the Fed.

[ncollier1]

Paul, Do you know who owns the Federal Reserve bank, and the Bank of England (which was privatised in 1997)?

[nooriginalthoughts]

"The Federal Reserve System is not "owned" by anyone and is not a private, profit-making institution. Instead, it is an independent entity within the government, having both public purposes and private aspects."

BoE: "The current governance and accountability framework is set by the 1998 Bank of England Act, which provides for a Court of Directors, a Committee of Non-executive Directors within Court, and a Monetary Policy Committee."

According to official web-sites...

[WarrenMajestry]

You're an extremely intelligent human being. I am studying to be a Capitalist, this gave me a whole different perspective to play with. Thank you.

[PaulMcKeever]

It takes one to know one. All the best, PM.

[PaulMcKeever]

CharlieMohar: I hope to continue the series and and when time permits. My practice has been extremely busy for the last month, and I've had no time to do any videos. Hopefully, the next couple weeks will afford me some time.

Lorax: previous experience has led me to introduce the subject starting with money fundamentals (i.e., "what IS money?"). With many people, everything else fails if the rudiments aren't addressed first.

[lorax2013]

Excellent logical description of the subtle theft of counterfeiting. But... why didn't you just come out and say that this is how the banking industry subtly steals from the economy through fractional reserve lending. Maybe you explained it in a different video - if not search "the real story of money"

[CharlieMoher]

...And then what happened ? Is there a Part 5 etc to this series ?? What am i supposed to be viewing next ? I am enjoying this tremendously ! Very easy to follow and understand.

[AynRandOeuvre]

"The small minority of adults who are unable rather than unwilling to work, have to rely on voluntary charity; misfortune is not a claim to slave labour; there is no such thing as the 'right' to consume, control, and destroy those without whom one would be unable to survive. As to depressions and mass unemployment, they are not caused by the free market, but by government interference into the economy."

(Cap:TUIdeal\WhatIsCapitalism?­\AynRand:etal\62AR)

[setanta333]

OK,after the latest fall in stocks,who do you think is the counterfeiter?The Banks,the Lenders?????and Lenders????and Lenders???,who are the "BANKS",Who are "The Federal Reserve".??/Surely ever decreesing circles to BAD times.(SUB PRIME EVERY LOAN,NOT JUST MORTGAGES)There is no money supply now,it is just fictional interest money which does not exist now that it can not be paid back or called in or foreclosed?

[AynRandOeuvre]

"We accept nothing but 'objective' values." (JG:DT\AS\AR)