seems to work ok to me, as long as they don't lend money to people who can't pay it back. which they did. i was on the dole and the bank phoned me up asking me if i wanted a £1000 credit card. when i was younger i couldn't even get one when i was working. they also gave people on the dole mortgages. so who is to blame here? the fed? who decided to lend money to people who can pay it back, did the fed allow this to happen or just the banks?
i always thought i brought the banker 100 gold, and the bank lends out 12.000 gold... Like the top 3 French banks with 3 times France Gdp (6 trillion gold) and 200 billion gold in assets. Looks fine to me..
Colonel Gaddafi was the greatest and, by far, the most effective humanitarian who ever lived. The Great Man Made River alone will save millions of lives (and that's why the Nato Nazis bombed it.) Gaddafi's plan for an African central bank, free of Rothschild \ Bilderberg ownership, would have freed Africa from the horror of the IMF and World Bank, and the Gold Dinar would have freed Africa from the Fractional Reserve system, thus saving millions of lives.
And then, according to "mark to market," if I understand that concept correctly, the bank can count that 2710 as actual capital on its balance sheets. So they can make a bunch of credit default swap deals using that phantom 2710 as capital.
@Cenu911 A bank run is what everyone fears, but it is actually very unlikley to happen because people rarely take their entire savings out unless there is some panic from bad news. If you imagine a world without FBR, there would be no irrigation for the farmers, workers, or the factory.
@Cenu911 No, there is actually 1000G circulating around, and people think they have 2710G in their savings. In the real world, a single person can withdraw SOME out of the 2710G pool and everyone else would be fine. However, If EVERYONE withdraws 2710G then there would be a bank run because there is only 1000G in the system.
You have 2710g in circulation that are supposed to equal the 1000g in your reserve vault. Isn't this hypothetical series of events that an act of fraud?
@Cenu911 what really makes it a fraud is the fact that the new money created steals value from the current existing money, which decreases the value of each single dollar, this is a "hidden tax"
@Cenu911 also the interest charged is even more a fraud because the money to pay the interests doesn't even exist, which is mathematically garenteeing that the poor will get more poor and rich will get more rich
The interest charged does exist but he doesn't mention it to avoid confusing the shit out of the normal person. The bank takes it in as revenue so that it can pay its bills so it can do the things it does, such as FRB, so that everyone can get what they need/ want. When everyone can get what they need/want sustainably, then thats all what a healthy economy is.
i serously don't get how they create money. The bank is lending out the money of one of its depositors (or is it creating out of thin air the same amount?) and then the irrigation farmer pays this money to the farmers. The irrigation farmer needs to repay the bank but where is it going to get the money unless it works for the bank. Therefore the money is not being created simply circulating right? But if it is only circulating then how does the money supply grow? :S
Hey KhanAcademy thanks for breaking down a topic that's usually hard so hard to understand to an average joe like myself. You made it simple to understand. Thank you.
@KillerWhaleSFl LOL...no its not a Ponzi Scheme. You get interest on your investment. When you have a savings account at the bank, don't you get interest? A ponzi scheme is where you lose your money if you invest later. The people that invest earlier get their money back.
FRACTIONAL RESERVE BANKING is actually unconstitutional. The thing is that these banks make so much money by creating money out of nothing that they have control over politics. No matter what anyone tells you...the truth is that commercial banks CREATE MONEY EACH TIME THEY MAKE LOANS. THEY CREATE MONEY OUT OF NOTHING.
Can someone please explain what happens if the factory workers due to whatever circumstances, maybe better skill and know-how command more salary than the irrigation workers? Not only that suppose there are more number of technicians/workers required than the simple irrigation workers how is the factory boss gonna fund the salaries coz in the example we've seen how money has progressively lost value from the irrigation workers to the factory workers.
@BillWilliamsonSr That's untrue. Until Nixon abolished our tenuous link to gold in '71, dollars were still convertible to gold. If you're curious in further reading, I suggest Murray Rothbard's "What has government done to our money", available freely online (just google). There's a fair amount of basic explanation of "what is money", and it progresses to explain how inflation is theft.
Inflation is not theft! But of course we don't want our earned money to devalue. These Keynesian fools claim that we need inflation to beget higher demand when the absence of demand for product simply reduces costs in reducing the proximity of capital to serving some human end, thereby enabling production for a future, as-yet absent consumption. Begetting such investment over time prior to finalising product distracts from producing 4 present consumption so the rentier charges
(cont) so the charges from the rentier are desirable in raising interest to impose costs of capital when there is consumption and to induce good allocations to raise dividends as of course the basis of social economisation for others is being influenced to consume less of what others need and to reduce strain on care systems for lower insurance premiums/prices etc. If hoarding arises then costs will fall to offset rates that might not & notes for loan receipt would on free markets
(cont part 3) would on free markets be differentiated from banknotes for 100% deposits else trust in that notes likelihood to maintain its value would fall, its expansion of banknotes of unconditional redeemability would cause insolvency and acceptance of it would fall compared to the notes of banks that differentiate between money substitutes and certificates for redeemability of loans or fractional reserve loans
so that loans themselves would no longer increase the money (proper) supply only for money taken out of circulation until its note of deposit is cashed in and extinguished. If a bank were to conflate notes for specie lent out be it called fractional reserve or a time delayed bond or whatever, those notes would find deficit of reserve behind them and thus cumulative lack of trust in them since they aren't for actually deposited specie
Yno it's funny there are so many people that belive FR banking is robbing people of their money, that you would think these bankers WANTED you to think this were true. Anyone agree?
You take way to long to get to the point of what your explaining, I know its a general audience your trying to appeal to here but I doubt many of your viewers here are associated with watching shows like America's Got Talent. I come from an accounts background and I enjoyed your colourful use of accounting terminologies throughout your video, but please less emphasis on simplicities.
in reality, the banker loaned out 10,000 in notes against that 1000 gold. THAT's how fractional reserve lending works. In Scripture it is known as USERY! It was first used in babylon by the jewish bankers of the day. The farmers also got screwed because the thieving banker didnt cut them on the profits he made from their gold, nor even told them about it! Banking is fraud from the ground up! It always has been and always will be.
Uh? How exactly does the irrigation project get finished if you've loaned out the money to the factory workers? How would the factory workers work on a factory had you continued and lent the money out to someone else? This isn't about the factory or the irrigation at all, is it? This is about you collecting interest on the most amount of loaned money as possible.
i congratulate you ... you explain this very well instead of these nutty conspiracy theorist who tell you that the bankers are robbing the people .. MULTIPLY EFFECT IS GOD FOR THE ECONOMY
They are actually robbing people, they're using people money and making fake money they don't have and when something goes wrong then we have our current world crisis. using this video example the problem is when those projects go wrong and workers don't get money and so they can't deposit, the banks loses that money which is people money and will not be able to give it back and now people pay for the bank mistakes. it's the perfect business, they just play with other ppl money
Problem is, you can't do those projects "simultaneously" with gold, because you can't print gold. So, when you said the projects could be going on "at once" at 8:20, it was a misleading factual error. Instead, you'd have to wait for enough gold to trickle back into your bank (when people are paid) before you could lend it out again - in a much smaller amount, of course, than 810 units.
the 900 loaned out to irrigation is not the same 900 that the workers deposit. It really creates 1800 for the bank. For example if you purchase an airline ticket through a travel agency on your credit card for 700, Once the travel agency deposits it it becomes a second 700. So that creates 1400 circulating which is really suspicious to me.
I don't quite understand. Shouldn't we also be counting the money that the Irrigation guy and the factory guy still owe to the bank amongst the money in circulation? That is, shouldn't we count that as negative money? The farmers have 1000G entitled to in the bank, The irrigation Workers have 900G they are entitled to in the bank, the factory workers have 810G they are entitled to, so doesn't the Factory owner have -810G he is entitled to?
@rufsketch1 It's all negative money. It doesn't exist. (Except what the farmers originally produced.) That is the only real creation of wealth.
The job of fractional reserve banking, backed by the federal reserve for a certain amount, is to cause inflation. It's designed that way. It cannot cause anything but inflation. You are making money up. Also called counterfeiting.
@asleeperj - you're obviously confused by political propaganda; money is an abstract concept; in history tea, sea shells, tobacco and etc have been used as money; yes, i know you are going to say gold is money; but gold is only considered to be money in an abstract sense; value/price isn't necessarily intrinsic to anything; demand is what gives everything a measurable value; with no demand for gold, there's no value; it's the same for dollar bills, its value/price comes from demand for it
Maybe if I HAD money, I'd be able to understand this better. I never have any opportunity to actually turn the theory into experience. I learn better by experiencing it.
That's why I liked playing the Stock Market in Economics class. We 'bought' stock and watched what it did. We didn't really buy it, we acted like we did.
That helped, even thought I don't understand how every stock I selected made money and increased my stock.
@vickiormindyb you are describing an investment in an individual, or company, and not into a complete banking system. In the stock market if you see a company do things that you know will bankrupt them, you will pull your money out; however, in the banking system backed by the tax payers you don't worry about it because your money is guaranteed.
Your counting that money as a liability AND and asset??? It's almost like your counting it twice??? Honest Interest does not create REAL money. People have to sell real goods and services to satisfy that interest. Take a room full of people. Split the room in half. Loan one side's gold (money) to the other side. Does that create more gold (money)?? OF COURSE IT DOESN'T
@nalcow The reserve ratio is determined by the Federal Reserve, and is completely subject to their whims. They can change it with or without approval from Congress. Not good...
lets say the bank is the only bank in the world, and those 1000 gold pieces are all the gold in the world, and the bank loans out 2700 gold pieces throug the fractional reserve system, how are the companies who took out the loans going to pay back 2700 gold pieces from 1000 gold pieces with interest tacked on.
if deposit is 1000 bank keeps 1000 as reserve (all of it) and lends out 9000????
is this the same thing or is that just the net result of completely exhausting the $1000 through the multiplyer effect? ie ends up creating 9000 of new money on a 1000 deposit. . . .
either way wouldn't debt destruction reduce the money supply.....therefore even though the FED is printing huge amounts of money, if they dont keep up with debt destruction we will still experience deflation..thnks
What about interest? The "money" wasn't created (borrowed) to pay the interest (on loan #1). So more money must be borrowed(created) to pay that interest (loan #2). And a cycle of loans starts - forcing the economy(ex. apples) to increase. However, no increase=no new loan=not enough money to repay loan #1=recession. So if we always grow, we won't get hyper inflation or depression. But how big can we grow before we destroy the environment?
Isn't what you just described full reserve banking? From my understanding, in Fractional Reserve Banking, if someone deposits 1 dollar in the bank then you can lend out 9 dollars thus increasing the money supply.
Wow and here I though that only central banks could increase the money supply! This is legalized fraud. Does anyone have any idea of how expansion of commercial money has influenced inflation? Is FRB as bad helicopter Ben?
@jaguarclaw No, governments create bonds through which they buy money. The government is the cause for the transaction, not the banks. Alot of people erroneously put the blame on banks because they don't make this simple connection.
Say you have an army, and political support as well as the control of bank regulation under your power, you can force any bank to supply it's currency for you to use, whilst you have a scapegoat that better do what you say otherwise they lose your powerful business
FRB CAN happen with both of the moneys - gold or paper. the problem of FRB is simply that there is MORE money chasing the SAME amount of resources: a bust HAS to ensue.
With gold, FRB is severely limited because the people always exchange their paper receipts for gold bullion. This puts a limit on the amount of inflation that can take place.
In ANY case, with FRB a bank run can happen, and this alone proves FRB to be evil.
@evangrogers That doesn't mean it's evil, it just means it's risky. I thought i'd clarify. My opinion is that it is "evil" only and only if it is leveraged politically by the government.
@evangrogers Well sorry but today you will learn that fraud is subjective. Many companies that use pool accounts out there for commodities actually perform fractional banking. Seeing as how their losses aren't socialized they have a huge incentive into being solvable and responsive to their clients, whereas the bank is virtually immune from reprisal. Will you arrest these innocent people whom provide a service people like and want on the basis that "they are evil"?
what a scam. this is why regulation is needed. all this loaning does is create more and more interest. as interest in included in each step where you loan stuff out. sure each depositor gets interest, but if there is no regulation, the bank is free to keep loaning out more than they actually have in hopes of earning more due to interest. what if a scare happens and every one pulls their deposit? or if the bank gives out a bad (housing) loan? it all crashes. the bank gets "too big to fail"
@kzymeth what you are describing is a "bank run", since the advent of the deposit insurance (fdic) bank runs are relatively uncommon. the federal reserve also acts to prevent bank runs as well.
This is about creating wealth. When it is leveraged, more is created. Banking is a service industry. Think in terms of "value chain". Each player adds value so you at the end of the chain add value to your life.
Because it represents the business as a seperate entity. If you own the business, it owes you that equity. If you sell the business, it or the new owner owes it to you. ie.; The business is not you.
This was an explosion in profit, sense they were getting stupid money with that concept. Today banks are still allowed to practice that old tradition of loaning out 10x more money than you have, and hopefully the interest will pay for what the bankers didnt pay to actually start theyre bank... If we are paying the Gov-bond for the bank to start and they dont pay up theyre half, and we are stuck with the bill they get more money, and now banks are the biggest buildings in the world
Here is the problem i was having, okay some of that seems clear but one factor you said that the bankers arent making anymore gold?
But that doesnt seem to be exactly how fractional reserve works,
England began with gold when they werent using sticks so they actually did have goldsmiths, and naturally goldsmiths became the bankers, because they gave out recipts to keep your gold...
this lead to gold smiths giving out more receipts for loans, than they actually had, and with interest.
This guy doesn't understand that you can't multiply gold amount by pressing a few key strokes. Yes, you can initially, but when the mad mob is at the bank door you can't just print new money to pay them off. You'd have to get real gold from somewhere... that's the whole point why gold isn't compatible with fractional reserve banking...
If you went and asked the poeple who had deposited some money how much they had on their accounts they should reply NONE, because its frozen until a certain date. Otherwise the bank wouldnt risk bulding the house of cards your portrayed for fear of someone comming and withdrawing the bottom card/original gold deposit
Not bad, but the trouble with this is that modern banks use "chequebook money" based on a fiat currency.
When you ask for a loan, they literally just type it in. In the case of mortgages with 10% (100,000) money down, they bank does not even need any money at hand to create $1000,000. Since the "deposit" includes the cash they need to maintain the reserve. Not to mention some banks were inflating 40 to 1. See "Money as Debt" also on youtube.
Theres a big difference... Gold has to be mined. Keep in mind that gold does not only yield a monetary value but an industrial value as well which makes it difficult to devalue. This is just a fact... Paper yields only monetary value which constantly changes based on global economic events. Inflation is a another key factor being that if one bank goes under then money can be printed to cover the loss (FDIC) meaning that the money losses value. This effects everyone that holds paper money.
Gold cannot be printed meaning that if a gold holding bank went under, the chances of being covered for a large amount (Lets say a trillion dollars worth) would be slim to none meaning that only the people that dealt with that bank are effected. Meanwhile other stable gold holding bank and their customers will do just fine as their gold wont face devaluation due to the inability to inflate the gold supply.
In the end fractional reserve lending is a major risk as it depends on the customer to pay the loan back. But this is why there is collateral. If a customer defaults, they can eventually be sued and have property seized. As long as the property which is seized has been valued correctly then the bank can get their money back by selling the seized property. The major problem we have had lately is the over-valuing of property.
As a real estate appraiser I know a bit about this. If we are talking real estate with inflated values then thats where the problem occurs. The bank has the over valued properties on their books that wont even sell for 50% of what they loaned for it due to corrupt brokers, RE agents and appraisers. This is why RE prices are going down so slow... The lending institutions do not want to suffer such a loss so they keep the prices fixed but its not working.
Don't you think it is also a matter of whether one will keep their promise? Money is really only as good as the commitment to a promise. The society that supports its money determines the value it possesses on a global scale.
Not sure if I am following you completely on your statement but I will do my best to answer. Fiat currency is only as good as a commitment to a promise as fiat currency has debt attached from the very beginning. There is only one controlling source (Central Bank) which operates as "the" primary lender for a nation. This controlling source issues credit that it knows can never be paid back causing permanent debt. *Continued on second comment*
They cannot dumb the dollar because nations have to pay in Federal Reserve Notes if they want to buy petrol. Kissinger set this up. While nations must pay in Federal Reserve Notes, we offer protection to the present regime. Military protection that is. We offer them armaments. We keep them in power.
In this fiat world money continues to lose value as more and more is created from nothing. This has enabled several entities to buy up foreign assets for basically nothing while the dollar keeps falling. Currently, several nations are seeing this and getting angry as their dollar reserves and US investments continue to lose value. In turn they are holding private conferences about dumping the dollar and going with a new world reserve currency.
@lighthammer2531 That's why CUBA doesnt sell themselves to this scam!!!!!! THey value their ressources and they value the production of the Cuban worker.
This is not the fractional reseve method used by the modern banking network with the Federal Reserve as central bank. Reserves are now government securities and treasury checks. Modern fractional reserve method increases the actual money supply while this entire supply is loaned by the bank with unmonetized interest.
Are these people watching the same video I am? Gold is not magic, in that it doesn't defeat fractional reserve lending. That is the banking system explained here. If you only count money as gold, then no new gold is created. If you count money as deposits in a FR system, new money can be created as demonstrated. Pay attention.
To everyone saying it doesn't work with gold, look at it this way. Gold is not created out of thin air, money is. The non-gold money doesn't exist in physical form. If 1 man made a deposit of 1000G and then a 2nd man asked for a loan of 900G at a 10% reserve rate, the 2nd man has 900G and the 1st man knows he has 1000G in his bank but only 100G is left there. If he were to withdraw any more than 100G without the 2nd man repaying his loan, there would be a bank run.
He said that the people who deposited the gold think this, but would discover that this was not the case if they all came to the bank to claim the gold, they thought they had
This can totally happen with gold. Go back and follow the video again. This time, assume that everything happens in the same day. Then look at the money supply - as defined by M1 - at the end of the day. Farmers deposit -> loan to irrigation -> money to workers -> workers deposit -> loan to factory builder, who deposit loan back into bank for time being. It makes sense!
This video is completely flawed, because your treating gold in the same way paper money is created now adays. It is created out of nothing. Your creating gold out of nothing, so of course it will have a multiplier effect.
@dieyoubastards it CAN happen with gold, he explainswhy it can happen with gold. The problem that he ignores, however, is that MORE money is chasing the SAME amount of resources. Creating more money does NOT increase the amount of resources, so the bust will still follow.
The thing about gold is if you use a RECEIPT for gold, then FRB wont' work well. If you have a paper money that is backed by gold, and they inflate too much, then people will just ask for the gold. which leads to a Bank run
@evangrogers exactly! RUN the banks,put the parasites out of business,and make them find honest work instead of enslaving hard working people through FRAUD!
Paper and gold are not the same thing. While the gold has a 'real' value - money itself is an illusion and is valuless. It is perceived to have value and that perception is based on the reserve of 10%. The more money in the system = more debt needing more money to service that debt. The more money there is in the system, the less its worth. There is still the same amount of gold in the system.
Fractional Reserve Banking is theft: it creates money ex nihilo for the benefit of the banker at the expense of the nation: FRB causes inflation (quantity theory of money).
Your examples are misleading: most loans are not invested in domestic development, but unproductive holidays, gadgets, luxurys via credit cards and loans. The bank benefits, the nation loses out.
I don't understand how FRB creates new money. If you loan money, you are simply transferring money from one person to another. There is no money creation. I've been trying to discuss this issue with people, but nobody can explain to me how FRB is inflationary.
Yes but everyone has the money at the same time. If the bank keeps track of the loans and liabilities then they can balance them on the budget sheets at the end of the month/year, but there is still more money in the system than there was at the beginning. That's why he says "people think they have 2710 gold pieces." It's counter-intuitive that's why it seems so misleading at first, and why D4Shawn just can't get it.
See, if you watch the end of the video he proves me correct. He says "People think they have 2710 gold pieces" and these people really do have this much gold. they just can't have it all at once. This is the creation of money that I was trying to explain to you.
I used the wrong words, They CAN have it all at once, that is what makes it new money. But the chances that everyone would withdraw at once is so rare that the lending rate, the "reserve" is set at ten%.
If it were the same money being spent at different times then it wouldn't be possible for each individual to withdrawl at any time
But FRB does not transfer money, it creates (usually) nine times of the actual money it has. It IS money creation. And that happens after the central Bank (e.g. Fed) prints money ex nihilo for Bonds!
Ron Paul wants a return to 'sound money' (i.e. full reserve banking).
the creation of money has nothing to do with fractional reserve, the creation of money comes from the ability of the banks to create an iou note, give it to the depositor AND lend out the money given to them. the fractional reserve is there to limit this ability.
You go to a bank, and ask for a loan for a house. The bank takes the loan as security for your loan, and gives you let's say 2000 dollars for the house.
Where do you think these 2000 come from? It's not transferred from another account, it is created. Try looking at wikipedia about FRB and you will understand much more.
IT IS creation of money, it happens digitaly and it all would collapse if everybody did it at the same time, a so called "bank run". Google is your friend.
You can't know how much these videos about finance and banking have opened my eyes! Been watching them for several months now, and it's finally sinking in. Thank you for all your wonderful work, Salman!
Fractional Reserve banking can work in a true free market. If competing bank notes were allowed and FDIC was repealed. Without these no one would invest in banks that overextended themselves with bad loans.
Yeah, but this in a normal result of the increasing gap between production and purchasing power. It's a consequence of the flawed fiat monetary system.
Oh really? Ask old people how much deeper into debt were the people and the governments in the 80s and 90s compared to before. It never stopped piling since the times of Lincoln and Jefferson.
wow dude u have no idea how bad the economy is right now do u? if u saying u r sooo great at this why dont u go tell obama UR PLAN and SAVE AMERICA, if u think u r soo good go to white house and tell them what u can do
I never said the economy was fine, I'm just correcting your wrong statement about the state of things in the 80s and 90s. The economy is about to collapse, but on purpose, by the crisis engineered by the international banksters. I would have a plan but they know how to save America already, they just want to do the exact opposite. No need to get angry.
Did I hear you say Liability=Asset? Enron did that, and we know what happened. Someone need funding for a project, he can go to the farmer and borrow it. So why do we ever need a bank? but modern economists say "it's not efficient". If borrowing doesn't creat product, why borrow in the first place? So without bank, money at least is honest. But bankers want "activity=economy". now money is a fraud.
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@swiftysmithuk - Most of the pulic could not care less as long as they get to watch their reality television programs, they are so pathetic that it's funny. Peace!
All these examples use fixed or circulating capital examples which involves expanding productive capacity and is more tolerant of speculative growth of the money supply since it creates equity. Most of the fractional reserve lending is aimed at housing which produces squat. This cannot support the interest payments since its mere asset inflation. This recent bubble ended with the monetization of low quality debt and its failure has led to demonetization and depression
my son needs a haircut
nnava5 4 weeks ago
seems to work ok to me, as long as they don't lend money to people who can't pay it back. which they did. i was on the dole and the bank phoned me up asking me if i wanted a £1000 credit card. when i was younger i couldn't even get one when i was working. they also gave people on the dole mortgages. so who is to blame here? the fed? who decided to lend money to people who can pay it back, did the fed allow this to happen or just the banks?
MegaTress1 1 month ago
i always thought i brought the banker 100 gold, and the bank lends out 12.000 gold... Like the top 3 French banks with 3 times France Gdp (6 trillion gold) and 200 billion gold in assets. Looks fine to me..
097112 1 month ago
End Fractional Reserve Banking! Debt Slaves...!
baydood510 1 month ago
superb explanation
goauld88 1 month ago
@tawk57 in this case yes because the irrigation was funded by the cash flows from fractional reserve banking
poorperson 2 months ago
penis
KimJong69 2 months ago
Colonel Gaddafi was the greatest and, by far, the most effective humanitarian who ever lived. The Great Man Made River alone will save millions of lives (and that's why the Nato Nazis bombed it.) Gaddafi's plan for an African central bank, free of Rothschild \ Bilderberg ownership, would have freed Africa from the horror of the IMF and World Bank, and the Gold Dinar would have freed Africa from the Fractional Reserve system, thus saving millions of lives.
davisoneill 2 months ago
And then, according to "mark to market," if I understand that concept correctly, the bank can count that 2710 as actual capital on its balance sheets. So they can make a bunch of credit default swap deals using that phantom 2710 as capital.
seanlaca 3 months ago
@Cenu911 A bank run is what everyone fears, but it is actually very unlikley to happen because people rarely take their entire savings out unless there is some panic from bad news. If you imagine a world without FBR, there would be no irrigation for the farmers, workers, or the factory.
You have minimal risk vs enormous benefits.
poorperson 3 months ago
@poorperson There would be no irrigation without fractional reserve banking?
tewj57 2 months ago
@Cenu911 No, there is actually 1000G circulating around, and people think they have 2710G in their savings. In the real world, a single person can withdraw SOME out of the 2710G pool and everyone else would be fine. However, If EVERYONE withdraws 2710G then there would be a bank run because there is only 1000G in the system.
poorperson 3 months ago
Now wait a minute.
You have 2710g in circulation that are supposed to equal the 1000g in your reserve vault. Isn't this hypothetical series of events that an act of fraud?
Cenu911 3 months ago
@Cenu911 what really makes it a fraud is the fact that the new money created steals value from the current existing money, which decreases the value of each single dollar, this is a "hidden tax"
ppsp3 3 months ago
@Cenu911 also the interest charged is even more a fraud because the money to pay the interests doesn't even exist, which is mathematically garenteeing that the poor will get more poor and rich will get more rich
ppsp3 3 months ago
@ppsp3
The interest charged does exist but he doesn't mention it to avoid confusing the shit out of the normal person. The bank takes it in as revenue so that it can pay its bills so it can do the things it does, such as FRB, so that everyone can get what they need/ want. When everyone can get what they need/want sustainably, then thats all what a healthy economy is.
poorperson 3 months ago
Thank you
noormusab 3 months ago
i serously don't get how they create money. The bank is lending out the money of one of its depositors (or is it creating out of thin air the same amount?) and then the irrigation farmer pays this money to the farmers. The irrigation farmer needs to repay the bank but where is it going to get the money unless it works for the bank. Therefore the money is not being created simply circulating right? But if it is only circulating then how does the money supply grow? :S
tacticalmastermind 3 months ago
came here out of intellectual curiosity and found it very easy to understand. great work.
soundman420 3 months ago
Low budget video with high quality information. Well done.
dabeesta17 3 months ago
Banking violates the First Law of Thermodynamics
kourosh89 4 months ago
This has been flagged as spam show
@kourosh89 well said
"Banking violates the First Law of Thermodynamics"
chrstsldr 3 months ago
Hey KhanAcademy thanks for breaking down a topic that's usually hard so hard to understand to an average joe like myself. You made it simple to understand. Thank you.
LyfeIzLike 5 months ago
Can someone please tell me how to download specific videos from Khan Academy
ionuorah 5 months ago
People sometimes argue that bank runs are protected by FDIC.
Understand that allowing the banks to commit the fraud of Fractional reserve banking becomes like a tax on citizens.
Now here we are still effected by the toxic assets and have to do Quantitative Easing...
It is FRAUD plain and simple.
Just like if the farmers sold apples that they never grew.
Maybe we should all of us, loan out assets we don't posses and charge interest.
How would that work?
RJSoftware2000 5 months ago 2
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RJSoftware2000 5 months ago
PLEASE GUY STOP REPEATING THE LAST LINE YOU SAY!
aswayb 5 months ago
isnt that a ponzi scheme by definition?
KillerWhaleSFl 5 months ago
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@KillerWhaleSFl LOL...no its not a Ponzi Scheme. You get interest on your investment. When you have a savings account at the bank, don't you get interest? A ponzi scheme is where you lose your money if you invest later. The people that invest earlier get their money back.
HaHaStuPadasso 3 months ago
Simple and brutal
BASABASA4747 5 months ago
A biggest public campaign has started to abolish fractional reserve system. Visit POSITIVE MONEY website and support the campaign.
PositiveMoneyUK 7 months ago
FRACTIONAL RESERVE BANKING is actually unconstitutional. The thing is that these banks make so much money by creating money out of nothing that they have control over politics. No matter what anyone tells you...the truth is that commercial banks CREATE MONEY EACH TIME THEY MAKE LOANS. THEY CREATE MONEY OUT OF NOTHING.
Francescaalejandro 7 months ago
@Francescaalejandro ... Did you even watch the video?
Muso992 7 months ago
Can someone please explain what happens if the factory workers due to whatever circumstances, maybe better skill and know-how command more salary than the irrigation workers? Not only that suppose there are more number of technicians/workers required than the simple irrigation workers how is the factory boss gonna fund the salaries coz in the example we've seen how money has progressively lost value from the irrigation workers to the factory workers.
Please help.
spyk316 7 months ago
Our money hasn't been backed by gold for over a hundred years.
BillWilliamsonSr 8 months ago
@BillWilliamsonSr That's untrue. Until Nixon abolished our tenuous link to gold in '71, dollars were still convertible to gold. If you're curious in further reading, I suggest Murray Rothbard's "What has government done to our money", available freely online (just google). There's a fair amount of basic explanation of "what is money", and it progresses to explain how inflation is theft.
andrewldexter 7 months ago 11
@andrewldexter Have a nice day.
BillWilliamsonSr 7 months ago
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@andrewldexter
Please can you answer my question? Its on the top.
spyk316 7 months ago
@andrewldexter
Inflation is not theft! But of course we don't want our earned money to devalue. These Keynesian fools claim that we need inflation to beget higher demand when the absence of demand for product simply reduces costs in reducing the proximity of capital to serving some human end, thereby enabling production for a future, as-yet absent consumption. Begetting such investment over time prior to finalising product distracts from producing 4 present consumption so the rentier charges
cannotbebothered100 3 weeks ago
@andrewldexter
(cont) so the charges from the rentier are desirable in raising interest to impose costs of capital when there is consumption and to induce good allocations to raise dividends as of course the basis of social economisation for others is being influenced to consume less of what others need and to reduce strain on care systems for lower insurance premiums/prices etc. If hoarding arises then costs will fall to offset rates that might not & notes for loan receipt would on free markets
cannotbebothered100 3 weeks ago
(cont part 3) would on free markets be differentiated from banknotes for 100% deposits else trust in that notes likelihood to maintain its value would fall, its expansion of banknotes of unconditional redeemability would cause insolvency and acceptance of it would fall compared to the notes of banks that differentiate between money substitutes and certificates for redeemability of loans or fractional reserve loans
cannotbebothered100 3 weeks ago
so that loans themselves would no longer increase the money (proper) supply only for money taken out of circulation until its note of deposit is cashed in and extinguished. If a bank were to conflate notes for specie lent out be it called fractional reserve or a time delayed bond or whatever, those notes would find deficit of reserve behind them and thus cumulative lack of trust in them since they aren't for actually deposited specie
cannotbebothered100 3 weeks ago
part 5) thus FRB or bond certificates would be different from money notes proper
cannotbebothered100 3 weeks ago
Yno it's funny there are so many people that belive FR banking is robbing people of their money, that you would think these bankers WANTED you to think this were true. Anyone agree?
alohastewie 9 months ago
@alohastewie No, It's lending people paper and digits then using scarcity to attain their material wealth.
mmtot 8 months ago
You take way to long to get to the point of what your explaining, I know its a general audience your trying to appeal to here but I doubt many of your viewers here are associated with watching shows like America's Got Talent. I come from an accounts background and I enjoyed your colourful use of accounting terminologies throughout your video, but please less emphasis on simplicities.
Darksoul2x 9 months ago
Great video, makes banking easier then some teachers teach (:
serenememories 9 months ago
ERROR, TRY AGAIN
paulceltics 9 months ago
in reality, the banker loaned out 10,000 in notes against that 1000 gold. THAT's how fractional reserve lending works. In Scripture it is known as USERY! It was first used in babylon by the jewish bankers of the day. The farmers also got screwed because the thieving banker didnt cut them on the profits he made from their gold, nor even told them about it! Banking is fraud from the ground up! It always has been and always will be.
bluesjammingman 9 months ago
Uh? How exactly does the irrigation project get finished if you've loaned out the money to the factory workers? How would the factory workers work on a factory had you continued and lent the money out to someone else? This isn't about the factory or the irrigation at all, is it? This is about you collecting interest on the most amount of loaned money as possible.
Shenanigannery 9 months ago
i congratulate you ... you explain this very well instead of these nutty conspiracy theorist who tell you that the bankers are robbing the people .. MULTIPLY EFFECT IS GOD FOR THE ECONOMY
MyArchie17 10 months ago
@MyArchie17
They are actually robbing people, they're using people money and making fake money they don't have and when something goes wrong then we have our current world crisis. using this video example the problem is when those projects go wrong and workers don't get money and so they can't deposit, the banks loses that money which is people money and will not be able to give it back and now people pay for the bank mistakes. it's the perfect business, they just play with other ppl money
DeathSpawn666 9 months ago
Youtube Ron Paul Federal Reserve good stuff
RunLiberty 10 months ago
Problem is, you can't do those projects "simultaneously" with gold, because you can't print gold. So, when you said the projects could be going on "at once" at 8:20, it was a misleading factual error. Instead, you'd have to wait for enough gold to trickle back into your bank (when people are paid) before you could lend it out again - in a much smaller amount, of course, than 810 units.
EvilUSAandthe911Lie 11 months ago
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EvilUSAandthe911Lie 11 months ago
son needs a haircut? wtf
robertplant634 11 months ago
the 900 loaned out to irrigation is not the same 900 that the workers deposit. It really creates 1800 for the bank. For example if you purchase an airline ticket through a travel agency on your credit card for 700, Once the travel agency deposits it it becomes a second 700. So that creates 1400 circulating which is really suspicious to me.
busybuzzbuzz 1 year ago
Very interesting video. But this doesn't take into account 2 things:
Deposits from people you haven't given investment money to, and the return on your investment in the irrigation and factory.
b3rkut 1 year ago
I don't quite understand. Shouldn't we also be counting the money that the Irrigation guy and the factory guy still owe to the bank amongst the money in circulation? That is, shouldn't we count that as negative money? The farmers have 1000G entitled to in the bank, The irrigation Workers have 900G they are entitled to in the bank, the factory workers have 810G they are entitled to, so doesn't the Factory owner have -810G he is entitled to?
rufsketch1 1 year ago
@rufsketch1 It's all negative money. It doesn't exist. (Except what the farmers originally produced.) That is the only real creation of wealth.
The job of fractional reserve banking, backed by the federal reserve for a certain amount, is to cause inflation. It's designed that way. It cannot cause anything but inflation. You are making money up. Also called counterfeiting.
asleeperj 1 year ago
@asleeperj - you're obviously confused by political propaganda; money is an abstract concept; in history tea, sea shells, tobacco and etc have been used as money; yes, i know you are going to say gold is money; but gold is only considered to be money in an abstract sense; value/price isn't necessarily intrinsic to anything; demand is what gives everything a measurable value; with no demand for gold, there's no value; it's the same for dollar bills, its value/price comes from demand for it
sfiorare 1 year ago
Maybe if I HAD money, I'd be able to understand this better. I never have any opportunity to actually turn the theory into experience. I learn better by experiencing it.
That's why I liked playing the Stock Market in Economics class. We 'bought' stock and watched what it did. We didn't really buy it, we acted like we did.
That helped, even thought I don't understand how every stock I selected made money and increased my stock.
vickiormindyb 1 year ago
@vickiormindyb you are describing an investment in an individual, or company, and not into a complete banking system. In the stock market if you see a company do things that you know will bankrupt them, you will pull your money out; however, in the banking system backed by the tax payers you don't worry about it because your money is guaranteed.
asleeperj 1 year ago
Your counting that money as a liability AND and asset??? It's almost like your counting it twice??? Honest Interest does not create REAL money. People have to sell real goods and services to satisfy that interest. Take a room full of people. Split the room in half. Loan one side's gold (money) to the other side. Does that create more gold (money)?? OF COURSE IT DOESN'T
66chevyo 1 year ago
What's money?
JinxOz 1 year ago
Sir, when you say 10% Reserve in the example of 1000 gold pieces, is the 10% the same as capital adequacy ratio or CAR. Thanks.
james02Perry 1 year ago
Super stuff, Sir. Though all examples are hypothetical as expected,one can easily connect with the real world. Thank you for sharing.
james02Perry 1 year ago
@nalcow The reserve ratio is determined by the Federal Reserve, and is completely subject to their whims. They can change it with or without approval from Congress. Not good...
ndcomix 1 year ago 11
Sal.. in the US the reserve cash is always 10% or is that's only as a example? thanks.
nalcow 1 year ago
lets say the bank is the only bank in the world, and those 1000 gold pieces are all the gold in the world, and the bank loans out 2700 gold pieces throug the fractional reserve system, how are the companies who took out the loans going to pay back 2700 gold pieces from 1000 gold pieces with interest tacked on.
Arkanon89 1 year ago
@Arkanon89 they cant thats why the system is faulty. The only way to get the interest is by taking it from a forigen country by trade or war.
jayjasonbird 1 year ago
One of the simplest, clearest explanations yet of our banking system is the YouTube video WHY WE ARE IN SO MUCH DEBT. Recommended.
SilentNoMorePubs 1 year ago 2
10% is never reserved: at the moment the major banks are annoyed that they have to reserve 7% - before then it was around 2%!
madkafir 1 year ago
10:1
if deposit is 1000 bank keeps 1000 as reserve (all of it) and lends out 9000????
is this the same thing or is that just the net result of completely exhausting the $1000 through the multiplyer effect? ie ends up creating 9000 of new money on a 1000 deposit. . . .
either way wouldn't debt destruction reduce the money supply.....therefore even though the FED is printing huge amounts of money, if they dont keep up with debt destruction we will still experience deflation..thnks
salonwithapeal 1 year ago
What about interest? The "money" wasn't created (borrowed) to pay the interest (on loan #1). So more money must be borrowed(created) to pay that interest (loan #2). And a cycle of loans starts - forcing the economy(ex. apples) to increase. However, no increase=no new loan=not enough money to repay loan #1=recession. So if we always grow, we won't get hyper inflation or depression. But how big can we grow before we destroy the environment?
namanclothing 1 year ago
Isn't what you just described full reserve banking? From my understanding, in Fractional Reserve Banking, if someone deposits 1 dollar in the bank then you can lend out 9 dollars thus increasing the money supply.
bonfirejovi 1 year ago
Wow and here I though that only central banks could increase the money supply! This is legalized fraud. Does anyone have any idea of how expansion of commercial money has influenced inflation? Is FRB as bad helicopter Ben?
bonfirejovi 1 year ago
finally a sane view on Fractional Reserve Bankind
SandipDev 1 year ago
@jaguarclaw No, governments create bonds through which they buy money. The government is the cause for the transaction, not the banks. Alot of people erroneously put the blame on banks because they don't make this simple connection.
Say you have an army, and political support as well as the control of bank regulation under your power, you can force any bank to supply it's currency for you to use, whilst you have a scapegoat that better do what you say otherwise they lose your powerful business
ExquisiteDoom 1 year ago
OK - here's the problem we're having with gold.
FRB CAN happen with both of the moneys - gold or paper. the problem of FRB is simply that there is MORE money chasing the SAME amount of resources: a bust HAS to ensue.
With gold, FRB is severely limited because the people always exchange their paper receipts for gold bullion. This puts a limit on the amount of inflation that can take place.
In ANY case, with FRB a bank run can happen, and this alone proves FRB to be evil.
evangrogers 1 year ago
@evangrogers That doesn't mean it's evil, it just means it's risky. I thought i'd clarify. My opinion is that it is "evil" only and only if it is leveraged politically by the government.
ExquisiteDoom 1 year ago
@ExquisiteDoom FRB is evil
IF anyone else were to do something similar to FRB in any other industry, you'd be arrested for fraud.
evangrogers 1 year ago
@evangrogers Well sorry but today you will learn that fraud is subjective. Many companies that use pool accounts out there for commodities actually perform fractional banking. Seeing as how their losses aren't socialized they have a huge incentive into being solvable and responsive to their clients, whereas the bank is virtually immune from reprisal. Will you arrest these innocent people whom provide a service people like and want on the basis that "they are evil"?
ExquisiteDoom 1 year ago
what a scam. this is why regulation is needed. all this loaning does is create more and more interest. as interest in included in each step where you loan stuff out. sure each depositor gets interest, but if there is no regulation, the bank is free to keep loaning out more than they actually have in hopes of earning more due to interest. what if a scare happens and every one pulls their deposit? or if the bank gives out a bad (housing) loan? it all crashes. the bank gets "too big to fail"
kzymeth 1 year ago
@kzymeth what you are describing is a "bank run", since the advent of the deposit insurance (fdic) bank runs are relatively uncommon. the federal reserve also acts to prevent bank runs as well.
dogcow666 1 year ago
what a fucking scam , hopefully other people will go line some of these bankers up soon.
MrMick73 1 year ago
This is about creating wealth. When it is leveraged, more is created. Banking is a service industry. Think in terms of "value chain". Each player adds value so you at the end of the chain add value to your life.
carminepascucci 1 year ago
This has been flagged as spam show
This video sucks. FUCK YOU
JTMarlin8 1 year ago
why is equity on the liability side of the balance sheet?
lwanatt 1 year ago
Because it represents the business as a seperate entity. If you own the business, it owes you that equity. If you sell the business, it or the new owner owes it to you. ie.; The business is not you.
carminepascucci 1 year ago
@lwanatt its called retained earnings - assets = liabilities + stockholder's equity
smartcardia 1 year ago
This was an explosion in profit, sense they were getting stupid money with that concept. Today banks are still allowed to practice that old tradition of loaning out 10x more money than you have, and hopefully the interest will pay for what the bankers didnt pay to actually start theyre bank... If we are paying the Gov-bond for the bank to start and they dont pay up theyre half, and we are stuck with the bill they get more money, and now banks are the biggest buildings in the world
YahweshaBenIsrael 1 year ago
Here is the problem i was having, okay some of that seems clear but one factor you said that the bankers arent making anymore gold?
But that doesnt seem to be exactly how fractional reserve works,
England began with gold when they werent using sticks so they actually did have goldsmiths, and naturally goldsmiths became the bankers, because they gave out recipts to keep your gold...
this lead to gold smiths giving out more receipts for loans, than they actually had, and with interest.
YahweshaBenIsrael 1 year ago
Attention world this man "Dr. David Lewis Anderson" has created a time machine. This is the truth.
dellwon 1 year ago
All of these lowly farmers planting gold in the ground.
endgammer 2 years ago
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endgammer 2 years ago
This guy doesn't understand that you can't multiply gold amount by pressing a few key strokes. Yes, you can initially, but when the mad mob is at the bank door you can't just print new money to pay them off. You'd have to get real gold from somewhere... that's the whole point why gold isn't compatible with fractional reserve banking...
bart12121314 2 years ago
@bart12121314 Gold standard was finished in 1971 by Nixon, now there is only money (paper with color).
aarkerio 2 years ago
agreed 100%
bart12121314 2 years ago
I'm not sure how your comment defies my statement that "gold isn't compatible with fractional reserve banking (system)" ...
bart12121314 2 years ago
sorry,
what happens to the cash when it is used to pay back loans?? does the bank keep that cash for itself??
biagiolembo 2 years ago
you are great!!
biagiolembo 2 years ago
If you went and asked the poeple who had deposited some money how much they had on their accounts they should reply NONE, because its frozen until a certain date. Otherwise the bank wouldnt risk bulding the house of cards your portrayed for fear of someone comming and withdrawing the bottom card/original gold deposit
fergus247 2 years ago
Correction: Not bottom gold deposit, but underlying gold deposit
fergus247 2 years ago
rofl
popartcatharsis 2 years ago
ur lucky he hasn't shown u what credit and debit mean rofl
popartcatharsis 2 years ago
What a big fucking sham. The money changers should be hung. They have ruined America!
bombdoghandler 2 years ago 2
Andrew Jackson, US-President: "I KILLED THE BANK."
Last brave man standing.
Besides JFK.
result321 2 years ago
Not bad, but the trouble with this is that modern banks use "chequebook money" based on a fiat currency.
When you ask for a loan, they literally just type it in. In the case of mortgages with 10% (100,000) money down, they bank does not even need any money at hand to create $1000,000. Since the "deposit" includes the cash they need to maintain the reserve. Not to mention some banks were inflating 40 to 1. See "Money as Debt" also on youtube.
BarringtonDailey 2 years ago 3
excellent work
Muhammadtariqgondal 2 years ago 3
Theres a big difference... Gold has to be mined. Keep in mind that gold does not only yield a monetary value but an industrial value as well which makes it difficult to devalue. This is just a fact... Paper yields only monetary value which constantly changes based on global economic events. Inflation is a another key factor being that if one bank goes under then money can be printed to cover the loss (FDIC) meaning that the money losses value. This effects everyone that holds paper money.
lighthammer2531 2 years ago 3
Gold cannot be printed meaning that if a gold holding bank went under, the chances of being covered for a large amount (Lets say a trillion dollars worth) would be slim to none meaning that only the people that dealt with that bank are effected. Meanwhile other stable gold holding bank and their customers will do just fine as their gold wont face devaluation due to the inability to inflate the gold supply.
lighthammer2531 2 years ago 3
In the end fractional reserve lending is a major risk as it depends on the customer to pay the loan back. But this is why there is collateral. If a customer defaults, they can eventually be sued and have property seized. As long as the property which is seized has been valued correctly then the bank can get their money back by selling the seized property. The major problem we have had lately is the over-valuing of property.
lighthammer2531 2 years ago 3
As a real estate appraiser I know a bit about this. If we are talking real estate with inflated values then thats where the problem occurs. The bank has the over valued properties on their books that wont even sell for 50% of what they loaned for it due to corrupt brokers, RE agents and appraisers. This is why RE prices are going down so slow... The lending institutions do not want to suffer such a loss so they keep the prices fixed but its not working.
lighthammer2531 2 years ago 3
Don't you think it is also a matter of whether one will keep their promise? Money is really only as good as the commitment to a promise. The society that supports its money determines the value it possesses on a global scale.
njneopatriot 2 years ago
njneopatriot:
Not sure if I am following you completely on your statement but I will do my best to answer. Fiat currency is only as good as a commitment to a promise as fiat currency has debt attached from the very beginning. There is only one controlling source (Central Bank) which operates as "the" primary lender for a nation. This controlling source issues credit that it knows can never be paid back causing permanent debt. *Continued on second comment*
lighthammer2531 2 years ago 16
@lighthammer2531
They cannot dumb the dollar because nations have to pay in Federal Reserve Notes if they want to buy petrol. Kissinger set this up. While nations must pay in Federal Reserve Notes, we offer protection to the present regime. Military protection that is. We offer them armaments. We keep them in power.
Francescaalejandro 7 months ago
*2nd comment*
In this fiat world money continues to lose value as more and more is created from nothing. This has enabled several entities to buy up foreign assets for basically nothing while the dollar keeps falling. Currently, several nations are seeing this and getting angry as their dollar reserves and US investments continue to lose value. In turn they are holding private conferences about dumping the dollar and going with a new world reserve currency.
lighthammer2531 2 years ago 21
@lighthammer2531 That's why CUBA doesnt sell themselves to this scam!!!!!! THey value their ressources and they value the production of the Cuban worker.
sanctiX 10 months ago
@lighthammer2531 And if that currency were also a fiat currency, it'd be doomed to the same fate.
axelasdf 5 months ago
This is not the fractional reseve method used by the modern banking network with the Federal Reserve as central bank. Reserves are now government securities and treasury checks. Modern fractional reserve method increases the actual money supply while this entire supply is loaned by the bank with unmonetized interest.
motoiyogi 2 years ago
Excellent video - explains it very clearly.
AlephNeil 2 years ago
Are these people watching the same video I am? Gold is not magic, in that it doesn't defeat fractional reserve lending. That is the banking system explained here. If you only count money as gold, then no new gold is created. If you count money as deposits in a FR system, new money can be created as demonstrated. Pay attention.
ChristopherMarlowe 2 years ago
To everyone saying it doesn't work with gold, look at it this way. Gold is not created out of thin air, money is. The non-gold money doesn't exist in physical form. If 1 man made a deposit of 1000G and then a 2nd man asked for a loan of 900G at a 10% reserve rate, the 2nd man has 900G and the 1st man knows he has 1000G in his bank but only 100G is left there. If he were to withdraw any more than 100G without the 2nd man repaying his loan, there would be a bank run.
Orygyn 2 years ago
You can't define "having money" both as having it physically (with an equal debt to the bank) and having it deposited in the bank.
artursoler 2 years ago
it looks like madden is explaining a football play
99mees 2 years ago
He said that the people who deposited the gold think this, but would discover that this was not the case if they all came to the bank to claim the gold, they thought they had
charlessmyth 2 years ago
This can totally happen with gold. Go back and follow the video again. This time, assume that everything happens in the same day. Then look at the money supply - as defined by M1 - at the end of the day. Farmers deposit -> loan to irrigation -> money to workers -> workers deposit -> loan to factory builder, who deposit loan back into bank for time being. It makes sense!
00dfm00 2 years ago
This video is completely flawed, because your treating gold in the same way paper money is created now adays. It is created out of nothing. Your creating gold out of nothing, so of course it will have a multiplier effect.
FiddleRockStar 2 years ago
Lies it cannot happen with gold.
Gold cannot be created by banks out of nothing and cannot be printed up limitlessly by the fed.
That is why gold is fair and constitutional and Federal reserve notes are a fraud which has devalued our money by 96%.
This video is a croc of shit.
dieyoubastards 2 years ago
@dieyoubastards it CAN happen with gold, he explainswhy it can happen with gold. The problem that he ignores, however, is that MORE money is chasing the SAME amount of resources. Creating more money does NOT increase the amount of resources, so the bust will still follow.
The thing about gold is if you use a RECEIPT for gold, then FRB wont' work well. If you have a paper money that is backed by gold, and they inflate too much, then people will just ask for the gold. which leads to a Bank run
evangrogers 1 year ago
@evangrogers exactly! RUN the banks,put the parasites out of business,and make them find honest work instead of enslaving hard working people through FRAUD!
dieyoubastards 1 year ago
Paper and gold are not the same thing. While the gold has a 'real' value - money itself is an illusion and is valuless. It is perceived to have value and that perception is based on the reserve of 10%. The more money in the system = more debt needing more money to service that debt. The more money there is in the system, the less its worth. There is still the same amount of gold in the system.
waynethecelt 2 years ago
Fractional Reserve Banking is theft: it creates money ex nihilo for the benefit of the banker at the expense of the nation: FRB causes inflation (quantity theory of money).
Your examples are misleading: most loans are not invested in domestic development, but unproductive holidays, gadgets, luxurys via credit cards and loans. The bank benefits, the nation loses out.
Ontologistics 2 years ago
Real Value Thoery > Quantity Theory
jefflehman 2 years ago
I don't understand how FRB creates new money. If you loan money, you are simply transferring money from one person to another. There is no money creation. I've been trying to discuss this issue with people, but nobody can explain to me how FRB is inflationary.
D4Shawn 2 years ago
The way he does it is misleading because the bank never really gets rid of the farmers 1000g.
yuothineyesasian 2 years ago
he does say that all the gold is on reserve in the vault
waynethecelt 2 years ago
Yes but everyone has the money at the same time. If the bank keeps track of the loans and liabilities then they can balance them on the budget sheets at the end of the month/year, but there is still more money in the system than there was at the beginning. That's why he says "people think they have 2710 gold pieces." It's counter-intuitive that's why it seems so misleading at first, and why D4Shawn just can't get it.
yuothineyesasian 2 years ago
See, if you watch the end of the video he proves me correct. He says "People think they have 2710 gold pieces" and these people really do have this much gold. they just can't have it all at once. This is the creation of money that I was trying to explain to you.
yuothineyesasian 2 years ago
Hmmm... I wonder why they can't have it all at once...
I don't suppose it's because there is no new money; it's the same money being spent at DIFFERENT TIMES.
D4Shawn 2 years ago
I used the wrong words, They CAN have it all at once, that is what makes it new money. But the chances that everyone would withdraw at once is so rare that the lending rate, the "reserve" is set at ten%.
If it were the same money being spent at different times then it wouldn't be possible for each individual to withdrawl at any time
yuothineyesasian 2 years ago
But FRB does not transfer money, it creates (usually) nine times of the actual money it has. It IS money creation. And that happens after the central Bank (e.g. Fed) prints money ex nihilo for Bonds!
Ron Paul wants a return to 'sound money' (i.e. full reserve banking).
Ontologistics 2 years ago
the creation of money has nothing to do with fractional reserve, the creation of money comes from the ability of the banks to create an iou note, give it to the depositor AND lend out the money given to them. the fractional reserve is there to limit this ability.
nosson77 2 years ago
Wrong. They can lend out 9 times the IOU! That is creation of money as FRB.
Ontologistics 2 years ago
"9 times"
where do you get this number from
nosson77 2 years ago
10% reserve requirements
Rockin2Long 2 years ago
You go to a bank, and ask for a loan for a house. The bank takes the loan as security for your loan, and gives you let's say 2000 dollars for the house.
Where do you think these 2000 come from? It's not transferred from another account, it is created. Try looking at wikipedia about FRB and you will understand much more.
IT IS creation of money, it happens digitaly and it all would collapse if everybody did it at the same time, a so called "bank run". Google is your friend.
kefthexa 2 years ago
You can't know how much these videos about finance and banking have opened my eyes! Been watching them for several months now, and it's finally sinking in. Thank you for all your wonderful work, Salman!
astroleila 2 years ago
Zeitgeist did this same video. Except it had scary music
BigPurple121 2 years ago
Fractional Reserve banking can work in a true free market. If competing bank notes were allowed and FDIC was repealed. Without these no one would invest in banks that overextended themselves with bad loans.
BlindWebster 2 years ago
Literally though, the amount of gold in circulation doesn't change when you use gold. If you had a run on the bank, you'd be screwed.
LiSyaoran3063 2 years ago
american do too much borrowing!!!!!!
jackuy12345 2 years ago 3
Agreed! FAR FAR FAR too much borrowing. No one here knows how to live within their means.
stitched83 2 years ago
yea they have no idea what they r doing and just borrowing money and start their random business which will fail
jackuy12345 2 years ago
I hate to live within my means. In fact you don't have to. Just be a little smarter than the average then you will be ahead of the game.
theartofluv 2 years ago
Yeah, but this in a normal result of the increasing gap between production and purchasing power. It's a consequence of the flawed fiat monetary system.
draggeddownthehole 2 years ago 2
This comment has received too many negative votes show
not really dude, america was great in the 80s and 90s but now stupid bank lending ppl money for shitty projects and it will fail
jackuy12345 2 years ago
Oh really? Ask old people how much deeper into debt were the people and the governments in the 80s and 90s compared to before. It never stopped piling since the times of Lincoln and Jefferson.
draggeddownthehole 2 years ago
wow dude u have no idea how bad the economy is right now do u? if u saying u r sooo great at this why dont u go tell obama UR PLAN and SAVE AMERICA, if u think u r soo good go to white house and tell them what u can do
jackuy12345 2 years ago
I never said the economy was fine, I'm just correcting your wrong statement about the state of things in the 80s and 90s. The economy is about to collapse, but on purpose, by the crisis engineered by the international banksters. I would have a plan but they know how to save America already, they just want to do the exact opposite. No need to get angry.
draggeddownthehole 2 years ago 2
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so u correcting my shit? u need to calm the fuck down, reply me if u want to suck my cock
jackuy12345 2 years ago
we borrow the future, later we just default the debt and start all over again.
theartofluv 2 years ago
yea yea yea if u r soo correct why dont u tell ur idea to the white house and save california, all u have is talk but no action
jackuy12345 2 years ago
yup just as i thought, u learned nothing but say the same thing over and over, u know nothing about economy or america, all u can do is talk
jackuy12345 2 years ago
Did I hear you say Liability=Asset? Enron did that, and we know what happened. Someone need funding for a project, he can go to the farmer and borrow it. So why do we ever need a bank? but modern economists say "it's not efficient". If borrowing doesn't creat product, why borrow in the first place? So without bank, money at least is honest. But bankers want "activity=economy". now money is a fraud.
glassvision 2 years ago
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Elisedfgs 2 years ago
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lorsdfs 2 years ago
And if it all goes tits up, you simply tax the gullible public to cover the losses.
To compare gold to FIAT money as though there is no difference is an absolute joke!
swiftysmithuk 2 years ago
@swiftysmithuk - Most of the pulic could not care less as long as they get to watch their reality television programs, they are so pathetic that it's funny. Peace!
Lingerfoot 1 year ago
Legalized counterfeiting...
PairoftheSocks 2 years ago 4
Funny to listen to the pro paper guy always define it in gold when you could simply use dollars; but this is very clear, it just takes a while.
carracer481 2 years ago
took a while to get to the point but made it very clear. 5 stars.
stevehawking 2 years ago
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All these examples use fixed or circulating capital examples which involves expanding productive capacity and is more tolerant of speculative growth of the money supply since it creates equity. Most of the fractional reserve lending is aimed at housing which produces squat. This cannot support the interest payments since its mere asset inflation. This recent bubble ended with the monetization of low quality debt and its failure has led to demonetization and depression