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newculture uploaded a new video
(1 month ago)
The economic crisis resulted from banks creating money based on unfillable promises. In 1 minute, discover an inherent flaw of our banking system....
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The economic crisis resulted from banks creating money based on unfillable promises. In 1 minute, discover an inherent flaw of our banking system.
The current rules allow banks to lend out 90% or more of the money of owed to depositors. This is known as "fractional reserve banking". These rules lead to the majority of all deposits in bank accounts being backed only by the promises of borrowers to pay back the loans, on schedule and with interest. If the borrows are unwilling or unable to keep up their payments, the banks enter a state of crisis, and the savings of all the depositors are at risk.
In 2008, such a banking crisis began, where the value of homes dropped to severely, that most, if not all, of the banks owe their depositors much more than the value of their assets, which are mostly mortgages. This situation puts the bank into a state of insolvency, where drastic measures must be taken just to keep the bank operating. The banks, unwilling to make new loans, create a credit crisis, which leads to less economic activitiy and spending, resulting in job losses, and a downward spiraling economic crisis.
In this ultra-compact one minute video, review the essentials of how banks create money from promises, and the inherent risk of such a fractional reserve banking system.
(Note: This is a 1-minute compact summary of longer 5-minute and 10-minute videos which cover the same concepts, although at a more relaxed pace and with many more details, and with different audiences in mind. Please see those videos for additional information.)
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newculture uploaded a new video
(1 month ago)
The economic crisis is the result of flawed banking rules. In 5 minutes, learn the basics of how banks operate and why the rules must change.
The r...
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The economic crisis is the result of flawed banking rules. In 5 minutes, learn the basics of how banks operate and why the rules must change.
The rules of banking allow banks to lend out 90% or more of the money of depositors under a system known as "fractional reserve banking". This leads to the majority of all deposits in checking and savings accounts to be backed only by the promises of borrowers to pay back the loans on schedule and with interest. If the borrows are unwilling or unable to keep up their payments, the banks enter a state of crisis, and the deposits of all the savers are at risk.
In 5 minutes, review the basics of how banks "create" money from "nothing" by lending out money based on promises of future repayment. If the borrowers fail to repay, and if the collatoral backing the promises is insufficient, then crisis results. This is a key component of the current economic crisis, which led to bailouts, financial crisis, tightened lending standards, job losses, and a recession that some believe will continue indefinitely.
(Note: This is a 5-minute revision of a 10-minute video covering the same concepts. The 10-minute video goes through each step in more detail, bringing in more basics, and created with a school-aged audience in mind.)
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newculture uploaded a new video
(1 month ago)
Children and teenagers, as well as adults, can quickly understand the concept of fractional reserve banking, with very little more that a basic ari...
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Children and teenagers, as well as adults, can quickly understand the concept of fractional reserve banking, with very little more that a basic arithmetic background. This 10 minute video walks step-by-step through fraction reserve banking process.
The video details the making of a deposit, the creation of a checking account, the determination of how much money is available for lending, the decision of a borrower to commit to a loan, the loan creation process, the difference between high powered money or currency or M0, and easily spendable money including checkbook money and cash held outside banks normally known as M1.
The video concludes with a look at how banks do not have enough cash to cover all of the accounts of the depositors, and how various issues with borrowers can put the banks into bankruptcy and insolvency.
An extension of this video would include additional depositors, banks, and borrowers. For elementary school students, some of the steps of account creation can be consolidated. Additional extensions can look at a banking system as a whole, the need for interbank lending, and the purpose of a lender of last resort central bank.
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newculture favorited a video
(1 month ago)
Ben Dyson is a monetary reform activist from the UK who has been consulting with the American Monetary Institute on what is now being called The Am...
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Ben Dyson is a monetary reform activist from the UK who has been consulting with the American Monetary Institute on what is now being called The American Monetary and Financial Security Act, which Congressman Kucinich has pledged to introduce into Congress.
He briefly discusses his views on the cause of the financial crisis which is our unsustainable debt burdens.
Recorded at the American Monetary Reform Conference in Chicago.
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newculture uploaded a new video
(1 month ago)
The crisis in banking, housing, debt and unemployment is a single massive and recurring problem that deserves the examination of systemic solutions...
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The crisis in banking, housing, debt and unemployment is a single massive and recurring problem that deserves the examination of systemic solutions including monetary reform.
After providing an extremely clear and compelling presentation on monetary reform at the 2009 American Monetary Institute Conference, Ben Dyson is interviewed by Local Future founder Aaron Wissner to discuss the causes of the crisis, how banks create money, and how to prevent a recurrence of this crisis in the future, and perhaps to also bring a quicker recovery now.
The current monetary system is structured such that most money is created when loans are created.
Under the current "fractional reserve" banking system, when a loan is made, 90% or more of the money of bank depositors can be loaned to the borrowers, but at the same time, the depositors consider 100% of that money available, and everyone treats deposit money as if were the same as cash.
The money that is loaned out then is paid to someone, and that money is typically again deposited back into the bank, and again around 90% of this deposit money is lent out by the bank. This process continues until the total amount of checking account "money" increases by 3, 5, 10 or even more times.
Banks have very little cash even though they have very large amounts of deposits. The deposits are backed almost entirely by the loans that the banks have made, and most of these are mortgages. In the event that the loans go bad, the deposits do not have adequate backing, and the bank becomes insolvent, leading to a monetary crisis.
A monetary crisis leads to a housing crisis or mortgage crisis, a credit crisis or financial crisis, an unemployment crisis and revenue crisis for government entities, a banking crisis and insolvency crisis for banks, and an overall debt crisis and money crisis for everyone.
Monetary reform attempts to add resilience to the monetary system by making improvements to the accounting rules that banks must follow, improvements to the monetary policy mechanism, and improved ways to issue money into circulation.
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