Banking 11: A reserve bank

Introduction to the idea of a reserve bank.

Category:

Education

Tags:

• banking
• banks
• federal
• reserve
• currency
• gold

[jdrizd2]

I thought the fiat currency system was deregulated from gold several years ago and therefore this example would have no relevance to today's central banking practices. I am aware that if the government defaults on the loans there is a emergency contingent plan to remove all gold from central banks though.

[khanacademy]

I'm trying to get to modern central banks incrementally. We'll get to the workings of the modern Fed in a few more videos.

[dakshinamurti]

I wonder if Sal thinks this monopolistic system where one private cartel has the sole authority to issue currency and can print money out of thin air, and have no asset backing in Real money is the best we can hope for.

[khanacademy]

You bring up a good point. I think a lot about that and am going to address this issue once we get through the mechanics of how everything works.

[pongman]

Sal! Is there a test at the end of this series? If there is do we all get an MBA? Lol. Thank you for explaining all of this it is truly appreciated. I think you should open up a university and issue degrees to everyone. Thanks professor.

[khanacademy]

Frankly, they don't teach you this in business school (or anywhere in the formal education system as far as I can tell).

[balanemate]

This is very interesting, thanks, Sal, for expaining! Just why all this is not taught in business schools, formal education? Any ideas?

[dko02]

Sal, thanks for another wonderful video that explains how banking works. I have learned far more from your presentation than from any other source.

I do like that your presentation is very neutral and unbiased but essentially just logical.

Along with the other viewers, I'd like to hear your opinions about the current economic/financial crisis and what more optimal systems are available for us to choose.

[vainamoinen17]

End The Central Reserve Bank! lol

[mlevi2538]

nice.

mlevi2538@gmail.com

[AdrianAzian]

Thank You very much for the videos. I find this much more helpful than my macroeconomics class!

[clray123]

@angpetru No, the "excess" loans are not a "problem" at all as long as (1) they are collateralized (that is, the borrowers put up some form of insurance against default and their creditworthiness is scrutinized) and (2) the depositors know what is going on (as they do!).

The "excess" loans are essentially just a way for the depositors to let the bank earn more interest using their money (by getting involved into more projects) than it could otherwise do.

[MustangManiac1115]

@exquisitedoom Actually, no. Market creation of the central bank is still "evil". There is little need for the creation of the central bank if there wasnt fradulent fractional reserves in the first place. What would the banks need insurance on if they had all the money already? The only function a true, non fraud, market created central bank could do is supply a uniform bank note.

[allchangesintime]

brilliant as always. thanks for this :)

[Vikash137]

soo does this mean that a person can take their bank notes to the central bank and get gold? since the bank notes represent claim to that gold....

[oldereb38]

GOLD ASSET??? The Fed obtained $8.4 trillion last year from the auction of Treasury securities---OFF OF THE BOOKS--without Congress and the public being aware of it !!!! The Ponzi scheme Fed does not even report the income as they confiscate the wealth of the people and inflict perpetual indebtedness and national bankruptcy. Search the mathematical inevitability at RIP OFF BY THE FEDERAL RESERVE or 3W scribd dot com, message 48194264

[aleardo]

@balanemate they teach this at yale for sure 100% exact material .. not sure for other university .. if you are still in a business school or finish MBA that still do not understand this at all, you better get your money back for real .. you've just wasted too much time, energy and money being fooled by education institution