Banking 5: Introduction to Bank Notes

Introduction to bank notes (which you are more familiar with than you realize).

Category:

Education

Tags:

• federal
• reserve
• bank
• notes
• cash
• currency

[murtleman224]

Sal if you have bank notes that are owned by the Fed reserve and are lent at interest doesn't that mean you are always loosing money to a privately owned bank

[khanacademy]

I assume you're talking about holding bank notes issued by the Federal Reserve (i.e. dollars) that aren't getting interest in which case you are making an astute observation. This is how the Fed has money to operate without taking taxpayer money (in normal times). It gets interest on the loans it makes to banks but pays no interest on the reserves kept with it or the notes (dollars) that it issues.

[GtheMVP]

you need to clone yourself so you can spread your common sense better, this world needs it!

[dsglop]

This vid explains quite well that it doesn't matter if there is gold "backing" our dollar because gold and paper currency serve the same function.Products and services back our economy so no stock pile of gold is necassary.

[bruincafe00]

@MrJoeyboomboom Yes, but the person I sold the house to got money from where? Remember my stipulation? There are only a limited number of GP, and the fact that the person bought my house for 100GP means he/she had to get the money from somewhere (which has interest on it).

I can't sell the house to someone if they don't have money. And if they do have money, it's because they've borrowed it (just as I have). If everything stems from interest... well, my case holds.

[TheCapitalistdog]

@GtheMVP

Dude, I've seen you post on Stefbots videos

Weird coincidence. :-D

[Raeez100]

Sal, we are in fact paying interest to the federal reserve for the dollars that we have.

The currency we have is constantly DEVALUED due to the effects of INFLATION, which is under the control of the Fed Reserve Bank.

So the purchasing power of the dollars that we own decreases EXPONENTIALLY.

We are in fact paying COMPOUND INTEREST!!!

[MrJoeyboomboom]

@bruincafe00 let's say you have 0 "GP" as you put it. You borrow 100GP from a bank, but must pay 10% interest, and start a business building houses by yourself. By the time you complete one you've spent 50GP on whatever. You then sell the house to someone else for 100GP and now have 150GP. So after you pay the bank back 100 plus 10GP (10% interest) you have 40GP and you didn't have to borrow from anyone else.

[cjwtech]

@dsglop Yes, but gold is a limited quantity, so we cannot produce it at any rate we want to. Paper money is producible, so the Fed will produce more when it needs it, making it less valuable than gold.

[jewbinson]

@seany282 Sal is using gold in his examples, but in this context the gold is immaterial: he could be using salt, or plastic, or glass, or pieces of paper, or whatever. It doesn't matter. It's what those things represent which is important (that thing being "value").

[seany282]

just asking you are using gold but what is like gold to money now because ive been watching alot of videos lately and nolonger banks use money to gold ratio? or something like that hope you know what i mean and can help :)

[jewbinson]

Hey Sal, these videos are very interesting and informative. I have one question though.

How do you build Sal's Bank in the first place? Surely you need builders to pay to build it. Where does the money to pay them come from?