How is money really made by banks? - Banking 101 (Part 3 of 6)

See the evidence: http://www.positivemoney.org/how-money-works/banking-101-video-course/how-is-money-really-made-by-banks-banking-101-part-3/ PART 3: How is money really made by banks? Three Forms of Money - 00:02 The Balloon Model - 03:01 What determines the amount of money in the economy? - 05:18 Exactly how banks create money out of nothing - 06:20 Inter-bank settlement: One payment - 09:35 Inter-bank settlement: Multiple payments - 12:40 Fractional reserve banking - 15:03 Reserve accounts & Real-time gross settlement - 16:10 -------------------------- Help us translate this video on Amara.org: http://www.amara.org/en/v/BgAJ/ -------------------------- SUBSCRIBE to Positive Money UK's videos: http://www.youtube.com/subscription_center?add_user=PositiveMoneyUK Like us on Facebook http://www.facebook.com/PositiveMoney Follow us on Twitter http://www.twitter.com/PositiveMoneyUK Follow us on Google+ http://www.positivemoney.org.uk/googleplus -------------------------- POSITIVE MONEY is a not-for-profit research and campaign group. They work to raise awareness of the connections between our current monetary and banking system and the serious social, economic and ecological problems that face the UK and the world today. In particular they focus on the role of banks in creating the nation's money supply through the accounting process they use when they make loans - an aspect of banking which is poorly understood. Positive Money believe these fundamental flaws are at the root of - or a major contributor to - problems of poverty, excessive debt, growing inequality and environmental degradation. For more information, please visit: http://www.positivemoney.org/ -------------------------- Animation by Henry Edmonds Help us caption & translate this video! http://amara.org/v/BgAJ/

Comments

1. rightly said
2. If central bank reserves are created by the Bank of England, how come they are used by commercial banks to make payments to each other? Who do they belong to? I'm in the dark.
3. Well no, the bank of england could have much control if there would not be the fractional reserve system.
   And there would be even more control if the bank accoutns would not be just a credit to the bank and if if would be a treated as a criminal undertaking if hte bank lends money from the accont holders without asking.
   
   So state, central banks and banks in that form and with that support for each other are the problem.
4. Well, this explains why governments bail out banks during a financial crisis.
5. This is somewhat true, for people who are denying this. This is why in Economics there is M0/M1 money supply or an M4 money supply. M4 money supply includes money created by banks by issuing loans. This is usually 5-6 times the amount of M0 or M1 money.
6. 6:42 - I've know about this stuff for three years now and I SMH at this process. Unbelievable.
7. Can someone with some actual knowledge on the subject answer this question for me? We are told that the reason the government cannot print its way out of debt is because it would cause runaway inflation. My question is - who regulates this? Meaning, if they were to print billions, who would know when the population is so large that the average person would not even know that the government doubled or tripled its printing output?
   
   I can imagine a small town where they trade with gold and someone (such as Mansa Musa) comes through and spends so much gold that the average person sees an increase in gold in his town and everyone has more spending power then the value of gold goes down. But on a global scale (or at least in the US or UK), who would even notice? Thank you to anyone who can explain this to me.
8. the money that the bank types in Robert account when he makes a loan could not possible be just numbers,. because Robert might spend that money and the bank should send the money to other banks. And it cannot send money that don't exist. This is miss - information. The money are already in the system. There is a limit to how much money the banks loan to people and is determined by deposits and banks equity.
9. You're using the word "money" really loosely here. Once you properly define "money", you discover that banks do not create "money" out of thin air.. When a customer deposits $100 and the bank lends $90 out of that, you don't magically have $190 in total "money", you still just have $100. It doesn't matter that the first customer thinks he has $100 in his account, in reality he only has $10 left in there, and cannot spend the entire $100 until the second customer pays back his loan. The total amount of "money" in the economy is not dependent on what number shows up in your checking account when you log in online, that's just how much the bank owes you. Total "money" in the economy is what there's actually there to spend, in this case, $100 the entire time.
10. This video somehow costantly makes you think that electronic money are somehow worse than physical money. But they are not :D. "It is easy in computer to create billions" well Mint can just make one coin and write it worth 100Billion as easy. There is no difference. Money in current economy are not covered by any physical thing, electronic or "paper"
11. Yeah money is created like that so what...? money is just a social contract money it self is nothing by virtual agreement, we use fiat money because we wont be barting around trading producst and services for another products or services... so if you work as clown for kids party will you go to the supermarket and made a little show to the cashier to pay for the grocery?
12. What about the Basel Accords?
13. If banks don't lend you their own money but instead just create it out of nothing then why do they care if you default on the loan?
14. This is so well explained. Thank you for this.
15. What software did you guys use to make this?
16. we are all doomed...triple face palm
17. Surely the Interest Rate set by the Bank of England is the fundamental influencing factor in the "mood of the banks", therefore the Commercial banks are not in control of the money in the economy in the way described in this video? Maybe I've missed something, but this article seems to backup my assertion : http://www.bankofengland.co.uk/monetarypolicy/Pages/how.aspx
18. NUMB£R$ grow on trees ? [nature] NO ? Numbers ARE MAN - MADE, then ? SO why do lack them ?
19. 3:43: Awesome video, but one error in a detail at 3:43 : The base money is not created by the government but by the central bank. And the central bank is NOT an entity of the government, but independent (at least officially/legally)!!
    
    More precisely, both the private banks' electronic bank deposites at the central bank as well as the cash generation is controlled by the central bank. The coin (royal mint) is maybe indeed created by the government for historical reasons, but that is a neglibible fraction of the overall base money.
20. Your information has helped me so much! I enjoy these videos.