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How money gets destroyed - Banking 101 (Part 6 of 6)

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This explanation leaves out one very important detail: interest A borrower doesn't just need to repay the money that was created when the loan was issued (the principal), but also interest This means more money is owed than was created
Comment from : @ReimuandCirno

I think that the government, whether the UK or the USA, should deficit spend at around 2 to 3 percent of the overall GDP without attaching the deficit spending to borrowing money That way, there is enough liquidity in the money supply for people to repay their personal and corporate debts
Comment from : @michaelbme1983

Right, so the net takeaway from this series is that borrowing is great, because it means the money supply and economy will continue to grow?brbrA small point that I think you may have overlooked is that money is not a determination of economic valuebrbrbrA growing GDP figure is meaningless, if inflation means that people are paying more in real terms for all of their good - just look at Zimbabwe, with its heptillions of Zimbabwean dollarsbrbrI'll tell you what is an insane way to run an economy though: using increasing the supply of money as a justification for adding even more borrowing to the existing trillions of pounds of public debt
Comment from : @toma3025

A beautiful video that simply explains if you think about it and make the connections, the reason for inflation and recessions
Comment from : @mornnb

I don´t understand the part of the "destruction", yeah you pay your debt and that erases the liability that the bank had for borrowing and also the bank of the service/goods providers "lost" their assets since the debt is paid, but someone HAS to have that money The bank of the recipient of the money has to pay them what the borrower owed them, the good was brought and the money is now paid, but why it is said it literally stop existing, the person that received the money of the loan has to have it, that is the point of accepting money the other person don´t physically have but the bank promised they give it to him so he have it in their account, you get that money, it is now from the persona that got pay
Comment from : @marlonrojas1864

What happens to physical cash if physical cash is used to pay loan?
Comment from : @xabiergaray4264

Great series
Comment from : @vn737

what if we revert back to COMMODITY based currency?
Comment from : @intranext1359

I will pay my debt no matter what I'd rather see economy collapse than have to take debt to support economy
Comment from : @mbrp5107

Not with cryptocurrency!brMoney doesn't have to be debt!
Comment from : @LarlemMagic

For fock sake, let us have finally have full reserve banking
Comment from : @the_real_economics

Great video series This word for word is coherent with what the Bank of England published later in 2016 explaining the moment supply, except this was made 4 years earlier
Comment from : @ed11689

the bank would just keep create loan to new unsuspecting consumer who doesn't understand this process the disease will not stop spreading so does human nature if you want to quit this endless circle destroy the system Money will hold and store wealth better if we know higher and lager debt diminishes value of fiat currency
Comment from : @AL-rv3jz

What happens to the money supply when a loan is defaulted on?
Comment from : @yaseral-saffar7695

Hello from 2020! brbrWe have beer flu now and the whole world stopped for a few months
Comment from : @toblerusseta

These videos changed my life, I am in debted to the genius human being who made these beautiful videos ! Thank you so much ! You restore my faith in humanity 😭 Seriously - god bless you !
Comment from : @akiraleva5496

This is pretty much the same as the fractional-reserve theory of banking; as people pay off loans, the money supply shrinks However, and this is the key: money does not equal wealth More money doesn't equal more wealth, and less money doesn't equal less wealth The value of whatever money is in circulation depends on the market which dynamically gives money its exchange value for goods and services
Comment from : @cyberjunk2002

remember, do not pay off your debts, ensuring you live as an indentured servant your whole life while banks keep their fabricated trillions This message brought to you by your friendly global bank and gov lackey's
Comment from : @ronin6158

what if we all repay our debts? brfinancial crisis 20
Comment from : @chubs2312

Wrong The bank creates the money from nothing, so when it hands the money to the borrower, it still has the same amount of money When the borrower repays the loan, say, £1000, the bank simply gets £1000 richer During the time of repayment, 10 years say, the total money in the economy rises from the £1000 given to the borrower to £2000, as the borrower earns more money and gives it to the bank This is obvious if you consider that the original £1000 might have been immediately spent on a new gold plated banana Thus, paying off loans does not destroy money That's just silly
Comment from : @unclestephen2722

youtube/59mRZ1Vj8ZU
Comment from : @austin7037

Banks can go bankrupt Would they create money instead of (just) credit, they wouldn't go bankruptbrIf the paying back of loan would destroy the former created money, why should banks go bankrupt, if too many people don't pay back the loan(?) Why is it a difference, if the money don't come back and it's gone or the money come back and its also gone?brbrThis theory is a diversionary tactic to bring people think about wrong theories to hide the real problems of money behind this Like interests and their accumulation, which force economies to rise without ending
Comment from : @Lord_Naphensis

This video must be longer and more explanation is needed about the video specific subject More examples please
Comment from : @severerevenge8575

Why is it so important to have more money in the economy? Why not have more assets instead? Thats also valuebrbrbtw, money doesn't lose value over time but assets do This makes them less valuable and the money keeps growing, especially interest on loans This causes even more money and even less valueable assets as time passes causing even more inflation
Comment from : @ultraali453

Watch this video while high I called it! #420
Comment from : @phile4293

Something doesn't make sense The video 0:10 says money is destroyed when someone repays the debt That doesn't make sense, if I get the loan 1000€ and I spend it on buying whatever, that money goes into the bank account of those people What's the logic on saying repayment destroys money, if money equalize real wealth, goods and services, on first, the loan increase the money supply without having created read goods, but the people who pays back the loan has had to work, that means he have created real goods on exchange for that new money created What are the reason or proofs to say money is destroyed? Thanks for your videos, they are great
Comment from : @LuisDiuk

"Money, the type of money that the public use, has been destroyed in the act of repaying the loan" - What kind of sentence is this?!
Comment from : @HokShunPoon

best explanation video
Comment from : @OakhillSailor

what software do you use to make your videos? ( I mean the presentation)
Comment from : @omarshoura6327

Question:brAs a bank falls short on assets and is eg unable to pay its liabilities in CBR to another bank, bwhy is this bank being bailed out by a loan from the Central Bank/Government, even though the bank has clearly shown to be a bad investment risk?/bbrIt bothers me that the banks seem to have a very special relationship with the government
Comment from : @ConfectionerCat

I have a question When the treasury bails out the banks do the banks get to keep the collaratel such as a house?
Comment from : @se7ensnakes

"Money is destroyed when someone is repaying their loan" I get it But when someone defaulted on their loan, does it also destroying the money that circulated in the economy?
Comment from : @WidyawanWidarto

What you're basically describing is that the economy is constantly living on more money that it actually has - it lends from banks This implies that:br- If we actually stay true to the actual value of the economy, in other words, don't overspend and give banks the power to create money, it's bad since we will suddenly have less money This means that:br - We would always be in debt It's not the bank's fault, or anyone's for that matter It lies in human nature, the fact that we always like to make compromises with ourselves to spend more than what we actually have This leads to the fact that:br - Boom-bust cycles are inevitable It lies in HUMAN NATURE There is in fact no way around itbrbrThis idea seems scary to me, but I can't work my mind to a logical argument against it Am I wrong? What do you guys think?
Comment from : @TheRealNOOBuster

Can't prices just go down as we repay debt to account for the reduced money supply?
Comment from : @ThePeterDislikeShow

Are you a bank?
Comment from : @AlexControlado

The bank creates the loan amount from thin air When principal and interest are paid, those payments become bank equity? Bank pays income tax on the interest only? Not the principal created from thin air?
Comment from : @bruiseraa

Care to discuss and explain derivatives in a video?
Comment from : @balloakz9857

Great series of videos - I have one question if anyone could help If banks don't rely on deposits in order to make loans, why do they give interest in savings?
Comment from : @nikosbkk

imo the system has evolved this way for real reasons ie so it will permit the continuation of political imperatives which have been in play for a long time eg the removal of industry from the west and it's relocation in the east (replacing that lost economic activity with an expansion in housing credit/building activity etc)
Comment from : @tingoorensis

I don't think I understand, if there is more money in the economy, doesn't that inflate the value of the dollar/pound and therefore decrease the value of the money itself?
Comment from : @SuperChickBritt

This is one illustration of why a capital/equity monetary system is superior to a credit/debt system An example of capital/equity system is a pure gold and silver money system In such a system, issuing pure credit at interest is rare, because prices constantly fall Most 'loans' are in fact equity purchases by the bank Even with repayment of loans, the gold and silver are not destroyed, only the financial asset (loan) is destroyed - the money volume is constant
Comment from : @amagnonx5093

Very very accurate!
Comment from : @ImmortalmageMedia

forgot about central bank buying stuff to pump money into the economy
Comment from : @spark300c

alot recession caused by cheap credit drying up
Comment from : @spark300c

You say at 0:42 that the shrinkage in the money supply causes the economy to slow down But wouldn't it be more accurate to say that the chain of causation is: people spend less > people borrow less > the amount of bank money/credit falls? The real question is: are recessions caused by consumers and business managers deciding to borrow/spend less, or are recessions caused by banks refusing to lend?
Comment from : @JamesJamesMorrisson

More importantly, as Consumption and Investment is leveraged to this banking model, a countries GDP is essentially partly a function of their banking regulation and development?
Comment from : @maldrift

So conspiracy theories have been right all along Bankers control economies, period!!
Comment from : @TheJoshtheboss

Dont miss the point here? Ailing power blocks UK and US without industry to back up its financesForetells the forthcoming gloom of Climate Change and loss of Economic statureWith the control over a degrading territory about to suffer years of drought and un-predictable weatherA plan to sell off the liabilty of the Land and stuff the Banks full of cash rather than face aggresive foreign Bankers and their GovermentsWas hatched and thats REALLY why? the Banks hold all this inflated wealth
Comment from : @ericjarvie

Well, this banking stuff scalated quickly!
Comment from : @arturoperez6756

Payments coming to a bank for loan repayments are actually reserves sometimes Therefore loan gets cancelled out but the bank continues to hold the reserves that were used to repay the loan Therefore the money supply doesn't contract it just leaves the economy and goes to the banking system The banking system may choose to return this money into the economy and sustain the active money supply or it can simply hold it and turn stagnant part of the money supply it receives as loan repayments
Comment from : @daniel987878

The full plan is on their website Detailed proposal is in their book
Comment from : @k17741

Great Series Will your team produce a series that is US-centric?
Comment from : @beatlesfan129

The more people that realize this the better
Comment from : @tomphillpotts

haha we have been deceived Roman law maxim says "lets he who will be deceived, be deceived" they have made in legal to scam us all into wage slavery, the joke is on all of us!! Lets shut this system down NOW! ;D
Comment from : @kbombin77

Now that you've finished 101, are you going to be making another series? I'd really enjoy finding out more about how money works
Comment from : @Permafry42108