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

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Banks are limited by their capital - they need to have enough capital or reserves to settle interbank payments each day otherwise they need to borrow reserves from other banks or the CB They’re also limited in how much they create based on how many credit worthy borrowers come in They don’t just create money out of nothing as that nothing or deposit is connected to a loan, expected reserve balances, and fulfillment of capital requirement Money multiplier isn’t real post-gold either
Comment from : @jaymills1720

Why does the government accept anything other than its own money as taxes? Why isn't that distinction drawn? That's the distinction between a stock or a contract and a dollar bill, one can pay taxes, another can't
Comment from : @mobilityproject3485

Impressive how major CH Douglas deductions on how banks operate were this accurate almost 100 years ago, the man was a Tesla of his time for economics, really worth it researching his ideas
Comment from : @DistributistHound

What I don't get is those 10000 pounds, you say they're just being created but, aren't they just part of the central bank reserves of the Barclays account? Aka money that the central bank owes Barclays?
Comment from : @gabis2603

Why pay roberts bill with central bank reserves Why not just transfer roberts account money from his account?
Comment from : @mjsmcd

Hello,I have a question : I don't understand when you state that they hasn't been a reserve ratio for years? Do you have evidence for this? (I am doing a paper on the relevancy of banks today and this is a genuine question, I want to understand)
Comment from : @michellechekwoti6612

could you elaborate when you say 'mood swing'? Isn't it the central bank interest rate that determines this 'mood'?
Comment from : @tabmax22

Thank you for debunking fractional reserve banking
Comment from : @CaribbeanCryptoTips

The "mood swings" of bankers do not really swing The bankers are always in the same mood Greed
Comment from : @StratusBlue

this is an amazing channel wow
Comment from : @danielwilson1105

It would be much easier if you simply say pretty simple and fascinating truth Money is money, and interbank liquidity is interbank liquidity It’s two different “markets”, that should be separated Once you get there, it’s all just way easier to understand and explain :)
Comment from : @thePot_

So how do we get our own bank, that would F**& them up, we could buy assets with no money
Comment from : @georgeorwell5596

What about the Bradury Pound
Comment from : @bryanbufton9264

Eye opening Is this applicable only to the UK?
Comment from : @hasancoool

Just imagine if kids were educated about relevant things in the real world
Comment from : @ronin6158

Money supply "isn't determined by reserve ratio but by the confidence of banks" I'd be willing to be the more liquidity on their ledger the more "confident" they are, preserving the correlationbrbr"Legally speaking the money in your account isn't really money at all" And what law is that you're referring to?
Comment from : @JudoJonny5

IS THIS STILL RELEVANT TODAY OR HAS IT CHANGED?!!!!!!!!!!
Comment from : @customersupport9055

CardanobrFuck banks
Comment from : @LarlemMagic

Such a good explanation of such a difficult to understand concept
Comment from : @kadams842

Probably the most important 20 mins on youtube No wonder it has so few views
Comment from : @BB-mr3vy

Thank you fantastic explanation of an inherently complicated system Most are oblivious As I was too
Comment from : @AK-hk3hs

Given that its just numbers being transferred means itmoney is really no thing That these nothings are given such immense gravity is an act of mass conditioning beyond belief People die in droves for these numbers and nature is often trashed
Comment from : @summondadrummin2868

Its vague to differentiate the electronic reserves and the other electronic money Its just numbers in computers either way
Comment from : @summondadrummin2868

This is too difficult for me Let's do particle physics next time
Comment from : @matouspalecek8208

Professor Richard Werner has being telling exactly about all these subjects since 1990s Just see his videos
Comment from : @takashimurakami6420

This is just a central bank supplied, false narrative
Comment from : @dwaindibley4137

because the loan contract is considered an asset to the bank it can type money in the persons account what?
Comment from : @MrTrollBeast

Thankyou for the video Amazing content
Comment from : @sanace1983

Didn’t understand !!! Damm
Comment from : @christianwood1891

Its not the gold its the devaluation of your piece of paper which just get printed by state bank the more you print money the more devaluation you have br brNow a days, money don't even get printed instead it gets born just by typing in computer brAnd this typing power is in the hand of local banks not even in the hands of state bank brWhy local banks create money ??? brwell! local bank create money to give brloan/credit to general public br(consider credit /loan as money you are taking from your future and using it in present ) brIt's like time traveling of your money from your future to present so the more money do time traveling (from future to present) the more devaluation you will have in your currency br brcredit money is the 97 of total money(look how much we have brought from future to present ) in this world which means 97 is all loan money in economy and 3 are real currency note The real currency note act as glass and credit act as water so if u want to use credit (drink water)bank pour liquid (credit) brin glass(real note) and use this glass(real note) again and again to serve you water(credit) brCredit is created by banks simply by typing few numbers as 100,000$ in computerthe more loan u take the more devaluation you have in your currencyblame banking loaning system brmoreover (interest)make it worse for you to pay it back
Comment from : @taimoor722

Is that why balance sheets are not show in the public register of companies? Only balance sheets from companies that are NOT banks are being shown
Comment from : @Kazzzzzo

blockchain123com
Comment from : @longli9668

So the point of the video is that banks can basically loan as much as they would like provided the net sum of payouts to other bannks do not exceed the total central bank reserves But how do the banks get their central bank reserves and cash in the first place? That is not explained in the video
Comment from : @cookietrix3842

A must watch video
Comment from : @severerevenge8575

15:20 - 15:45brCan anyone explain it more I did not understand this small part
Comment from : @severerevenge8575

Excellent! I'm one of the many that have just begun to realize what a sham this whole banking system is, after sitting comfortably for 30 years of adult life my main frustration is, why wasn't I told about this earlier!
Comment from : @ric6383

Best videos I have seen on the topic Thank you
Comment from : @chavylevy7355

Yes, the total amount of money can keep expanding without limit when there is no reserve ratio But that's exactly what the money multiplier model says: if the reserve ratio is zero, the multiplier is infinite So how does all this contradict the money multiplier model?
Comment from : @arturoh2002

Not Every Country follows not having a reserve ratio
Comment from : @u59n

Hi Positive Money team,brbrThis is a great video but I have a question if you don't mind - 12:25 we talk about Barclays, in order to confirm the transfer of owing $10k to Lloyds, places funds into the reserve account operating under the BOE Does this mean that these banks have so called "proxy" reserve accounts held by the BOE in order to confirm transactions during the day? I mean, does LLoyds have access to Barclays reserve account details at BOE to show that they have in fact paid the $10k owing? Therefore, Lloyds are comfortable with this and can wait for X days to have the transfer to the Lloyds bank eventually? Am I understanding this correctly?
Comment from : @Fuzzbuggy

6:21br1) Customer signs loan contractbr2) Bank types numbers into a new account for customers
Comment from : @megavide0

rightly said
Comment from : @mdfaiz4583

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
Comment from : @Karlopapa

Well no, the bank of england could have much control if there would not be the fractional reserve systembrAnd 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 askingbrbrSo state, central banks and banks in that form and with that support for each other are the problem
Comment from : @FDominicus

Well, this explains why governments bail out banks during a financial crisis
Comment from : @firefrostpeacemaker

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
Comment from : @parthsna

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
Comment from : @bogdanRandom

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
Comment from : @marcosbeni5875

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"
Comment from : @modisp

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?
Comment from : @Nosekname

This is so well explained Thank you for this
Comment from : @lillybell4579

What software did you guys use to make this?
Comment from : @FromBehindTheBoard

we are all doomedtriple face palm
Comment from : @LinuxUsersAreHung

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 : wwwbankofenglandcouk/monetarypolicy/Pages/howaspx
Comment from : @fugoff8588

Your information has helped me so much! I enjoy these videos
Comment from : @naomiking2442

Fantastic video
Comment from : @CaravaggioRoma

so more bad home loans the bank give out the more imaganare money they can make
Comment from : @IIIIALBYIIII

Regarding the statement around 5:10, doesn't the multiplier only determine the outer boundary of how much money can be created in the economy? Just because the central bank expands with its reserves doesn't mean banks must lend more
Comment from : @Unprotected1232

There are two sides to every loan created by a banker The lender and the borrower To say imply that it's only the banker that is controlling the amount of newly created loans is a bit misleading The banker needs a borrower
Comment from : @petethedrummer

Strange logic here When paying your rent you use your electronic bank account There you have "CENTRAL BANK RESERVES" a kind of electronic cash But to have CENTRAL BANK RESERVES you need to be a bank and have an account at the Bank Of England So in this case you MUST be a bank with an account at the BoE in order to pay your rent CHECK THIS IN THE FIRST 2 (TWO) MINUTES OF THE EXPLANATION !!!brAt 0:45 your electronic money is "CENTRAL BANK RESERVES" and at 2:12 the same money in your electronic bank account is "DEPOSITS"brAt 02:50 "cash is created by the government" WRONG !!! The government sponsors the bankers by printing notes certifying the agreement called "money" brbrPfff I 'm done here, got to stop Too much Bravo Sierra The producer of this non-sense needs a thorough re-schooling on money
Comment from : @lastugrogmailcom

One of the best videos I ever saw on Youtube
Comment from : @ArunJoshi123

Power has always been concentrated in th few in any large society, I think it's better in the hands of hard working bankers than in corrupt politicians or in the past Nobility
Comment from : @chillerman625

The money of mortgages is transfeerd to the building industry and so enters the real economy
Comment from : @cornucopianow

What about the value of the assets they call collateral? These can always be seized by force So the banker's special relationship with military and police constitutes the true base of the money
Comment from : @wresing

Ps also there is a difference between "demand" in the economy and money The extension of credit by banks boosts aggregate demand, but does not add to the money stock in net terms, as the loan needs to be funded by a depositor, which is a sort or "anti money" that contras the credit creation If depositors ask for their money back, the bank needs to call in loans to repay depositors, and the multipier goes into reverse
Comment from : @lyall3000

At 550, only partly It also depends on the demand for credit from businesses and consumers The reasons QE has not resulted in a lot of inflation or money creation post GFC has been mainly that there has been limited demand for credit, not a lack of supply/willingness of banks to lend
Comment from : @lyall3000

Few commentsbrMinute 455 - Why banks start panic? Panic isn't good Banks always should be 100 stablebrMinute 655 - Why Robert have to pay interest rate? This isn't good(This is major mistake in system) My proposition is - cancel intrest rate for any kind of credit That simplyfy the system Banks don't have to earn money this way, becouse they can create almost unlimited amount digital money Just manipulating in databases(Add zero on account in decimal, or in low level in hexadecimal change values of bytes from 00000000 to FFFFFFFF)br Bank as a company should have account in own banking system to create money to pay wages for his own employee and maintain Bank in this system never can be bankruptbrDo you understand?brGreetz for All and peace on the world
Comment from : @sylwesterbogusiak2334

Oh jeez, electronic money is just numbers, yes, and paper money is just paper It is still a medium of exchange weather it is seashells, paper or ones and zeroes
Comment from : @blirk99999

Not really "the mood of bankers", it is self-regulated as any industry If we lend too much, people can't repay and we bakers loose money (returns), if we lend too little we do not have enough returns So all the bankers are trying to find a sweet spot :)
Comment from : @blirk99999

mikedd56 It's not trying to make it seem like we should all be so alarmed because it's done electronically, it's saying we should be alarmed because A) This is how the system actually works and this is not taught in universities and B) That the BANKS have the majority of the control over the flow of money in the system and NOT the government Electronic banking is fantastic, but the point is that banks utilise this to create non exsistent money that unsettles the economy
Comment from : @demiheath2346

hold on, so there's no reserve ratio? I'm pretty sure there is My lecturer told me that before the financial crisis UK banks had a reserve ratio of 2
Comment from : @HaroonKhan-dc2kp

que impide que en una corrida bancaria el banco solo imprima de la nada dinero para saldar sus deudas y en el caso de balance entre bancos ,la misma situacion si un banco le debe a otro solo tiene que imprimir mas dineroya por ultimo no es fraccional por que guarde una fraccion de lo depositado es fraccional por que usan un coeficiente para que la masa monetaria no crezca hasta el infinito
Comment from : @tato-g

bounds when people buy bonds there is no reserve so now that investors are scared the banks has more control because people more money into banks and buy less bonds and paid down debt
Comment from : @spark300c

shit when this guy speaks for more tan 3 secs i cant understand shitfucking accent i dont know how this guys reproduce women most hate this way of speaking so unmanly damn all this guys most spend 5 years mínimum in Texas for a change
Comment from : @jirv25