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How Commercial Banks Really Create Money (the Money Multiplier is a MYTH).

Money u0026 Macro 413 views

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When the global financial crisis happened, the entirety of the world income was estimated to be $70 trillion The debt in loans worldwide were $700 trillion, meaning that by a very long margin, there was more loans in the world needing repayment than money on earth to pay them back
Comment from : @conors4430

Commercial Banks create money? Yes Well, so Money Multiplier exist
Comment from : @dragonkiller2244

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Comment from : @OresteZubak-r9j

i didn’t understand a thing ☹️
Comment from : @tahseen_is_having_fun

Thanks for this wonderful explanation✨✨
Comment from : @seymagulnihalyildiz6488

"If the people only understood the rank injustice of our Money and Banking system, there would be a revolution before morning" -Andrew Jackson
Comment from : @JohnDaniels

Ridiculous So essentially your belief is tht it doesn't exist because the central bank lends out reserves
Comment from : @zerog1037

too many inconsistencies in this video
Comment from : @georgegurdjieff37

I’m not sure about this,but if the bank doesn’t have to have any reserve and can go to the central bank to ask for money,why should the Silicon Valley collapse because of lack of reserve,can anyone answer this?
Comment from : @Hip48

Like dropped
Comment from : @PoiSonSonic

banks dont create money we do
Comment from : @kbiz31

The origins of "money/currency" creation has been a confusion The place to start with is - All "Money" originates from Debt For good references find Richard Murphy, a Brit and Richard Werner, a German on YT Lots of info on Banking and monetary functions
Comment from : @twhelostl61

Monopoly money at its best! 🧐brThey just print it different colors and stickers for the rarity it holds brSounds like a pyramid scheme 😅
Comment from : @BenG33

Economy is itself pyramid scheme
Comment from : @akashverma5756

Why is it so easy to learn wrong things in the university, when it comes to finance?
Comment from : @ichbinmasi

Profesor Richard Werner proved this empirically As long as the bank is large enough
Comment from : @alfinal5787

I would be interested in knowing how all this process of lending and money creation works in an country that uses another currency, like Panama Can an local banks in such countries create new usd money in the form of bank deposits by making a loan?
Comment from : @simontremblay6785

I don't think anyone really understands the world's financial system - an important central bank official actually told me this a few years ago
Comment from : @rickjensen2717

AUDIO SUCKS ASS DUDE !!!
Comment from : @BradMillsXRP

ask jews
Comment from : @SS-HansLanda

This all fake news Banks dont accept deposits, In reality you give the bank a loan everytime you think your making a “deposit” And they dont loan other depositors money, instead they purchase securities
Comment from : @llroySaves

1 I get loan from bank which never existed beforebrbr2 I buy the bank a house with that moneybrbr3 I start to buy the house from the bank by paying the bank interest & capital with money I get as wages at my job brbr4 Meanwhile the bank creates more money and loans it out to others who buy housesthis in turn creates more demand for houses which drives up the prices of housesbrbr5 Because house prices are rising due to the bank creating money and loaning it outthe house I am buying from the bank is now worth moreso now the banks asset reserve is growing so now the bank can create more money to loan out
Comment from : @adrianjos04

Banks control the world via that debt anyway :'(
Comment from : @CommentatoreITA

what a crazy, unsustainable system money must derive it's value from energy commodities (food, fuel and electricity) and banks should not be allowed to lend more than 50 percent of the food, fuel and electricity they have stored on hand at any given time Exchange rates should be fixed and set by law at 1 dollar per joule or kilojoule
Comment from : @scipioafricanus2

I don’t understand this I am so confuse
Comment from : @Epic-so3ek

“You can print money but you can’t print wealth”
Comment from : @KAPUSIJAPAN

Money is created by commercial banks buying securities from "depositors" AND in Washington Only Washington has an unlimited printing press "Inflation can only be created in Washington Inflation is a printing press phenomenon" - Milton Friedman Only Washington can create 4 trillion dollars out of thin air Central banks printing do the dirty work for govts AND commercial banks handing out too many unproductive non GDP loans cause hyper inflation
Comment from : @jacksonstoos6974

8:17 you can find reserve requirements here: br enwikipediaorg/wiki/Reserve_requirement
Comment from : @dalahast06

it sounds like a giant ponzi scheme? if banks can create money why cant private businesses or private people? Im curious what laws and regulations only give this power to banks?
Comment from : @jmsmilin

I think it's a bit too easy to call it a myth, that 7-8 reserve the banks keep is linked to this multiplicator, it's not imaginary brIt would be a myth if the textbooks would make it sound like that's why a run on the bank is so dangerous, because from you 100 euro, there's only 8 euro that still exists and all the rest is gone up in debt-smoke brbrI guess reality of the danger of a bankrun is that the loans are long term contracts and the deposits that immediately follow the loan when the borrower pays his bills and this money gets saved by other people, and this happens with short(er) term contracts, which makes for a dangerous balancing actbrbrI'd still say that the multiplication increases the risk and makes the entire system basically a joyride towards the next crash
Comment from : @marcdc6809

You are being intellectually dishonest In your example from 2:37 to 3:24, you state that they mutually loan each other money While it is true that the promissory note is listed as an asset on the bank’s balance sheet, and the borrower’s bank balance is listed as a liability on the bank’s balance sheet, the dishonesty come from the fact that the bank truly created that money out of thin air WHILE the customer has to pay back the money with interest out of blood, sweat and tears brbrEither you are ignorant of the facts or you are being dishonest
Comment from : @salvatorelivreri

Thanks!
Comment from : @wuchengli

jews
Comment from : @Choodcel

So simply put; banks make profits on money they created out of thin air… ?
Comment from : @rik-keymusic160

magine a dollar as an inch on a ruler A foot of lumber cost 12 inches Today that equates to $12 dollars brbrWe counterfeit a couple trillion dollars to add to existing supply Now back to our lumber A foot of lumber still costs 12 inches However, the dollar no longer equates to an inch, but instead because of the added units, equates to 1/3rd of an inch 12 inches now equates to $36 dollars
Comment from : @Jackson-l3r

Steps: br1 Raise tier 1 capital (eg $10m)br2 Attract your first deposits (eg up to $100m) br3 Make your first loan when you’ve attracted some deposits br4 Profit brbrMoral: commercial bank Can’t make a loan without attracting deposits first
Comment from : @Yotrek

Who gave the right to bankers to coin money?
Comment from : @62g4u

Thank you for pointing this out Very informative video
Comment from : @mislavgleich5978

Hey Joeri, thanks for explaining so well However, isnt there another dimension of multiplying?brbrThe koney banks lend to a company is paid out as wages or saleries or as income for suppliers which in turn spend the money on other companies goods or workersbrbrSo each Euro or Dollar can be used several times if not saved or taxed away too earlybrbrShouldn't this determine how much or little circulating money we need to run all required transactions of our economybrIs this a multiplyer effect?brThanks for any response! 🙏
Comment from : @ProgressiveEconomicsSupporter

ThanksbrbrI made a video on the outdated story some time ago brbrThis new way of looking things at is a breath of fresh air
Comment from : @TobyUnravels

If you think about it, its not really creating new money by issuing loans Its just converting idle money sitting in savings to active money (to be used in spending)
Comment from : @alrey72

Great vid, reminds me of Prof Richard Werner's vids
Comment from : @andresrashti7138

Thanks for this It's annoying that the same myths are still taught in business courses It's no wonder the public doesn't understand economics, when so many economists either also don't understand it, or are lying to them
Comment from : @crawkn

Hey Joeri! brLove your content, very happy it was recommended to me (1Dime brought me here initially)brbrI have been learning a lot about banking, central banking and Macroeconomics in general And I really really appreciate you using your specialised knowledge and make it so accessible!brbrThanks, keen to be watching more of your backlog and future videos 🙂
Comment from : @DeFlekkie

I don’t understand If the bank lends you money but you repay it isn’t that money not created?brbrIf the money goes to the seller of a house isn’t that money real?
Comment from : @jonathanlivingston7358

Thank you for this explanationbrcan somebody explain why banks need people to deposit money and why they pay interest on customer savings?
Comment from : @DOC884

Usury is unlawful legalised fraud
Comment from : @Mikeybhoy1979

So what about the difference between currency and money? Seems like an oversight Banks create currency, not money
Comment from : @mitchellsteinke8045

Thanks for this explanation
Comment from : @titusojar2461

Great video! Thank you! Somehow the last point of this wasn't clear to mebrbrbut that ultimatley translates to "the people feelings about the future" from the Johnny Harris, that you commented on ->brlet me explain:brIf not reserve requirements is the limit to the money creation (but still - in the countries with bigger requirements it might be? -> could you confirm/deny that that could ever happen that the teoretical limit from the Money Multipilier Story was ever hit?) than all the individual decisions of the people (if people feel like they want to go for run-bank -> the banks are forced to limit their creation, lowering amount of the money in the economy -> eventually lowering prices/firing people etc), same with "loan Demand" -> if people (or institutions) doesn't feel like the investment is worth their money - they would not lend money and ultimatley the amount of money in the economy would fall as wellbrbrbrSomehow I just got entirely new light on "economic news" -> they have MUCH more power than I ever thought that they actually have Going against the flow is in fact much harder than I tought (on a macro scale at least, for small average Joes there's still a lot of room to exploit any situation)
Comment from : @radoslaws1373

I have watched your video a few times, you do not discredit that banks create money You just explain some extra steps involved in the money creation, but they do create money still
Comment from : @didiermodica7336

Fed made the fractional reserve percentage from 10 to 0 ,banks can now actually print infinite money 🙂
Comment from : @mdsohailhaque8513

I don't understand this part: if a customer takes a loan from the bank, bank borrows money from customer and customer borrows from a bank at the same time?
Comment from : @markoc-e2j

Hasn’t QE put enough money in the system ? So banks don’t look for funding after the loans most big banks have the reserves to meet payment obligations How does Fed add more reserves ?
Comment from : @jaymills1720

🎯 Key Takeaways for quick navigation:brbr00:00 💰 Understanding Money Creationbr02:04 💵 How Banks Create Moneybr05:26 🕒 Timing and Money Creationbr07:15 💳 Constraints on Money Creationbr11:20 📚 Further Reading and RecapbrbrMade with HARPA AI
Comment from : @kenethchua2507

the link to the blog is broken!
Comment from : @mionome501

I have a question -brAre banks in the United States under the control of the Gov or can it interveen!! as we know 567 banks have failed since 1974 its a disaster brbrMalpracticing banks:br1Wells Fargo: In 2016, for opening millions of unauthorized accounts on behalf of customers without their consent br2Bank of America:Its role in the subprime mortgage crisis br3JPMorgan Chase: The London Whale trading scandal br4Goldman Sachs: Its role in the 208 financial crisis br5HSBC:2012 for money laundering and other financial crimesbrbrWhy havent the Gov not canceled their licences ?
Comment from : @ashishkarumbiah1365

We the People is securities! You must explain that to plus all other assets in the land!
Comment from : @dansoderstrom9585

What is the difference with a full reserve or let's say 90 reserve system?
Comment from : @DistributistHound

This video is correct but is incompletebrbrBanks create money - indeedbrBanks create RISK b*/bbrbrThis means that we need to associate each change in the money supply with a change in total economic riskbrbrBankers create Risk
Comment from : @robertblandford

I don't understand the point about how reserve requirements DO NOT constrain money creation You say that almost all central banks facilitate reserve creation on demand Why is that? Why DO central banks "almost always" lend money to banks?
Comment from : @gabis2603

The money multiplier theory doesn't assume the bank simply "has" assets it can use as a backing for potentially defaulted loans That's the step which is being missed in this new theory They're using the fed model on a commercial level, except the fed has the faith and trust of US taxpayers as its backing Do commercial banks? Apparently that's the new status quobrbrSo, the money multiplier isn't a myth; it's nothing more than a sane way to view economics; ithis new status quo is fully divested from reality/i I guess we really are headed for another 1929
Comment from : @Mavendow

If people accept your checks at par to cash, you can technically create money
Comment from : @ProfAzimov

Essentially, banks create money because they manipulate their ledger When they give a loan, they change a few numbers on the bank account statements, and record on their spreadsheet that they owe bank account A $1M, and Bank Account A owes them $1M When you want to spend your money, the bank debits a few digits off your end of the spreadsheet, and credits the account you pay Since people accepts bank obligations at par to cash, the bank can create money by changing their spreadsheet to add points to someones account
Comment from : @ProfAzimov

Huh To be honest I thought I was being taught something fundamentally different But what is the difference with the ''other youtube videos''? I've watched this video 3 times but have to admit I can't tell the difference Banks just create money, right? Isn't this also told in other videos?
Comment from : @GDor-k4t

The amount they lend us, the bank gets 10x the credit……
Comment from : @dougbillman2333

Research public law 73-10 … government will pay your debt, dollar for dollar…
Comment from : @dougbillman2333

It’s against the law for banks to lend money…
Comment from : @dougbillman2333

Banks steal our credit……
Comment from : @dougbillman2333

focusing on the fractional reserve element hoodwinks people to not see the elephant in the room, which is private entity's having the extreme privilege of money creation and receiving the interest payments on that newly created money which of course is the primary cause of inequality and poverty on a global scale
Comment from : @Danster82

So your video admits/confirms most economists and bankers do not understand how money creation and the economy works Doesn't seem much original research has been done over the decades to find proof about how the economy works - so much for economics being called a science
Comment from : @SueFerreira75

commercial banks do not pay interest?
Comment from : @Abelka252

I don't understand how there can be a myth, and needing "research" to disprove something like this? brEither the banks loan money they don't have, or they don't brSo all this time economists and bankers have thought banks loan money they don't have, but in reality they've had the money all the time? brHow can thousands of banks exist, who's main mission and expertise are loans, money, and ledger, been surviving without even knowing how much money they have and how mush they have lended out? brIf I Gonnaga Bank have 1 million, and I loan out 2 million, I've done the Money Multiplier trick But I haven't? I've actually earned my money by loaning 1 million and getting 1,2 back over the course of 20 years brHOW has this NOT been common knowledge if that's the case? HOW can you run a company that only needs to know plus and minus, and not knowing basic plus and minus? HOW can tens of thousands of companies whos only criteria is knowing plus and minus not knowing plus and minus, at the same time??
Comment from : @gonnaga9302

Love a good throwback to see humble origins
Comment from : @nicolascorrea708

Svb failed cuz it couldnt fund customer deposit demand What did they do with that deposit money ? use to buy securities that lost value with interest rate rising?
Comment from : @mjsmcd

So its just fractional reserve banking but the reserve requirement is 0😂😂😂😂
Comment from : @bilalbaig8586

Tbe fed has eliminated reserve requirements now so that leads to what?
Comment from : @mjsmcd

Why when explaining this sort of things there are no clear numbers involved in simple form, "explain it like I am between 5 and 15 years old" or are they scared people will find it easy to point out their errors or/and maybe it would be just a lot of very hard work to make it clear? as always it is best starting at the beginning
Comment from : @rickyardo2944