Very sorry for another reupload. This time in colour, with enhanced audio and graphics. No changes in the script. Next video will be new:)

@zz-np2sr

4 жыл бұрын

This was a very good break down for laymen like myself,thx for the upload.

@lilhotdog7011

4 жыл бұрын

@Darius Kang yo shut the fuck up

@marcgraham6438

Жыл бұрын

kzread.info/dash/bejne/pX54ybeoftyxitI.html

@sanoopsaji7680

Жыл бұрын

Bro in the video did u mean the 900dollar will be lended 10times. Or u mean the 900dollar will be lent as long as it takes for it to get to its 10times multiplier(9000)

i would absolutely not mind more math in these videos to improve understanding. great tho thank you for your work!!

Incredible video and wery easy to understand. Keep up the brilliant work and i'm sure you'll succeed. Now one question? From your video, second option of bank does not produce inflation and good for economy right?

Best explanation I’ve found. Like and sub. Keep ’em coming sir

This is an eye opener.

It would be great to show bank balance sheets development (both assets and liabilities sides) under fractional-reserve banking vs. full-reserve banking

@sanoopsaji7680

Жыл бұрын

Bro in the video did he mean the 900dollar will be lended 10times. Or u mean the 900dollar will be lent as long as it takes for it to get to its 10times multiplier(9000)

Amazing work!

great content, keep it coming!!

Brilliant description

Excellent short clip, should be the first thing any economics/business student should see, not to mention the masses who happily accept this fraudulent behavior without the slightest protest.

@delrealeric

2 жыл бұрын

This fraudulent behavior is beneficial to our economy.

@ric6383

2 жыл бұрын

It is if you're a criminal..

@delrealeric

2 жыл бұрын

@@ric6383 fractional reserve banking is perfectly legal. What do you mean??

@ric6383

2 жыл бұрын

@@delrealeric Legal it might be, but morally criminal, that's why banksters are protected by law. Making money out of thin air, then charging interest on it. We'll agree to disagree.

@delrealeric

2 жыл бұрын

@@ric6383 what’s morally criminal? Charging interest? So are you against loans? Like mortgages and student loans? Or are you against making money from thin air? Because that’s literally what fiat currency is. All governments do it. You’re just against banks doing it? You don’t think this power is better controlled by the market vs a command government???

Superbly explained, however I belived most commercial banks work partly with fractional reserve and partly fully reserved

Good informative video which most people would not understand. There are some caveats in the full reserve bank such as what happens if the 900 dollars is not paid back and what level of interest rate would have to be charged for the 900 dollars in the full reserve bank? There is always the compromise of raising reserve requirments.

@jaysant6958

6 ай бұрын

Good questions. Maybe the bank can have “back up” money fir situations like that as well as collateralize the loans it gives out for better recovery of the funds.

It would have been nice to give some macro conclusions. For instance. In an economy with fractional banking, money creation is guided by money demand, which is in turn driven by economic demand. This means that the money supply can grow (and shrink) more dynamically with the economy. It does however create the risk of a bank run or debt crises, like stated in the video. In a full reserve banking economy the amount of money is determined directly by a central institute, like the central bank. This means that the bank has more power to directly influence the amount of money, that is, as long as growth is needed. Bu when the supply of monney needs to shrink, the central bank is powerless. Also, there is a more loosly coupled balancr between the amount of money in the economy and economic demand. This causes a more stable value of money in normal economic circumstances, but leads to greater swings in the value during a crises.

So which one is better? I like the 2nd one but the first one is good too because there’s no fee but that risk of everyone withdrawing at once & your full money not being available to you.

One thing I like about the full reserve philosophy is that it forces the depositor to think about what they want to have done with their money. Is it to be on deposit for years? On call? On call but some percentage of it loaned out, as in fractional reserve banking? Would they like it to be turned into bank shares and pay dividends for a while, or invest it in a fund that buys commercial property ... it's an attractive and within reason healthy idea that people should be forced to ask themselves why they have this money and what it's for.

@Taurungames

4 жыл бұрын

And that would still be their money, working for them. Banking would be a mediator, not a wealth parasite

@jaysant6958

6 ай бұрын

@@TaurungamesThings like that already exist but let’s face it. A lot of people don’t want to think that much and so there is demand for the way banks are right now.

Wonderful

We now have 0% fractional banking starting 26!march 2020

@dominic1722

4 жыл бұрын

U for real?

@austinbyrd4164

2 жыл бұрын

@@dominic1722 sounds crazy, but we're feeling the effects lol. Inflation through the roof

I am going to be a fractional reserve bank! Good money to be made

@jaysant6958

6 ай бұрын

Until all your depositors come requesting their money back.

I've wanted to create a video about this for years. Ever thoughy about going deeper into the topic? Incorporate wealth transfers from the poor to the rich.....

Hopefully you answer quick, thank you. Can a bank be fractional reserve and have a full reserve account.. Like a CD. I don’t know if I makes sense but, Imagine Wells Fargo how it is, but it also has a full reserve account that’s not free.. Or is a Cd the same as for reserve banking.

@beastblocker0477

Жыл бұрын

To keep it simple… is having your money any CD the same as having your money and a full reserve?

You cannot create fractions of money ad infinitum because there is a market ie people shop around for loans and banks accept/reject applications and probably a bank wont lend you if another bank has already lend you ie a credit score. The problem is when profitablity of bank falls for various and they get creative with lending leading to assets bubbles and reckless lending, over leveraging themselves in the process to boost profits, then asset bubbles collapse and we have mean reversion.

@austinbyrd4164

2 жыл бұрын

Absolutely. In a free market this phenomenon would collapse & depositers would naturally save.

Holy Shit! This blew my mind

This is a very good video except I have one question. It's always describe that fractional reserve banking creates money, and in a way as you illustrated it does temporarily, But just like scenario number two, that newly created money carries a balance that needs to be paid back. So while the money in the system does temporarily go up, shouldn't it go back to par neutral when the money is paid back to the bank Even in scenario number one? This is assuming people don't default on their loans, but that's the same risk in scenario number two

@NewBaldwin

3 жыл бұрын

Remember also that 1- most of the money is being spent on useless disposable items, 2-there is no closed economy money flows out when foreign goods are bought. In the end, useful resources are used to make useless things, resulting in landfills necessitating consumerism just to keep the game going, until China stops buying US bonds or a war is fought to reset the clock.

@Agent-zn2gl

2 жыл бұрын

I thought about this the same way. No new money is created essentially. The real cause of inflation is government printing new notes

@jaysant6958

6 ай бұрын

I think you’re on the right track but only if one knew when to stop. But continuing to overleverage is what I think makes things work.

How was $9,000 created through fractional lending? I just see it as money exchanging hands. The entire sum is still the same right?

So the banks can create money with nothing of value to back it up, then loan it to you to buy a house. If you default on the loan, the bank can take possession of the house, which has tangible value. Is this accurate?

May be I m getting it wrong, but in the first case, I can't see any new money being created; instead, the same initial money kept returning to the same bank (with 10% reduction each time). The only problem was that the bank thus created too much obligations that it couldn't possibly meet all at once. But the actual money in the market remained the same. Isn't it that money supply is controlled by the Fed, who has the authority to print money. Kindly correct me if I'm wrong.

@nikachigladze4516

4 жыл бұрын

As he said the 1000 dollars can be withdrawn on demand. The 1000 dollars gets lend by other people while taking 10% for fractional reserve ( thats one of the reason to make the bank rich). If the 1000 dollars can be taken on demand, how could they lend the same 1000 dollars to other people? Well my friend, by printing this fake money.

@nikachigladze4516

4 жыл бұрын

The bank has license to print money.

@berntengdahl1519

2 жыл бұрын

What's being created are CLAIMS to money. If I have a 100 dollars, and I lend them to you under the condition that I can get them back anytime, no new money has been created because the 100 dollars have simply switched hands. But you now have a debt of 100 dollars to me and I can cash in on the debt whenever I want.

@JUAN_OLIVIER

Жыл бұрын

Because both examples in the video are Full Reserve Banking. With the Fractional Reserve Banking system the bank would have kept all of the $1000. But then they would have created $9000 on their banking system and lend out that created money with interest.

Now do the difference between full reserve & (socalled) "free" banking.

The third conclusion on fractional reserve banking: "By creating a larger money supply and not a larger supply of goods and serivces...". What about the leather jacket and the purse that was bought with the money created through the relending of the money? Surely those goods would not have been produced if there was no money in the hands of consumers who could purchase them? Consider what the fractional reserve banking system allows for you as a consumer. What if, in the full reserve banking system, those with financial power would not consent to the bank relending their deposited money? Imagine trying to get a mortgage in that system, where a low supply of money and a large demand for mortgage would drive up the price for that loan

@jaysant6958

6 ай бұрын

To your last sentence, that would just mean people would need to be disciplined and save to buy a house cash. At the same time, if sellers of houses want to sell, they would have to lower their prices or else be stuck unable to sell. So in a sense, it seems to me like the full reserve system could help greatly regulate things and keep everyone for becoming too over leveraged.

What if in the full reserve system the tv store owner deposits 90 and lends 810 to the bank then the bank give it to a shoe buyer then the shoe maker deposits 81 and lends 729 to the bank then the bank gives it to me I buy a computer for 729 then computer store owner deposits 72.9 and lends the rest to the bank etc?

@racingorpingpong

5 жыл бұрын

Thinking the same

@kenshikenji

5 жыл бұрын

nothing its the same money being lent out with the knowledge it is not on demand

@QuelDroma366

4 жыл бұрын

The key is that none of the people lending the money expect it to be available while it is also being landed out. For example: Guy 1 deposits $100. Guy 2 borrows that $100, turns around to deposit it and loan it out. Guy 3 now has the $100 as he borrowed it. Guy 1 and Guy 2 do not expect the money back yet, so we're still only talking about $100. Fractional reserve banking would tell all three that they could have the $100 at the same time.

Bro in the video did u mean the 900dollar will be lended 10times. Or u mean the 900dollar will be lent as long as it takes for it to get to its 10times multiplier(9000)

Why have Fractional Reserve Banking then? It is causing currency devaluation.

@dinterest

4 жыл бұрын

@LiuYe Only thing is that the government doesn't print money. The Federal Reserve/Central Bank does, which is an independent organization. The government buys the money from the Federal Reserve then distributes it to commercial lenders.

@jakeberry2172

4 жыл бұрын

It’s to grow the economy faster this guy gave examples of lending to people for purchases when most it is to lent to small business if a bank has 1m it can lend 10mill to start small businesses it would be massively harder to get a small business loan without fractional banking.

@davidbofinger

4 жыл бұрын

With the full reserve approach the bank has to hold a lot more money in its vault, enough to cover a run on the bank where every single depositor simultaneously decided they wanted their unloaned money back. With the fractional reserve they just need to hold something statistically likely, where some percentage of the depositors decide they suddenly want the money, and the reserve bank guarantees them against big surprises (which is a way to make it less likely surprises will happen). So anyone who wants to run a bank is going to prefer fractional reserve, so unless it's made illegal (which might be a hideous thing to try to legislate and enforce) it's going to be the bank we have.

@bradvincent2586

4 жыл бұрын

Jake Berry yeah and then maybe so many small business owners wouldn’t go into stupid amounts of debt

@austinbyrd4164

2 жыл бұрын

@@dinterest stop spreading this nonsense that the fed is private. That's a complete myth. It was established by the government, operates under a currency monopolized by the government, has its officials chosen by the government, & it alway finances the governments spending with printed money at low rates. It is somewhat independent, but they're a public institution. They just have no accountability.

Full reserve banking & why it's good: If all deposits are 100% backed in hard currency by the time it's accessible to depositors & remain so as long as they're accessible, *on-net consumption* - equal to the amount deposited - *is deferred* over the course of the deposit's maturity (whether by the depositor themselves, _the bank, or other investment/lending entities_ [granted the bank lends for a longer term than the deposit/s maturity]). Given that one simple rule, lending intermediaries are free to lend as they wish. Society's not misled into believing they have access to money that's not there in full. There's no risk of bank runs, & thereby no need for a ‘lender of last resort’. There's no inflationary double-spending - thereby cantillon effects, distortions along the capital structure, & heightened societal time preferences. The only risk in banking is whether they lend to sound ventures or not. The only risk to depositors is to those who explicitly lend their money to the bank (time deposits). Deposits immediately accessible would be risk-free (on-demand deposits).

How will they be able to create more in the full reserve when deposits are just sitting there and not creating more money??

@austinbyrd1703

2 жыл бұрын

That's not what full reserve is. Actually watch the video.

How can the depositer be paid interest in the full reserve banking system? New money needs to be created in order to pay interest. Also the person who took the loan to buy the TV needs to get paid in someway to repay his loan. How would he get paid if there is no money being created?

@engelsteinberg593

2 жыл бұрын

He will use already existing money that will gain in that time period.

@austinbyrd4164

2 жыл бұрын

He will provide what others demand unorder to aquire that scarce currency. And since it's divisible anyone can do this to varying degrees, depending on how much consumption is detered through saving & how demanded their ventures are. They have to compete, work, & provide value to society unorder to get a piece of the pie. That's good for everyone.

one question how does the bank cover the interest on the $900 if there is only $1000 in the economy?

@tylerhyatt5677

4 жыл бұрын

lets see someone answer this correctly.

@boots911

4 жыл бұрын

There is no answer for it, it does not exist. In a system in which the central bank uses fractional reserve banking, there's always going to be credit defaults and all debts are literally impossible to pay off.

@gayathrik8395

4 жыл бұрын

@Jj Chen how is defaulting on bang loan related to interest?Which is the question

@TwistersSK8

3 жыл бұрын

@@boots911 I don't get it. Can you explain? Explain like I'm brain dead

@boots911

3 жыл бұрын

​@@TwistersSK8 All current money that exists is technically borrowed from a bank, and is owed back with interest by someone.

Which counts as 9000$ - 10% of reserve?

Conclusion #3 of the 100% reserve is mistaken. It assumes that in 1 year the borrower of the $900 will repay it. What if he doesn't? Then the detective will not be able to cash his CD. The only difference between 100% and 10% reserve is the amount of leverage, i.e. risk to the bank. (I'm talking in Free Banking, without bail outs from the government and moral hazard.) The bank indeed makes interest on the money it creates, but that's not "something fishy" at all. That's what leverage means. You take 10x the risk, you make 10x the return. Conclusion #2, in the 10% reserve case, is a consequence of conclusion #1. Conclusion #3 is true, but that makes sense, because fiduciary media is _not_ base money (which in free banking wouldn't be fiat but something like gold). Of course it's worth less than base money. Rothbard (whose I am a big fan) seems to purposefully overlook the fact that banks _tell_ you that your deposits are risky, hence the need for insurance and hence the interest you receive. Everyone who reads what he signs knows that fiduciary media is not the same as base money, so, of course the value of the former will fluctuate according to its quantity, because the larger the quantity the larger the probability that it won't be redeemed for base money. Rothbard makes claims like "banks are inherently bankrupt", meaning that if everyone goes to redeem his notes the banks will go bankrupt. That much is true, but then so are air carriers who overbook their seats, and hotels that overbook their beds, and insurers that insure way more houses than they would be able to pay for if they would all burn overnight. That's the essence of taking risk; you could lose. That doesn't mean it's fraud, nor anything nefarious, as Rothbard and Hoppe and Block want to make it seem. The only thing that makes it dangerous is the fact that the government bails out the losers, and that the base money is fiat legal tender. In other words, that we don't have free banking. But that's not the same as fractional reserve. The problems of non-free banking would exist even with 100% reserve, and, conversely, if we had free banking there would be no problem with a less than 100% reserve. After all, that's how banks (and hotels and air carriers and insurers) have always operated, even before the Central Bank and the FDIC.

Did you know the Fractional Reserve Banking is now 0% that needs to be in the banks vault so the $1.000 is loaned out over and over again. With the Full Reserve Banking system what happens the guy borrowed the $900 to get the TV and then the shop owner deposits the money in a different Full Reserve Bank what happens then..

With fractional reserve banking the money going to non-productive activities will cause inflation

@interstategar

3 жыл бұрын

Fractional Reserve Banking isn't the cause of inflation because bank loan customers produce real goods and services to pay off a loan. What causes inflation is inflated interest rates for credit, which are passed onto consumers. Once prices become higher than what people can afford prices go down. Also the Federal Reserve Board can can reduce the money supply by increasing interest rates and depending on their actions can cause a recession, like it did in the 70's. Prome rates then were in the double digits.

Why is it additional 9,000$?I need an answer today ASAP

One question you didn't answer is how did he get that $1000 in the first place......It came from a loan. (i.e money had to be created)

But where does the money to repay the loan come from (the loan taken by the TV buyer)? If the $1000 was the only money in circulation, how can the loan ever be paid in a full reserve system?

@ayoiawe

3 жыл бұрын

Because the tv buyer is most likely working and will pay it off from simply paychecks.

@austinbyrd4164

2 жыл бұрын

They must provide value to others unorder to aquire that scarce currency. It's divisible, so they accumulate more based on how much they contribute. That's good!

Just for those who don't quite understand, what do the banks do with the 10% they put in the vault ?? Thank you

@berntengdahl1519

2 жыл бұрын

The money just sits there in the vault until the owner wants it back. The bank is providing the service of guarding the money for the customer.

@pjrousche1600

Жыл бұрын

The 10% is kept as if it was a full reserve deposit. This is the current lowest reserve rate allowed by US federal law

@jaysant6958

6 ай бұрын

@@pjrousche1600That is so low.

I don't really understand the second part about the full-reserve banking: 1. How can the bank pay interest on the $900, where did the money come from? 2. What if the economy expands and in aggregate produces more goods than before with the same money supply, wouldn't the price of each item in the economy drop on average? Wouldn't that create deflation to infinity?

@Taurungames

4 жыл бұрын

1. Nowadays the money is creatwd continuously. Also, this fraudulent system syphons a lot of wealth from the rest of the economy. It's basically the reason inequality is growing in the west, financial capital is parasiting the econony. 2. Kinda. Deflation is good and there is no historical evidence that it leads to recession. In truth, deflation was the norm when worker's incomes were exploding. There is always metal mining, and new forms of money would come up. I do believe the monetary base would expand to accomodate bigger economies, but it would be done by market logic, which would be much better

@Jaroen66

4 жыл бұрын

@@Taurungames so how would the market expand the money base under a full-reserve system? Who's gonna do the expansion? I don't think you've thought this through enough. Banks can only exist upon fractional reserve systems, that's a fact. Would a capitalist world like ours work without banks? I don't think so, it's kind of the cornerstone of capitalism. So I'm at a loss of how this full-reserve system, which has never been done in the history as far as I know, could work

@Taurungames

4 жыл бұрын

@@Jaroen66 If you use gold as a currency, by mining gold for example. By using many different currencies. People have used grains, seeds and cloth, they find a way. The cornerstone of a market is private property, and fractional reserve is fraud. Banks can provide two services: storage and mediation between borrower and lender. The first one you pay fees for, the second you get part of the interest. In fact, banks are way more stable under a full reserve because then they aren't bankrupt all the time

@Jaroen66

4 жыл бұрын

@@Taurungames sounds good, doesn't work. 2 problems: 1. Gold is too heavy and cumbersome to be used in a cashless world that we're entering (I mean physical cash in this case) 2. Being able to expand the money supply is actually good for creating large businesses. It actually created modern prosperity as we know it. What was the last time we only used gold coin as cash? More than 1.5 century ago, before the industrial evolution. If you think you can bring that back now and have it work out, you are delusional

@Taurungames

4 жыл бұрын

@@Jaroen66 You don't need to carry gold coins around. And I like gold, but digital currencies are a reality for that very reason. Perhaps it is good for the money supply to increase, but not at the rate we have and not out of thin air. Gold coins were used in the US until the early 20th century, much after the industrial revolution

But even in a full reserve system we have loans, no? And if no additional money is created, how can loans be paid back plus interest?

@dale7326

4 жыл бұрын

Money is debt. That would be the answer...

@LucasRibeiro-po4pb

4 жыл бұрын

Because what needs to be repaid is real value, not nominal. A stable money supply leads to deflation, which means a borrower can repay a smaller nominal quantity while paying real interest. So, for example, if you borrow 100 gold coins to invest in machinery for your bakery and you have to pay real 3% interest over a year, but the inflation rate was -2%, then you would only need to repay 101 coins instead of 103.

@austinbyrd1703

2 жыл бұрын

They would provide demanded goods & services to *compete* for that scarce currency.

This video assumes that banks need to have a reserve before they can lend, they don't. They just lend money out of thin air and put some in reserve.

@luisstar5594

3 жыл бұрын

but how though? How can the bank lend you something that it doesn't have?

@Acid31337

2 жыл бұрын

@@luisstar5594 it could legally just put number into your deposit account. and row about your liability(credit) into their balance sheet. If you need cash, bank can legally exchange that number for cash from mint.

@austinbyrd4164

2 жыл бұрын

No duh dipsh*t. That's what we take issue with. Inflating the money supply is inherently detrimental to productivity as it distorts price signals, misallocates land, labor, & capital, & distorts our time preference thereby dooming projects to failure & incompletion (especially including opportunity cost).

Also note: if I share this video or similar videos .... KZread deletes the info from comments.

When you come across idiots like Krugman telling you that we had crisis even under gold standard - tell him that we might have had gold standard but did not have full-reserve banking. If you have fractional reserve banking - there is still fiat money being created.

@berntengdahl1519

2 жыл бұрын

How nice of to call nobel prize winner Paul Krugman an idiot. Please, explain to a mere mortal like me what aspects of his complex research that you disagree with.

@austinbyrd1703

2 жыл бұрын

@Bernt Engdahl ok 👍 👌 Cheap credit misallocates resources to undemanded/lesser demanded ventures, increases the present consumption & acquisition of goods, distorts our time preference, creates a dependency on continuous overvaluations, & distorts price signals (because of relative price stickiness, unequal velocity within different sectors, & circular demand within scarce demanded goods [assets]). Speculation increases as lesser educated consumers spend & borrow. They have not went through the thorough process of elimination that normally happens in the free market. When these malinvestments inevitably must end & the spigots of cheap credit are cut, a _'deflationary death spiral'_ must ensue. You *have to* allow resources to be freed up, consumption to be detered, & then properly allocate them to where they're demanded. If not, attempting to correct malinvestments within the system will crash the economy. Market set interest rates & a scarce divisible currency naturally fix this. Banks & borrowers must compete for scarce savings. Through interest rates, these funds are allocated to demanded ventures. In direct proportion to how demanded they are & how much consumption is detered through saving. Since there's no inflationary effects, our time preference of consumption & production is balanced, thereby allowing projects to reach their full potential. Artificially cheap inflationary credit interferes with needed corrections & exacerbates structural issues. We need to raise rates, default, & let the market properly restructure. Building up our productive capacity is the only way to viably get demanded goods & services. There's no shortcut. I can cite nobel prize winning economists that agree with me. Mises wrote this theory of money & credit we espouse. He predicted the great depression, lived during the gold standard, & his policies got us out of the 70s stagflation. You don't know know what you're talking about, & neither does krugman. Name a single thing he's ever predicted. I'll wait. He was wrong on the internet & housing bubble, & he's wrong today. Economists vastly disagree. Address our arguments. I know you have none!

@berntengdahl1519

2 жыл бұрын

@@austinbyrd1703 Thanks for your long respone. But you didn't discuss Krugman's research, which is what I asked about. Instead you went on a long rant with complicated terms like continuous overvaluations and malinvestments, which I was unable to make any sense of. It's not very helpful. You asked me to provide one thing that Krugman has correctly predicted. He predicted that during the great recession, monetary expansion would not be inflationary, and he was right. By the way, Krugman actually made a bet about this against the well known Misesian economist Bob Murphy. And Murphy, being the honest guy that he is, admitted defeat. So there you have it.

@austinbyrd1703

2 жыл бұрын

@Bernt Engdahl no duh. When you're the reserve currency & a global central banking cartel props up the bond market through fixed exchange rates, of course you can buy an endless amount of imports to prop up your unproductive job market. We export most of our inflation overseas for goods. The world subsidizes our reckless spending at their detriment. We don't produce much of anything, so they just hold huge amounts of worthless reserves. The USD's reserve status is the only thing propping up our terrible service economy. Of course when you change the mechanisms of measuring the cpi, suddenly the cpi doesn't show a substantial increase in prices. Using the same mechanisms we used during the 80s, we have the highest inflation in US history. Second only to maybe the civil war, when lincoln printed green-backs in mass. And you know how that ended? With the crash of 1873. You know how we got out of that? Massive spending cuts & a return to the gold-standard. One look at (scarce) asset, stock, & commodity prices over the past decade will show you the massive inflation this 0 rate environment got us in. That's called overvaluations, & borrowers & lenders are completely dependent upon their continuous artificial appreciation (through cheap inflationary credit). Nobody ever denied that bubbles take time. The great depression took almost a decade of cheap credit & malinvestments before our inevitably painful correction. Mises predicted the great depression, & his theories stand evermore true to this day. His student Hayek won a nobel price for extending his theories. We can both cite notable economists. One side here is obviously better. It's not my fault you don't understand basic terms like "overvaluations" lol. Learn to read, & when you do read mises. You, & Mr. "the internet will reveal itself to be nothing more than the fax machine" krugman, know nothing about what you're talking about. He openly said there was no housing bubble before it came tumbling. He's stupid af.

@the_real_economics

Жыл бұрын

@@berntengdahl1519 There is no such thing as nobel prize in economics. BTW, Ben Bernanke also got "nobel" prize, the guy with 2008 GFC under his belt, "nobel" prize in economics lost all of its credibility.

How can this be possible? What happens when people default on their payments or lose their money and the banks have created bigger debts than they can physically pay back?

@jaysant6958

6 ай бұрын

They recoup their losses with collateral or other creative methods.

@bensupit8991

6 ай бұрын

1929

What if the fractional reserve bank DOES inform the clients but says "this is how it is, folks, take it or leave it"? Then it tecnically wouldn't be fraud.

The first example seems incorrect. With the fractional reserve system the bank would have kept all of the $1000. But then they would have created $9000 on their banking system and lend out that created money with interest.

@jaysant6958

6 ай бұрын

If that was the case, how would the detective be able to withdraw anything up to $100? Even $20 he wouldn’t be able to withdraw.

Disappointed with what seems to be the Austrian take on fractional reserve banking. I otherwise agree with everything Austrian (economics wise) but so far I haven't seen an explanation that provides honest reason for objection to fractional reserve banking. In the example in this video, clearly, there was no new money creation. If there had been no bank at all and the guy with the first $1000 simply bought the TV himself and then the TV shop owner bought the leather jacket himself, then the jacket shop owner bought the purse, etc, it would have been the same progression of the money cycling through the economy, changing hand to hand, each time in exchange for a product. If anything, there is less money in the economy because the bank is retaining 10% after each transaction. The benefit here is that somebody who doesn't need a TV allows someone who does to get one. Somebody who doesn't need a leather jacket allows someone who does to get one. Etc.

Everyone should watch 'money as debt' on youtube if you seriously want to know how the banking system works

@Walter-mr5hd

4 жыл бұрын

I watched 15 minutes and the video quality is awful. The sound and animation. Wtf

@wahidnawaz6957

4 жыл бұрын

@@Walter-mr5hd it was on a budget. Usually people who are searching for and showing the reality of things do not have much of a budget like the mainstream does. Despite the budget, 'money as debt' is really revealing about how the banking system works against everyone.

Why is fractional banking allowed? Doesnt it just cause insane debts?

@NewBaldwin

3 жыл бұрын

Debt like you wouldn't know, but it makes it easier to finance wars and maintain the support infrastructure for mass enslavement.

@nikolatesla537

2 жыл бұрын

money is debt

@nikolatesla537

2 жыл бұрын

@@austinbyrd4164 so it’s basically debt

@austinbyrd4164

2 жыл бұрын

@@nikolatesla537 totally 🙄 Either you're a troll or you have no arguments.

@austinbyrd4164

2 жыл бұрын

@@nikolatesla537 betting on number 2

First one stimulates economic growth but creates catastrophe is an economic recession. Second one does not stimulate economic growth but does curb inflation and maintains the money supply. I wish the Fed was not private and could not use quantitative easing.

@austinbyrd4164

2 жыл бұрын

It's not private. That is a complete myth. It was established by the state, the money it prints is monopolized by the state, the officials of the fed are chosen by government officials, & they always monetize government spending. They're not private! They're, somewhat, independent from other branches of government in how they operate, but they're in no way private.

@austinbyrd4164

2 жыл бұрын

Absolutely true though, they shouldn't exist period.

@austinbyrd4164

2 жыл бұрын

And it's not economic "growth" either. It's a numerical boom. Supplying demanded goods & services (real growth) is actually hindered in this process. The correction is the cure to the malinvestments within the system.

Back when it was still 10% those were the days

@austinbyrd4164

2 жыл бұрын

Oh god

I don't understand how fractional reserve banking 'expands' the money supply and reduces purchasing power. If the detective deposits his $1,000 in the fractional reserve bank and the bank lends out 900 of it.. he has still parted with the 900. Assuming he doesn't claim the whole 1000 before the 900 is repaid to the bank, and the bank stays solvent, then the effective money supply is not increased. It's not like the detective and the TV buyer can both spend their money at the same time...

@donald_the_savage1234

4 жыл бұрын

ScRaS181 no, but more money is lent out than originally existed.

@joelalonde

4 жыл бұрын

The key issue for Fractional Reserve is that we're told "You can withdraw your deposit at any time". "If the detective deposits his $1,000 in the fractional reserve bank and the bank lends out 900 of it.. he has still parted with the 900." Actually the problem with the Fractional Reserve system is that he HASN'T parted with the $900. Despite the detective's $900 being loaned out by the bank, the detective was promised that all of his $1,000 is available on demand. Which means the detective is most likely spending that money at the same time the TV buyer is spending the money loaned to him. This is how the money supply is expanded. Essentially money is deposited and that deposit is loaned and so that money is in two places at once. Both people are spending that same money. This scenario repeats countless countless times and that's what really drives inflation. Besides the inflation, in the extreme worse case scenarios of this system you get the Bank Runs of the Great Depression. The video didn't do a great job of explaining these implications.

@jimmyjimmy8859

3 жыл бұрын

@@joelalonde You seem to understand this better then most people here Joe so can you recommend a video that explains it better?

*

So this is why the banks don’t like people withdrawing their money at the same time

Money and currency aren't the same. Money is real wealth while currency is has belief of wealth.

You forgot to mention deposit insurance.

If the store owner wanted to lend his 90% of his money, wouldn’t that ‘print’ more money?

@NayarJoolfoo

9 ай бұрын

then his 90% of money would also be locked up

@jaysant6958

6 ай бұрын

@@NayarJoolfooWhat about at after the length of term ends? Yes I think it does create more money.

Wrong! Someone paid the interest and the operating cost of the bank. That money was created from somewhere, and that somewhere was the fractional reserve bank. "Nothing is ever free!" Neither labor, service or banking.

Cool but I want to know why WORLD BANK is created when there local bank to give loan. And what WORLD BANK do. Why they just can't give loan to poor country to stabilize there economy why didn't they help Venezuela or Greece in there economic crisis

@jzk2020

5 жыл бұрын

"Confession of an Economic Hitman" John Perkins. Type that into youtube and read/listen to the audiobook if you want to know why IMF/World Bank aren't doing that.

@adamregan4921

5 жыл бұрын

Here's some info: The Eight families (Cartel). Starts of with the Federal Reserve, Who owns the banks and then onto the BIS, IMF and World Bank. www.globalresearch.ca/the-federal-reserve-cartel-the-eight-families/25080

@juanio7036

5 жыл бұрын

The imf and world bank are their to provide structural adjustment loans to 3rd world nation for the purpose of social and political change under the premise of helping the people by provinding food and building their infrastructure and creating jobs. The real reason is to turn those nations into socialist nations in which they can control the puppet they put as a head of the nation. Why? So they can easier create their global government. America is harder to turn because we are not a 3rd world nation but since all those loans are backed up by USA(us that pay taxes) eventually the USA will end up as a 3rd world nation as well. Now the fed is leading loans to nations as well and when they can’t pay we the tax payers have to eat it. 22 trillion in debt and counting. In case you wonder who owns and controls the money global money supply it’s those who you can’t ever criticize or you’ll get told your anti Semitic. A good read would be “the creature at jekell island”as it gives a back ground on how the fed reserve was establish and what its true purpose is.

Fractional reserves theory is simply not true. that's not what happens in banks. if you give a bank 1000 they deposit this as reserves (if reserves are 10%) and then they now can create money out of thin air up to 9000. Why this matter? because in your case you are assuming that the bank has to pay interest on first 1000, then he needs to pay the store owner interest on hi 900$ deposit etc. which means the bank will now have to pay interest on 10000 dollar. (in other words the bank eats up the loss from having to carry reserves which he cant lend.) In reality that just doesn't happen because the bank doesn't have to give you paper money at all. all they have to do is mark a number up in your account and they can then add it to their assets. you don't pay with cash when you buy a house or car or almost anything these days so the need for paper money is a just not there

Just published video with Dr. Murphy discussing fractional vs. full: kzread.info/dash/bejne/h2pts9SzYNvakqw.html

@EconClips

5 жыл бұрын

Dr. Murphy is a good specialist in the subject:)

@BobWidlefish

5 жыл бұрын

*@EconClips* yes, especially since he used to support fractional-reserve banking and now supports full-reserve (i.e. he’s well-informed on both sides) and has done debates and written on the issue many times. Plus he’s an affable guy and I find his style of communication both written and verbal to be very clear - he’s good at using plain English to explain complex technical matters. I also like the fact that on this issue and many others he’s very good about not straw-manning other peoples positions or ridiculing them. He seems like a genuinely good person that also happens to be very well-informed in various economic matters.

The best type of money system is commodity money(gold and silver) because it can’t be manipulated as you can’t create it out of nothing and never loses its value. What and ounce of gold bought you 40 years ago it will buy you today.

@DaddyAZTL

5 жыл бұрын

You can only have as much $$ as you do gold and silver. That wouldnt make you as rich as you could be.

@pinktoes3875

5 жыл бұрын

it has problems when the rich hoard their gold. the money supply goes down, economy in permanent stagflation = depression is the norm. it could make sense when human is the most effective producer in pre-industrial societies. no-reserve computer digit bit banking makes most sense when the real producer is automated machinery bcuz the real worker (machine) doesnt even want money. some economy clip said that out of the total productivity of the US 96% is done half to full automatically and 160 million ppl showing up to work counts as 4%. the real worker hasnt been human for a long time. its just that machine productivity is a thousand fold compared to human. and with gold, forget investment in the real producer which is technological productivity. they ditched a metal for something much more valuable = technological progress and the bits dont even need to be real bcuz the worker runs on electricity. gold might have worked when the invention of technology was done in sheds but now its done in a lab with computers and is simply not possible without investments and risk capital. so adopting a gold standard now probably means going back to the horse and cart.

@dickiller2199

4 жыл бұрын

pink toes nah bruh wtf they don’t hold their money in a vault they hold it in deposits in a bank which then makes credit with it

@austinbyrd1703

2 жыл бұрын

@@DaddyAZTL Wealth is determined by the amount of monetary units. Wealth is determined by the amount of demanded goods & services you have. Money is divisible. There's no benefit to inflating the money supply. It's only a detriment

@austinbyrd1703

2 жыл бұрын

@pink toes Natual deflation is good. It encourages savings. Saving is good. It frees up land, labor, & capital to be used by demanded ventures through sound lending. You deter consumption today for future production, & thereby more consumption. This stupid idea that nobody would spend has no evidence or logic behind it. People need to spend on necessities. Would you not buy a new game just because it's price will go down in the future? What's the point of money if you never spend it? Each person is at a different point in their lives. The old want to spend the savings they've accumulated over the years, while the youth are encouraged to save. There's still a continuous circular flow of the currency. Necessities are prioritized. This is good. Let's say, for the sake of argument, that nobody ever spent, what do ypu think that does? It hurts business, they're forced to raise prices to have any chance of surviving, & it creates shortages. This encourages people to spend. Even in the most extreme unrealistic scenario it's self correcting. Cheap credit misallocates resources to undemanded/lesser demanded ventures, increases the present consumption & acquisition of goods, distorts our time preference, creates a dependency on continuous overvaluations, & distorts price signals (because of relative price stickiness, unequal velocity within different sectors, & circular demand within scarce demanded goods [assets]). Speculation increases as lesser educated consumers spend & borrow. They have not went through the thorough process of elimination that normally happens in the free market. When these malinvestments inevitably must end & the spigots of cheap credit are cut, a _'deflationary death spiral'_ must ensue. You *have to* allow resources to be freed up, consumption to be detered, & then properly allocate them to where they're demanded. If not, attempting to correct malinvestments within the system will crash the economy. Market set interest rates & a scarce divisible currency naturally fix this. Banks & borrowers must compete for scarce savings. Through interest rates, these funds are allocated to demanded ventures. In direct proportion to how demanded they are & how much consumption is detered through saving. Since there's no inflationary effects, our time preference of consumption & production is balanced, thereby allowing projects to reach their full potential. Artificially cheap inflationary credit interferes with needed corrections & exacerbates structural issues. We need to raise rates, default, & let the market properly restructure. Building up our productive capacity is the only way to viably get demanded goods & services. There's no shortcut.

Actually, in a full reserve system, the purchasing power of money would INCREASE whenever a deposit is created. The reason is that the money is simply sitting there in the vault for the whole year, and is in effect removed from the economy. Hence, there is less money to circulate, leading to deflation.

Our currency is constantly increasing in value by increases in technology, productivity, and population growth. This puts us in constant risk of deflation. Deflation causes people to hold on to their valuable money and sets off recessions. We need to constantly devalue our currency to counteract deflation. Fractional reserve banking is the best way to do this. The alternative would be to allow the government to deficit spending all it needs to for the purpose of creating inflation. This is also a pretty good idea.

This video is faulty. At the beginning, the detective is given $1,000 but the money didn't come out of thin air! As we are talking about the banking system as a whole, we have to assume the $1,000 came out of this same bank to begin with! EconClips needs to re-do this video, with the original $1,000 coming out of the bank!

I actually support fractional reserve banking

@EconClips

5 жыл бұрын

Free banking team? :)

@adrianomattia5625

5 жыл бұрын

EconClips Yes. I know that there is some kind of split between Austrian economists on this specific subject. Rothbard and Mises are against FR. I would like to have a decent discussion about this.

@EconClips

5 жыл бұрын

Mises wasn't against FR. He writes about it in Human Action - "Indirect exchange" chapter. Especially in the 12 section "The Limitation on the Issuance of Fiduciary Media". We will surely make a video about free banking, but it will take us some time.

@adrianomattia5625

5 жыл бұрын

EconClips perfect. I was mistaken about Mises. I've read one Mises quote where he explained how banks deposits aren't real loans(economically speaking). I was mistakenly lead to believe he was against FR.

@adrianomattia5625

5 жыл бұрын

EconClips would you mind making a video about the economic calculation problem? Socialists nowadays claim to have solved the problem

Who the hell is buying a leather coat for $810?

And that's the picture of the deviation from the gold standard. Creating money from nothing is a theft.

this is noooooo longer true not there is no reserve requirement ... THey can do what they want print all they want .. its amazing time to live

It's scary, but let's face it. Without fractional reserve system, it would be Much harder to become wealthy.

@cramsa

Жыл бұрын

Most of the world is anything but wealthy... fractional reserve banking is parasitic and so is the fiat system.

This is the first of econ clips that I disliked. Let us say you have fractional reserve banking with a gold standard. And instead of 10% in reserve. You have 30% in reserve. They offer you a 6% interest rate, so the savings account looks less like a checking account, and people are less likely to take money out, and more likely to choose that bank over others. As more people deposit, thanks to the attraction of the higher interest rate, you won't have as much of a risk of running out of money in reserve, so you have a 99.99% chance of having money when people want to take it out of their savings. Does fractional reserve banking sound way more appealing now? Yes. Does it seem like a flawed system? No. I don't think so

@popo-lr8gm

Жыл бұрын

what gives these private banks the right to create currency? this is helping to maintain the concentration of power with the few elite.

@johnathanvale8634

Жыл бұрын

@@popo-lr8gm gold standard.

@popo-lr8gm

Жыл бұрын

@@johnathanvale8634 that's irrelevant

Fractional Reserve for the win! Death to Full reserve banking!

@jjenson2006

5 жыл бұрын

Wait until the system falls apart because of it.

@joaov.m.oliveira9903

5 жыл бұрын

​@@jjenson2006 It's always falling apart, every now and then everything breaks and countries get closer to starvation and war. It's called economic cycles, and they're caused primirily by this fraudulent fractionary reserve banking.

So stupid, Fiat currency and fractional banking serves a purpose that was not mentioned here. The Detective needs to get back to it and tell the viewers of this video why this system exist.

@austinbyrd1703

2 жыл бұрын

Name the purpose then dipsh*t. It's only detrimental to productivity & purchasing power.

This is useless information. Which can create anxious anticipatery anxiety. Whether fract reserve or full reserve bank will have to lend money to earn money to meet their expenses. A loan will always be the greatest invention. The ability spend money before you can earn it. Live in a massive house without having to save to build. Give a break with the prophesy of doom. If there are improvement to goods and services the cost will go up.

This is wrong. Fractional reserve loans go to produce more goods, not to buy consumer goods.

@christianldove

3 жыл бұрын

Literally just saw this after we wrapped up our conversation today. Too funny.

@AustrianDuration

3 жыл бұрын

@@christianldove the bot

@austinbyrd4164

2 жыл бұрын

Cheap credit misallocates resources to undemanded/lesser demanded ventures, increases the present consumption & acquisition of goods, distorts our time preference, creates a dependency on continuous overvaluations, & distorts price signals (because of relative price stickiness, unequal velocity within different sectors, & circular demand within scarce demanded goods [assets]). Speculation increases as lesser educated consumers spend & borrow. They have not went through the thorough process of elimination that normally happens in the free market. When these malinvestments inevitably must end & the spigots of cheap credit are cut, a _'deflationary death spiral'_ must ensue. You *have to* allow resources to be freed up, consumption to be detered, & then properly allocate them to where they're demanded. If not, attempting to correct malinvestments within the system will crash the economy. Market set interest rates & a scarce divisible currency naturally fix this. Banks & borrowers must compete for scarce savings. Through interest rates, these funds are allocated to demanded ventures. In direct proportion to how demanded they are & how much consumption is detered through saving. Since there's no inflationary effects, our time preference of consumption & production is balanced, thereby allowing projects to reach their full potential. Artificially cheap inflationary credit interferes with needed corrections & exacerbates structural issues. We need to raise rates, default, & let the market properly restructure. Building up our productive capacity is the only way to viably get demanded goods & services. There's no shortcut.

@austinbyrd4164

2 жыл бұрын

Expanding the money supply inherently hinders productivity.

@AustrianDuration

2 жыл бұрын

@@austinbyrd4164 not all loans are malinvestments. If the commercial bank lends short-term, they are coordinating the fact that checking account depositors want final goods in the short-term, not long-term. So, you have to look at the quality of the loans, are those loans bringing final goods on the short or long-term?

This is stupid. Fractional reserve banking IS the method that the reserve banking uses

This gives me a headache. This is so wrong

@austinbyrd4164

2 жыл бұрын

You're stupid & have no counter arguments. Willing to destroy you in a debate if you want.

@austinbyrd1703

2 жыл бұрын

Give an argument. Oh wait, you have none.

@Vjl5280

2 жыл бұрын

My argument is that the central banking system is a cancerous usurious international cartel that snatched away the sovereignty of freemen all throughout the world. It’s inherently inflationary. It’s slavery. It’s a deceitful slave inducing usurious money practice that does nothing but inflate our currency, decease the buying power of our currency, and at the end of the day steals away everything we own

@Vjl5280

2 жыл бұрын

If you want a lesson on reality let me know.

@austinbyrd4164

2 жыл бұрын

@@Vjl5280 oh, nvm lol, your comment gave the initial impression that you supported the fed & fractional reserve banking. I'm against it.