I am getting some questions on this along the lines of "But doesn't interest throw this system out of balance?" The answer to that is no - the Central Bank charges interest on the loans it makes, but it also PAYS interest daily to the banks which are holding money - so interest balances out. More generally, interest can never unbalance the system as a whole - it is merely a transfer from one group of people (debtors) to another group of people (creditors) Hope that helps
Interest just adds to the money supply. Banks add interest to loan balances. So higher interest rates are actually in themselves inflationary and run counter to the disincentive of lowering aggregate demand. The outcome depends on the relative impact of each as determined by the current macro environment.
@@stokesbay2152 Interest does not add to the money supply. Central banks charge an interest, and Banks pay the Central Bank interest on borrowings. Debt created, debt paid = cancels out.
@@nazb1982 The money is in the system! Central bank creates debt. Banks loan out money as debt. Peons take on the debt, and pay it off. e.g. I take a loan for $100, with an interest of 1%. I pay back $101. Bank pays Central bank back $101. Where did that $1 come from? Debt. I now take on the $1 debt that the Central Government had created.
That explains the concept of "reducing the money supply" because the debt is often paid off from savings - reducing the amount of LIQUID cash in the system (don't confuse this with total money - that always stays the same).
Your voice is so much needed. I drive a taxi and have stuttered through a collective unawareness with hundreds of people trying to make sense of what doesn’t make sense. Most of us are vulnerable, in my mind you are changing this. I wish you well.
Thank you from a 78 year old. I had to watch this twice, yes I am a little slow. But when I suddenly understood your argument, it was like a flash of lightning.
All those years ago during A level Maths, I remember a really passionate and articulate teacher trying his best to get the concepts across to us, his students. Thank you Gary for doing the same again 40 years later, it will certainly make a difference to our understanding of this system that we’re in.
@@FatHeadedZebra My personal experience is, that people don't want to know really. Like with climate change... they don't even know how much CO2 is in the atmosphere but "SCIENCE!!!" . ^^
Maybe Gary could become a teacher of Rishi Sunak's planned Remedial Maths for Arts Students. If I were teaching that course, I would go through the textbook and replace the names of people in the examples questions with those of Tory politicians.
One of the things that drive me mad is this line that government push to try to equate public finances with a household budget (in line with your point about "money running out"). The magic money tree is alive and well!
i have to etch this into my brain.....`money is not real resources, money is a distributional resource, money is only used to determine who gets the real resources´ thanx for free economics classes, u r a star, if i can give back let me know (I teach Spanish and French, and maths but u wont need classes in that i reckon hahah)
Underated channel. As someone who came from hardship and managed with a lotta luck, and a heap of hard work to get out. I appreciate a voice like yours. I see the imbalances, and its very real, and it feeds off itself.
More explanatory videos are very welcome - a lot of this debate is inaccessible without this sort of foundational knowledge. Great work as always Gary & team.
A zero sum game not increasing the money supply. IN THEORY! BUT The Bank of England Q1 2014 Bulletin website tells us 97% of the UK money supply is now created out of nothing as “borrowing” by commercial banks with only 3% as cash. This means the money to “repay” loans was also created as debt hence debt must increase. In theory this debt can be ignored as it’s the mirror image of wealth but interest is demanded by it. Therefore debt is still an increasing problem. It’s a game of pretence that there is no magic money tree but there is because there has to be a money creation mechanism. The vital question is whether it should be in private hands for private profits or in public hands for the common good. The answer is obvious but the money power is extremely powerful and can buy people.
@@garyseconomics and when you work in accounts for a few years you find out quickly what is simple to us isn't to ALOT of people. I think numbers in general scare a significant proportion of society. Before you came along I watched a Mike Maloney's Hidden secrets of money series which was also enlightening.
Exactly what I was thinking revising fundamentals of accounting - cash literally equals liquidity. To be able to create liquidity you need to *drumroll* liquidate an asset for the cash value (moving value from one account to another). The accounting equation applies to it 100%. Printing more money just reduces their value by increasing the supply.
this has been a burning question on my mind recently and I've tried understanding it from my own experiences and perspectives. They way you've analyzed and broke this understandingof money down into content form for me to digest was smoother than drinking water. Thank you for this ultimate perspective of money.
Thanks for this. I've always tried to describe that essentially money at a basic level, is only a measurement of distribution of available resources. It is solely a means of deciding who has earned what share of the resources. Therefore, money as a system is obviously currently failing.
Economics is shrouded in language ordinary people find difficult to understand, same as many “professions”. This is deliberate, a way of dissuading others from engaging, however when broken down like this by Gary, it really is simple. Falling wages and higher house prices are indeed a symptom of the very same thing, currency devaluation.
Thanks for this video Garry, i agreed with 95% with what you said, my only gripe is that central banks do not lend out reserves. they are simply a mechanism for settling interbank loans. Prof Steve Keen has some good descriptions of this. You are a great communicator and these complex ideas will spread widely thanks to your efforts. Keep up the good work !
Right, Net Financial Assets are created when govts spend into the economy via the Central Banks #LearnMMT The £s in the economy sitting as reserves held by private banks at the Central Bank, or as cash in people's pockets, are just the money created by the govt which has not yet been taxed away.
This is Richard Werner's whole shtick as well. 97% of money supply is created by retail banks out of thin air when they write loans. No internal transfers occur at the bank.
@@youthculture523He expressly states in the video that no internal transfers happen-that statement isn’t incompatible with his statement that the net balance of the economy’s total debt and credit is zero.
I yesterday came across a video in which an economist called Tony Lawson was denouncing economics, he seemed to be saying it's in a mess because for the last 70 years it has almost entirely relied on mathematical modeling to describe social reality ie "using a hammer to cut grass", that economics as practiced by the top economists has divorced itself from the real world. At least, that's my basic understanding of what he said. Have you heard of him?
A good argument. There's a real economy under it all about how we collectively supply each other with what we need & want to live. Growing food, building houses.... If some people are taking more & more wealth off us without doing any of that, it can't possibly end well for any of us.
I noticed you connecting the dots of public sector workers and pay unbalance. I think this is a very important message that needs to get across especially as mainstream media are covering this and will help Gary's message keep growing
I never considered looking at global GDP per Capita before. It's a little scary. Almost $90k per person globally. The vast majority of people are getting a bad deal.
On average most people are getting a bad deal. But a few people are getting rich. This is why billionaires are built on mass exploitation. They do everything to prevent fair pay or reasonable sharing of profits in their businesses. If all their staff are doing really well then they won't be getting as rich as an individual. Ultimate selfishness= billionaire.
@@ollydix that is too reassuring. That figure can be paid off in a decade on a personal debt. Those who run the system will never allow it to happen. They gather too much money into their personal accounts by keeping the majority on the negative side.
Thank you for your brilliant explanations. I have been looking for this level of communication for a long time. I think a lot of people are yearning for real understanding which calls out our politicians and shows them (not all of course) to be ignorant and themselves easily manipulated by lack of understanding. We need real knowledge and informed non-ideologues, moral leaders with brave and radical ideas. Please continue to educate us and especially the Labour party.
Finally someone has summed up money creation with words I can understand! I love the bit about there being no such thing as governments running out of money, it's just a distributional problem.
The problem with private banks creating debt is that by the simple tool of charging interest, the wealth will always be transferred from the poor to the rich. ALWAYS. Charging interest on borrowings is one most dishonest actions against the poor. Because money has no intrinsic value, as Gary says rightly.
There are perhaps three forms of currency; money, energy and time. The poor pay the wealthy with their energy and time. It's straight up Boxer from Orwell's Animal Farm.
@Blindstagehand if only. We also pay them with money, our health and very often, lives. Time is one commodity that we never get back, just like our life, and health.
Thanks Gary for breaking this down, I wish we teach financial concepts with such clarity in our school years to make financially literate citizens. All we learn is, work hard to get good grades, work hard to get good job but we miss some very essential concepts of money, how it can work for you and how you should handle it.
After hearing your explanation, now everytime I listen to a politician speech, in my head i'm substituting all the words like credit, loans, borrowing, govt debt, central bank lending, printing cash: with the 'money' word. Money that will goto the super rich. 😮
Thanks, this is a really useful video. Strange how the economy is treated as the key policy in many GEs, yet our education system, our media and our government all do such a poor job of teaching us what money actually is.
Control of the ideas that are regarded as "common sense" is a key basis for the maintenance of hegemonic control of a society by the rich and powerful. This control is exercised through education, the media and political orthodoxy. It's no accident that classical economics is so dominant. It's dominant because it serves the status quo and is ruthlessly enforced as the hegemonic common sense throughout capitalist societies. If you want to learn more about this process, check out work by Chomsky on manufacturing consent. The idea of hegemonic common sense is explained there, though the concept was actually invented by an Italian communist, Antonio Gramsci.
Here's the reason why the establishment doesn't teach economics more universally: it is rumoured when Warren Beatty was directing Reds, he taught his crew about the tenants of communism - they then promptly downed tools and demanded equal pay to the rest of the production. If the reality of modern economics was taught more broadly, considerably more people would realise they are getting a raw deal and something similar would happen
I like Gary's definition of money as the commodity we use to determine the distribution of all other commodities. But, I would expand on this. Consider that human society is not possible without the real material goods & services (commodities) required for it to function, and we currently have a capitalist & profit-driven political economic system. So, I would flip Gary's definition on it's head and say money is also how we determine where to allocate labor in production as well. I think both of these are true about the role of money in our current society, but one aspect might be more relevant than the other depending on the perspective of your analysis. (I am very deliberately restricting this analysis to how money works within our current capitalist political economy as that's what is the most relevant to us and all of these definitions above break down once you try to apply them to a transhistorical definition of money.) Anyway, I'm a big nerd that started reading Marxian, MMT, & econophysics books/papers almost 2 decades ago out of frustration with how divorced from reality mainstream economics is. I really appreciate Gary's commentary as he is able to cut directly through both the fake mathism of mainstream econ and liberal moralist bullshit around money/debt and clearly explain how our current day economic system really works. Keep it up!
Hands down, this is a mentor. I would listen to this guy any time of the day. Thank you Gary! He made me wake up and realize modern econ is nothing but people helping rich get richer and helping rich make poor get poorer. Pure modern day money laundering right in front of our face by the rich taking the cash from the government through the people and into the wealthy's pockets. But we don't call it money laundering, no we call it a modern capitalist democratic system because that's what the wealthy want it called. After watching Gary's videos, why Elon Musk was always courting world governments for contracts finally made sense to me. It is exactly this system in action that Gary explains.
In short, money is a measure of power over others, to the extent to which a thing may be for a price. Of course, because, without the others money has 0 value. I think that is by far the truest definition of "money"
I don't necessarily understand everything (I don't have a mathematical brain unfortunately) but I absolutely love your videos and what you're doing and your passion. Xxx
Brilliant background info on money to explain the economy in general and also what's happened recently. Gonna need to rewatch some sections to fully grasp it!
This explains the enormous wealth that the people running the Central Banks have. People borrow money, then owes interest to the banks that lent the money. The money that the banks lent in turn pays interest to the central banks. The central banks did not have to create anything but the fiat that they lent out.
Gary, have you heard of the positive money campaign? They want to change money from something created as debt into something created and spent into the economy. Would be interesting to hear your take on it.
Money is a promissary note, essentially an IOU from our collective wealth pot, represented by head of state or government. You should, in theory, be able to go to the royal mint and demand that IOU be changed back into a commonly agreed form of actual wealth. This used to be pure gold. Now it's pure faith. ...And that's how we've ended up using debt as the commonly agreed form of actual wealth. Got to replace the underlying promise with *something* or the whole thing is vapourware. So now it's debt all the way down - which means it IS vapourware - and the trick is to stop anyone diving deep enough to realise that way down there the whole thing is held up by eddies and currents in the sea of debt.
@@juliamountain1846 indeed. Markets run on confidence which is, essentially, faith. As do confidence tricks, which I have always though was entirely apt
IMO gold was always faith: faith that you could trade that gold for something you needed as that need arose. For many people gold had absolutely no use as gold, thus only had value to them as the medium of trade (in the same way as money only has value as a medium of trade).
Great job Gary, you explained the concept of money better than Robert Kiyosaki because you explained the HOW & WHY not just telling us the WHAT. Top marks on this teaching. What you could have explained better is HOW the government gave money to the rich. You’ve got to break it down further Gary.
They are letters of credit. First became popular with Welsh drovers driving livestock to the midlands and onwards to London Spitalfield market. Lloyds Bank, started off as the Black Horse bank in Llandovery, Wales. Early 18th century.
Indeed, if you look at a £10 note it says “I promise to pay the bearer on demand the sum of ten pounds”. So you £10 note is actual a loan note, the Bank of England has leant you £10.
This is the channel I've been looking for. I studied economics at Oxford Brookes and it's always fascinated me. These are simple concepts but explained exceptionally well. Thanks Gary ❤️
Thanks again Gary, for a truly insightful video. This is very educational and I really feel that you should sit on QT and challenge the MP's about where the money is now 👍🏽
Two things never cease to amaze me. The first is how rigged the system is. The second is how the people that have nothing to do with it always get blamed and ultimately suffer the consequences.
Love your work Gary. It's very hard to understand tbh. Is this not related to fractional reserve banking? Could you maybe do a video on the chain of events on how do the wealthy become wealthier when QE is done, or when financial institutions lend money through mortgages.
Love to hear your take on the capitalisation of state assets. I am thinking about the dissolution of Russian Communism i.e. how states operate in terms of the wealth withheld or 'held in trust' - in Austalia it is vast amounts of crown land and exclusive maritime economic zones. The Russian example seemed to be the total state ownership of all assets and productive capacity that was owed to the Russian people which instead became concentrated in the hands of a small number of powerful individuals.
Now if you were to run a campaign to prosecute these people you exemplify and hold them accountable, and get them to pay it back, I might buy into that x
Damn. I've studied 'money' for many years. At university and for myself. It's a short video and you and I know that there is much more to talk about, but you fuckin nailed it. This is the best video about 'money' in our modern world that I've ever seen. Furthermore I've seen your latest interviews. Go on, mate! We need you and I needed you. I've predicted the financial crash of 2008 in May 2008 but I didn't bet on it, because I was also only 23 and I didn't work for Citibank. Love your story. Will read your book. Thanks for your honesty. Wish you all the best, mate. There is no there is no alternative. Thanks for giving me hope. :) Because we're living in the 'end of times' and what we need is someone like you. I will follow your journey and wish you all the best. Get them mf!
Please can you explain 1) How does this 700 billion actually get transferred to the rich? 2) What is the impact of the government being in so much debt to the ordinary person? :) thanks!
Spot on explainer.The Dollar and Oil priced in Dollars is a great way of further understanding this.The whole world is on the hook for dollars as the unit of exchange for Oil.Currency is Credit and Debt.The money we had in our pockets pre 1970 contained Silver so we had a unit of exchange and a store of value in our possession,todays currency units are exchanged digitally and have no store of value per se.This helped the people who are closest to the tap where this modern money is created,namely bankers and the very wealthy.We need a new system to redistribute this money more evenly,trickle down economics has failed the majority in society.The trouble is the very wealthy not only control the money but also the media and in doing so the narrative. peace ✌
I've been watching this series since the start. Absolutely fantastic stuff. Thanks Gary. I was wondering if you've come across Dan Tubb and his take on western economics? He believes that Western nations' deficits have grown to the point where the interest on the debt makes them impossible to re-pay. He makes the case that we will see a domino effect financial crash towards the end of the decade. I'd be very interested to hear your thoughts on his views.
I've not heard of him. The debt is worrying, but it is offset by private sector wealth held by wealthy individuals, so it definitely COULD be repaid if we were to get some progress on the taxation of the rich and especially the very rich. Failing that I think what's more likely is the progressive dismantling of the welfare state or more periods of high inflation, rather than a financial crash. Both things would be very bad for ordinary families though.
@GarysEconomics Thanks for the reply. The chap I mentioned has a very similar take on the welfare state being progressively dismantled. It certainly feels like we're at a crossroads moment in history.
@@lmorgan877 Basic Income is a mechanism that could fix this crisis, it is a solution, and a good one. I don't understand how such a simple solution can be so unpopular, other than the rich simply don't get it, don't believe in 'handouts' [got to laugh or you'll cry] or, rather, they know they profit from the current tax system, it is the mechanism by which we are defrauded, it's legalised embezzlement! Nuts!
Gary, I understand what you are saying about a bank lending an individual £1000 and that money being created by the bank. Once the borrower has used this loan he has to earn some money to pay back the loan of £1000; so they are back where they started except the bank doesn't pay the money back to the central bank, it keeps it and is the beneficiary. What is happening is the Value of Money is going down; a house is always a house made of bricks, cement, wood and tiles,etc but it is going up in value thereby making money go down. 60 years ago you could buy a cup of tea for 2 and a half pence, old pence, now it costs 2 and a half pounds, but it's still just a cup of tea! As you have said this money system is benefiting the bankers and traders like you.
Even cash in your pocket is a credit. Because in itself the paper cash is worthless. It was only previously worth something because the central bank would owe u a specific amount of gold for that paper money you have. Now we use that cash on trust, trust that we can exchange it for goods, that trust is being eroded fast.
I completely agree with everything that you say in your videos Gary! The problem is that, until the ‘poor’ are educated on finances, nothing will change! You can tax the rich all you want and give it to the poor, but it will always end up back with the rich! Even if we did a factory reset and gave everyone in the world the exact same amount of money, the rich would end up with assets and the poor would end up with big screen tv’s! It’s more mindset and education that’s the issue in my opinion! I come from a ‘poor’ family with a good amount being on benefits, you can give them all the money you want, they spend it faster than it comes in and then moan that they are skint and need more help from the government!
Should have said what a brilliant job you do Gary. This stuff should be taught in school as a priority. Never maths until 18, let's do real economics. I'm 61 and learning.👍
Slight point of confusion - do central bank loans incur interest? If so I don't see how money + debt can add up to zero? Let's reduce it - they make you the first ever loan of £100, interest is 1%. After 1 year, assuming no re-payment, the money owed would be £101. You pay all the money you have to cancel out so £100 + -(£101) = £-1. So now there is no way to cancel out - unless the central bank create £1 and loan it to you?
Central bank loans incur interest, but they also PAY interest, because central banks PAY interest to whichever banks are holding cash at the end of every day. So it balances out.
@@garyseconomics ah okay at the same rate? So for every loan made, they also pay the same amount of interest as they charge? Does this fall apart when the secondary loan is made by banks? Also, if you are ever in Cambridge let me know - would be great for you to give talk in college!!
@@garyseconomics cool thanks! I'm still a little confused about what happens after the recipient (commercial) bank makes a loan at a higher interest rate - as obviously they don't pay interest to the recipients at the same rate as the interest they charge - this really means things cannot cancel to zero (e.g. You loan me the previous £100 at 10%). It seems like debt pools down the "pyramid" and the people in debt at the bottom would be in perpetual debt that cannot be repaid, so would always be forced to work?
@@TheRealRazorfane poor people have to constantly find ways to convince the rich to give them money, not just to pay debt interest, but also to pay their rent, to buy food, to buy energy, since these all resources owned by the rich. This does tend to lead to increasing inequality of wealth over time, but it is a consequence of unequal prior distribution of wealth, not of the money system (although unequal distribution of money is of course one part of unequal distribution of wealth)
Money is a medium of exchange, plain and simple. All it does is facilitate exchange between parties within an economy. A theory of money and debt is very important and I'm glad you are talking about them together because I too agree that debt is a huge driver of poverty but I would start with the simple fact that money is a medium of exchange.
Ive just started listening to you and I am loving your videos! I have never been able to explain these concepts as simply as you do. Keep up the great work!
With regards to the title of the video "what is money" I agree with everything you said and if you are not in the financial world it can be a bit of a head scratch, but I also think there is an explanation that comes before what you said (e.g. explaining the concept to young kids) and that in its most basic form, money is a means or tool to facilitate trade, so the baker dont need to give loaves to the fish monger for fish and vice versa etc and also makes it a short term store of value for the baker having spent their time and energy having made the loaf, and what gives it that value is user case, as in everyone agreeing on that standard. I know you touched on it in the vid when you mentioned it being a token. Sorry, im not trying to b smart arse and i dig what u are doing, looking forward to when you get the book out. Respect to you for having come from the other side and trying to change things for the better, nothing but love for that 🙏❤
My comment above about saving your home from the nursing home bills in the US highlights a major mechanism by which money moves from the middle class to the very rich. High insurance, high medical bills, medical bankruptcies in the US. My middle class family can't afford "affordable care act" insurance because we're not in poverty and still must pay most of our premium. $1500.00 per month for a family of 4 making 120K total per year. And many medical expenses are not covered by that insurance and are paid out of pocket. We did pay the insurance one year to get needed routine tests as my husband and I age, and almost one third of our income went to medical insurance, medical bills, dental, and vision. And we're all healthy. Really. I can't imagine what people who are ill are doing. Taking care of our health is a must. I'm just glad I have a little more time available now that the kids are older and can take better care of my health rather than working and parenting all the time. Increasingly, being able to hang onto a middle class life seems to depend on luck.
Hey Dave, if you appear in my video but say nothing it can be a business expense (this joke might not work because i don’t understand money yet!). Loving your videos. Really helps
Good explanation. Bear in mind that some people will struggle to process info presented in this way- additional use of visual material may help draw in a larger audience
Hi Gary, thank you for all you do. I work in colleges in East London and Essex and it saddens me to see the way we all get manipulated and I try to motivate very challenging and deprived lads to learn a trade so they can start on the property ladder but it all seems a waste of time when I agree and am inspired by your channel to know about the truth behind inequality.
Could you give us your opinion / explanation on blunt tools such as "tax the rich", "increase minimum hourly wage", universal basic income, abolish floating rate loans (fixed only), death duties above $2 million (for example) or other blunt tools the Government might use to re-balance the economy. You have shown the problem, it would be good to investigate / focus on (possible) solutions. Thank you and keep up the battle to protect our mum's houses.
Thank you! The end point is really important too. I keep saying if money is just the means by which goods and services (resources) are exchanged then statements like “there is no magic money tree” are false. The question is are there enough resources? Are there enough resources including labour power for everyone in the country to have enough food, a home, a decent work life balance, energy to stay warm etc. if there aren’t enough resources for that, then it’s a huge problem that we need to fix (eg with renewable sources of energy, sustainable farming) If there are enough resources to support each individual in the country yet people are struggling then the problem is distribution of resources not amount of money.
First of all, thank you for these amazing videos. I stumbled upon your channel a few weeks ago and the speech you uploaded is the best speech and most sensible thing I have ever heard about economics. I do have a questions about how central banks supply money vs private banks, since I thought that with fractional reserve banking, as opposed to full-reserve banking, banks are able to add money to the money supply. From my perspective, this process doesn’t differ significantly from the loans that central banks create, although the motives for this money creation process probably differ (economic policy vs. commercial) and are limited due to government-imposed regulations (e.g., the fraction of liquidity or capital a bank is required to hold). However, this doesn’t change the fact that when private banks issue loans, it affects their total assets and total liabilities, thus adding to the total money supply. If private banks didn’t ‘create’ money, the total assets and total liabilities wouldn’t change; only their structure would change (e.g., cash assets would be transformed into loans). Am I missing something or do private banks create money and add money to the money supply?
What happens when more assets are added? - for example, I go into my garden to dig up potatoes but instead I find gold. I mine the gold and sell it to others who want it. I have more money but no extra loans have been created in this situation … really love the video
It still doesn't create "money" (it simply moves some to your pocket from the person that buys it from you). You could apply the same logic to anything someone buys as there is always a profit margin somewhere - going back to your potatoes, you could have sold those too. Same basic effect of digging something up and selling it (just less valuable, unless your hungry).
Many thanks Alan. Loving the potatoes comments too. I once spoke to an art gallery owner who said ‘the value of art is all b*llocks, you’d swap a Picasso for a sandwich if you were starving’, (but that’s a different topic I guess)
These education breakdowns are invaluable. It’d be interesting to hear gary look at other alternative financial systems and discuss the pros and cons aswell as how we can make the current system here work more equitably
People now want to invest, becasue they realise money sat in the bank for most people, doesn't accrue enough interest to outrun Inflation. And money just sat in the bank is like an interest free loan you're giving to the bank each month. They invest it and return a minimal to you as an interest rate. But even that is only on savings, not your normal current account.
The Bank of England said in March 2014 private banks create money when they make a loan. The power of private banks was given to them by the Bank Charter act of 1844.
ooh interesting I came too a similar conclusion when I was 16 year old chemistry student. I said that "money" itself was worthless, by which I meant that money itself is imaginary in the mind of humanity. Its value made real through agreements between the people of the world and the centralbanks. My classmates thought I was weird when I said that money is just contracts and agreements of value. I've always said. I never want to be in debt, I want the banks to owe me money instead. Ofcourse you explain it much better and on a global scale.
Thanks Gary for sharing this video. Criminal the education system does not teach this in our schools.. how much you can learn just for 15 minutes of your video. 👍🏽
Excellent video. At College in the mid 70s I was taught about the, 'Multiplier Effect and Central Banks, at the same time I was reading, 'The Ragged Trousered Philanthropists', read the bit on, 'The Great Money Trick', I've never been the same since.
Money Multiplier is a fiction to "explain" how so much loan money can be created from so little deposits. In truth the commercial banks create money as collateral to borrowers promise to pay aka the "loans book". This is net neutral on the banks books but is new money spent into the economy. Money is also destroyed as the customer repays the bank and the loans book is reduced accordingly. Interest is the dog in the manger because it can only come from future money not yet created, hence the obsessive "growth paradigm".
Is this wildly reductive: "Whenever there is QE, the money will eventually distribute to everyone, but the path through which that money is distributed creates inequality."
I think you missed 2 things on commercial banks: 1) fractional reserve lending and how that impacts what you said about them having to have the money when you take it out and 2) I'm not sure the bank does need to have the cash available for you to take it out, they just need to have the relevant fractional reserve currency? Is that right? Same point in 2 ways I guess.
I am getting some questions on this along the lines of "But doesn't interest throw this system out of balance?"
The answer to that is no - the Central Bank charges interest on the loans it makes, but it also PAYS interest daily to the banks which are holding money - so interest balances out.
More generally, interest can never unbalance the system as a whole - it is merely a transfer from one group of people (debtors) to another group of people (creditors)
Hope that helps
Interest just adds to the money supply. Banks add interest to loan balances. So higher interest rates are actually in themselves inflationary and run counter to the disincentive of lowering aggregate demand. The outcome depends on the relative impact of each as determined by the current macro environment.
@@stokesbay2152 Interest does not add to the money supply. Central banks charge an interest, and Banks pay the Central Bank interest on borrowings. Debt created, debt paid = cancels out.
Yes but then ultimately how can the interest ever be paid off as it is asking for extra money not in the system?
@@nazb1982 The money is in the system! Central bank creates debt. Banks loan out money as debt. Peons take on the debt, and pay it off.
e.g. I take a loan for $100, with an interest of 1%. I pay back $101. Bank pays Central bank back $101.
Where did that $1 come from? Debt. I now take on the $1 debt that the Central Government had created.
That explains the concept of "reducing the money supply" because the debt is often paid off from savings - reducing the amount of LIQUID cash in the system (don't confuse this with total money - that always stays the same).
Your voice is so much needed. I drive a taxi and have stuttered through a collective unawareness with hundreds of people trying to make sense of what doesn’t make sense. Most of us are vulnerable, in my mind you are changing this. I wish you well.
Thank you from a 78 year old. I had to watch this twice, yes I am a little slow. But when I suddenly understood your argument, it was like a flash of lightning.
As a Uber driver I listen to you video's while taking passengers so we can wake the masses up.
It is AN Uber driver.
@@stephfoxwell4620lol you feel better adding one letter to a typo
@@zcache I do
@@stephfoxwell4620 make you feel superior?
All those years ago during A level Maths, I remember a really passionate and articulate teacher trying his best to get the concepts across to us, his students.
Thank you Gary for doing the same again 40 years later, it will certainly make a difference to our understanding of this system that we’re in.
I'm not sure if he is changing it. He's trying and giving us the information we need but we need to pull our fingers out and to make the change.
@@FatHeadedZebra My personal experience is, that people don't want to know really. Like with climate change... they don't even know how much CO2 is in the atmosphere but "SCIENCE!!!" . ^^
You're the teacher at school that I would have looked forward to being in your lesson so much.
These videos are like a really good school lesson.
I'll be showing his videos to my students when we come to the finance unit of pshe.
Hope teacher doesnt go on strike.
Maybe Gary could become a teacher of Rishi Sunak's planned Remedial Maths for Arts Students. If I were teaching that course, I would go through the textbook and replace the names of people in the examples questions with those of Tory politicians.
One of the things that drive me mad is this line that government push to try to equate public finances with a household budget (in line with your point about "money running out"). The magic money tree is alive and well!
i have to etch this into my brain.....`money is not real resources, money is a distributional resource, money is only used to determine who gets the real resources´
thanx for free economics classes, u r a star, if i can give back let me know (I teach Spanish and French, and maths but u wont need classes in that i reckon hahah)
Underated channel. As someone who came from hardship and managed with a lotta luck, and a heap of hard work to get out. I appreciate a voice like yours. I see the imbalances, and its very real, and it feeds off itself.
More explanatory videos are very welcome - a lot of this debate is inaccessible without this sort of foundational knowledge. Great work as always Gary & team.
Cheers for this, Gary. I'm training as an accountant and see exactly where you're coming from. It's basic bookkeeping applied to society as a whole.
Indeed, it really is as simple as that, but is surprisingly little understood.
A zero sum game not increasing the money supply. IN THEORY!
BUT The Bank of England Q1 2014 Bulletin website tells us 97% of the UK money supply is now created out of nothing as “borrowing” by commercial banks with only 3% as cash.
This means the money to “repay” loans was also created as debt hence debt must increase. In theory this debt can be ignored as it’s the mirror image of wealth but interest is demanded by it.
Therefore debt is still an increasing problem.
It’s a game of pretence that there is no magic money tree but there is because there has to be a money creation mechanism.
The vital question is whether it should be in private hands for private profits or in public hands for the common good.
The answer is obvious but the money power is extremely powerful and can buy people.
@@garyseconomics and when you work in accounts for a few years you find out quickly what is simple to us isn't to ALOT of people. I think numbers in general scare a significant proportion of society. Before you came along I watched a Mike Maloney's Hidden secrets of money series which was also enlightening.
Exactly what I was thinking revising fundamentals of accounting - cash literally equals liquidity. To be able to create liquidity you need to *drumroll* liquidate an asset for the cash value (moving value from one account to another). The accounting equation applies to it 100%. Printing more money just reduces their value by increasing the supply.
That’s what I took from it. Double entry bookkeeping 😂
this has been a burning question on my mind recently and I've tried understanding it from my own experiences and perspectives. They way you've analyzed and broke this understandingof money down into content form for me to digest was smoother than drinking water. Thank you for this ultimate perspective of money.
Great video. Helps explain that we need to tax that money back.
Thanks for this. I've always tried to describe that essentially money at a basic level, is only a measurement of distribution of available resources.
It is solely a means of deciding who has earned what share of the resources.
Therefore, money as a system is obviously currently failing.
Economics is shrouded in language ordinary people find difficult to understand, same as many “professions”. This is deliberate, a way of dissuading others from engaging, however when broken down like this by Gary, it really is simple. Falling wages and higher house prices are indeed a symptom of the very same thing, currency devaluation.
Thanks for this video Garry, i agreed with 95% with what you said, my only gripe is that central banks do not lend out reserves. they are simply a mechanism for settling interbank loans. Prof Steve Keen has some good descriptions of this.
You are a great communicator and these complex ideas will spread widely thanks to your efforts. Keep up the good work !
Agree.
Right, Net Financial Assets are created when govts spend into the economy via the Central Banks
#LearnMMT
The £s in the economy sitting as reserves held by private banks at the Central Bank, or as cash in people's pockets, are just the money created by the govt which has not yet been taxed away.
This is Richard Werner's whole shtick as well. 97% of money supply is created by retail banks out of thin air when they write loans. No internal transfers occur at the bank.
@@youthculture523He expressly states in the video that no internal transfers happen-that statement isn’t incompatible with his statement that the net balance of the economy’s total debt and credit is zero.
I yesterday came across a video in which an economist called Tony Lawson was denouncing economics, he seemed to be saying it's in a mess because for the last 70 years it has almost entirely relied on mathematical modeling to describe social reality ie "using a hammer to cut grass", that economics as practiced by the top economists has divorced itself from the real world. At least, that's my basic understanding of what he said. Have you heard of him?
I have not heard of him, no, but that sounds like an analysis I would probably agree with
In a simplistic way not too dissimilar from what Ha-Joon Chang would say also.
A good argument. There's a real economy under it all about how we collectively supply each other with what we need & want to live. Growing food, building houses.... If some people are taking more & more wealth off us without doing any of that, it can't possibly end well for any of us.
@@garyseconomics ua-cam.com/video/Kes9fRWN0sw/v-deo.html
Physicists can teach Economists how to do their job
I noticed you connecting the dots of public sector workers and pay unbalance.
I think this is a very important message that needs to get across especially as mainstream media are covering this and will help Gary's message keep growing
I never considered looking at global GDP per Capita before. It's a little scary. Almost $90k per person globally. The vast majority of people are getting a bad deal.
USA national debt is insane, $31 trillion. Capitalism is now plastic, not proper credit and debt. Divide 31 trillion by the population of USA, insane.
A quick google search and some references say's it's US $12,167 per person.
On average most people are getting a bad deal. But a few people are getting rich.
This is why billionaires are built on mass exploitation. They do everything to prevent fair pay or reasonable sharing of profits in their businesses. If all their staff are doing really well then they won't be getting as rich as an individual. Ultimate selfishness= billionaire.
Interesting I heard it was half a million each!
@@ollydix that is too reassuring. That figure can be paid off in a decade on a personal debt. Those who run the system will never allow it to happen. They gather too much money into their personal accounts by keeping the majority on the negative side.
Thank you for your brilliant explanations. I have been looking for this level of communication for a long time. I think a lot of people are yearning for real understanding which calls out our politicians and shows them (not all of course) to be ignorant and themselves easily manipulated by lack of understanding. We need real knowledge and informed non-ideologues, moral leaders with brave and radical ideas. Please continue to educate us and especially the Labour party.
Wow, first video by this Guy I have watched and I already know I am going to binge watch this content.
Finally someone has summed up money creation with words I can understand! I love the bit about there being no such thing as governments running out of money, it's just a distributional problem.
The problem with private banks creating debt is that by the simple tool of charging interest, the wealth will always be transferred from the poor to the rich. ALWAYS.
Charging interest on borrowings is one most dishonest actions against the poor. Because money has no intrinsic value, as Gary says rightly.
There are perhaps three forms of currency; money, energy and time. The poor pay the wealthy with their energy and time. It's straight up Boxer from Orwell's Animal Farm.
@Blindstagehand if only. We also pay them with money, our health and very often, lives.
Time is one commodity that we never get back, just like our life, and health.
Thanks Gary for breaking this down, I wish we teach financial concepts with such clarity in our school years to make financially literate citizens. All we learn is, work hard to get good grades, work hard to get good job but we miss some very essential concepts of money, how it can work for you and how you should handle it.
Brilliant Gary. Thanks so much for your clear explanations, that Governments don't want us to know.
After hearing your explanation, now everytime I listen to a politician speech, in my head i'm substituting all the words like credit, loans, borrowing, govt debt, central bank lending, printing cash: with the 'money' word. Money that will goto the super rich. 😮
Thanks, this is a really useful video. Strange how the economy is treated as the key policy in many GEs, yet our education system, our media and our government all do such a poor job of teaching us what money actually is.
Control of the ideas that are regarded as "common sense" is a key basis for the maintenance of hegemonic control of a society by the rich and powerful. This control is exercised through education, the media and political orthodoxy.
It's no accident that classical economics is so dominant. It's dominant because it serves the status quo and is ruthlessly enforced as the hegemonic common sense throughout capitalist societies.
If you want to learn more about this process, check out work by Chomsky on manufacturing consent. The idea of hegemonic common sense is explained there, though the concept was actually invented by an Italian communist, Antonio Gramsci.
@@michaelrch I agree Noam is the man
Here's the reason why the establishment doesn't teach economics more universally: it is rumoured when Warren Beatty was directing Reds, he taught his crew about the tenants of communism - they then promptly downed tools and demanded equal pay to the rest of the production. If the reality of modern economics was taught more broadly, considerably more people would realise they are getting a raw deal and something similar would happen
Never heard money explained like this before and I dont know why! Great vid Gary
I like Gary's definition of money as the commodity we use to determine the distribution of all other commodities. But, I would expand on this. Consider that human society is not possible without the real material goods & services (commodities) required for it to function, and we currently have a capitalist & profit-driven political economic system. So, I would flip Gary's definition on it's head and say money is also how we determine where to allocate labor in production as well. I think both of these are true about the role of money in our current society, but one aspect might be more relevant than the other depending on the perspective of your analysis.
(I am very deliberately restricting this analysis to how money works within our current capitalist political economy as that's what is the most relevant to us and all of these definitions above break down once you try to apply them to a transhistorical definition of money.)
Anyway, I'm a big nerd that started reading Marxian, MMT, & econophysics books/papers almost 2 decades ago out of frustration with how divorced from reality mainstream economics is. I really appreciate Gary's commentary as he is able to cut directly through both the fake mathism of mainstream econ and liberal moralist bullshit around money/debt and clearly explain how our current day economic system really works. Keep it up!
Hands down, this is a mentor. I would listen to this guy any time of the day. Thank you Gary! He made me wake up and realize modern econ is nothing but people helping rich get richer and helping rich make poor get poorer. Pure modern day money laundering right in front of our face by the rich taking the cash from the government through the people and into the wealthy's pockets. But we don't call it money laundering, no we call it a modern capitalist democratic system because that's what the wealthy want it called. After watching Gary's videos, why Elon Musk was always courting world governments for contracts finally made sense to me. It is exactly this system in action that Gary explains.
Expensive lessons. I REALLY LOVE this kind of content. Truly liberating.
In short, money is a measure of power over others, to the extent to which a thing may be for a price. Of course, because, without the others money has 0 value. I think that is by far the truest definition of "money"
I have had the mindset of money being created out of thin air. It’s good to get the deeper understanding. This is immensely valuable. Thanks Gary
I don't necessarily understand everything (I don't have a mathematical brain unfortunately) but I absolutely love your videos and what you're doing and your passion. Xxx
Brilliant background info on money to explain the economy in general and also what's happened recently. Gonna need to rewatch some sections to fully grasp it!
Well said . Brilliant explanation . Hope people get it ...Gary.. Paul 🇮🇪
This explains the enormous wealth that the people running the Central Banks have. People borrow money, then owes interest to the banks that lent the money. The money that the banks lent in turn pays interest to the central banks. The central banks did not have to create anything but the fiat that they lent out.
Gary, have you heard of the positive money campaign? They want to change money from something created as debt into something created and spent into the economy. Would be interesting to hear your take on it.
first good teacher ive had in my life tbh
Money is a promissary note, essentially an IOU from our collective wealth pot, represented by head of state or government.
You should, in theory, be able to go to the royal mint and demand that IOU be changed back into a commonly agreed form of actual wealth.
This used to be pure gold.
Now it's pure faith.
...And that's how we've ended up using debt as the commonly agreed form of actual wealth. Got to replace the underlying promise with *something* or the whole thing is vapourware.
So now it's debt all the way down - which means it IS vapourware - and the trick is to stop anyone diving deep enough to realise that way down there the whole thing is held up by eddies and currents in the sea of debt.
I love your final sentence, poetically structured with a dark warning of icebergs ahead.
Even worse, the eddies and currents have names like market confidence, animal spirits, bull and bear markets etc.
@@juliamountain1846 indeed. Markets run on confidence which is, essentially, faith.
As do confidence tricks, which I have always though was entirely apt
@@Andyreally thanks. I love me a good metaphor. Or do I mean similie. Meh. One of those.
IMO gold was always faith: faith that you could trade that gold for something you needed as that need arose.
For many people gold had absolutely no use as gold, thus only had value to them as the medium of trade (in the same way as money only has value as a medium of trade).
Love how Gary puts it everything in such a way we can all understand. The rich are getting richer and were in cost of rich crisis.
Really good Gary. A crystallising and clear 101.
Great job Gary, you explained the concept of money better than Robert Kiyosaki because you explained the HOW & WHY not just telling us the WHAT. Top marks on this teaching. What you could have explained better is HOW the government gave money to the rich. You’ve got to break it down further Gary.
They are letters of credit. First became popular with Welsh drovers driving livestock to the midlands and onwards to London Spitalfield market. Lloyds Bank, started off as the Black Horse bank in Llandovery, Wales. Early 18th century.
Interesting historical detail I didn't previously know.
Thanks Huw.
Indeed, if you look at a £10 note it says “I promise to pay the bearer on demand the sum of ten pounds”. So you £10 note is actual a loan note, the Bank of England has leant you £10.
This is the channel I've been looking for. I studied economics at Oxford Brookes and it's always fascinated me. These are simple concepts but explained exceptionally well. Thanks Gary ❤️
Thanks again Gary, for a truly insightful video. This is very educational and I really feel that you should sit on QT and challenge the MP's about where the money is now 👍🏽
@Grays_official64 Hi Gary, are you based in London, I'm sure you are but the number you have provided seems to look different?
Two things never cease to amaze me. The first is how rigged the system is. The second is how the people that have nothing to do with it always get blamed and ultimately suffer the consequences.
Love your work Gary. It's very hard to understand tbh. Is this not related to fractional reserve banking? Could you maybe do a video on the chain of events on how do the wealthy become wealthier when QE is done, or when financial institutions lend money through mortgages.
the more iv learned about physics throughout my life the more iv come to appreciate the relativistic nature of both nature and society
Love to hear your take on the capitalisation of state assets. I am thinking about the dissolution of Russian Communism i.e. how states operate in terms of the wealth withheld or 'held in trust' - in Austalia it is vast amounts of crown land and exclusive maritime economic zones. The Russian example seemed to be the total state ownership of all assets and productive capacity that was owed to the Russian people which instead became concentrated in the hands of a small number of powerful individuals.
Now if you were to run a campaign to prosecute these people you exemplify and hold them accountable, and get them to pay it back, I might buy into that x
Damn. I've studied 'money' for many years. At university and for myself. It's a short video and you and I know that there is much more to talk about, but you fuckin nailed it. This is the best video about 'money' in our modern world that I've ever seen.
Furthermore I've seen your latest interviews. Go on, mate! We need you and I needed you. I've predicted the financial crash of 2008 in May 2008 but I didn't bet on it, because I was also only 23 and I didn't work for Citibank. Love your story. Will read your book. Thanks for your honesty. Wish you all the best, mate. There is no there is no alternative. Thanks for giving me hope. :)
Because we're living in the 'end of times' and what we need is someone like you. I will follow your journey and wish you all the best. Get them mf!
Please can you explain 1) How does this 700 billion actually get transferred to the rich? 2) What is the impact of the government being in so much debt to the ordinary person? :) thanks!
Spot on explainer.The Dollar and Oil priced in Dollars is a great way of further understanding this.The whole world is on the hook for dollars as the unit of exchange for Oil.Currency is Credit and Debt.The money we had in our pockets pre 1970 contained Silver so we had a unit of exchange and a store of value in our possession,todays currency units are exchanged digitally and have no store of value per se.This helped the people who are closest to the tap where this modern money is created,namely bankers and the very wealthy.We need a new system to redistribute this money more evenly,trickle down economics has failed the majority in society.The trouble is the very wealthy not only control the money but also the media and in doing so the narrative. peace ✌
I can't believe i am watching this for free. I just can't
Would be a bit hilarious to charge for it, but I get what you're saying.
Thank you Gary! I think I am beginning to understand, after watching 100s of economic programmes!
Genius explanation!
Money is a debt instrument, you explained that very clearly.
I've been watching this series since the start. Absolutely fantastic stuff. Thanks Gary. I was wondering if you've come across Dan Tubb and his take on western economics? He believes that Western nations' deficits have grown to the point where the interest on the debt makes them impossible to re-pay. He makes the case that we will see a domino effect financial crash towards the end of the decade. I'd be very interested to hear your thoughts on his views.
I've not heard of him. The debt is worrying, but it is offset by private sector wealth held by wealthy individuals, so it definitely COULD be repaid if we were to get some progress on the taxation of the rich and especially the very rich. Failing that I think what's more likely is the progressive dismantling of the welfare state or more periods of high inflation, rather than a financial crash. Both things would be very bad for ordinary families though.
@@garyseconomics Thank you 😊
@GarysEconomics Thanks for the reply. The chap I mentioned has a very similar take on the welfare state being progressively dismantled. It certainly feels like we're at a crossroads moment in history.
@@lmorgan877 Basic Income is a mechanism that could fix this crisis, it is a solution, and a good one. I don't understand how such a simple solution can be so unpopular, other than the rich simply don't get it, don't believe in 'handouts' [got to laugh or you'll cry] or, rather, they know they profit from the current tax system, it is the mechanism by which we are defrauded, it's legalised embezzlement! Nuts!
Gary, I understand what you are saying about a bank lending an individual £1000 and that money being created by the bank. Once the borrower has used this loan he has to earn some money to pay back the loan of £1000; so they are back where they started except the bank doesn't pay the money back to the central bank, it keeps it and is the beneficiary. What is happening is the Value of Money is going down; a house is always a house made of bricks, cement, wood and tiles,etc but it is going up in value thereby making money go down. 60 years ago you could buy a cup of tea for 2 and a half pence, old pence, now it costs 2 and a half pounds, but it's still just a cup of tea! As you have said this money system is benefiting the bankers and traders like you.
Even cash in your pocket is a credit. Because in itself the paper cash is worthless. It was only previously worth something because the central bank would owe u a specific amount of gold for that paper money you have. Now we use that cash on trust, trust that we can exchange it for goods, that trust is being eroded fast.
Money is what is itemised on a ledger ie an account. It doesn't have to be tangible. The key is liquidity of money.
Liquidity, money is the oil of the engine that is the economy x
Thanks. 👍
Money is actually a ledger. Without it, there is no existence of money.
I completely agree with everything that you say in your videos Gary! The problem is that, until the ‘poor’ are educated on finances, nothing will change! You can tax the rich all you want and give it to the poor, but it will always end up back with the rich! Even if we did a factory reset and gave everyone in the world the exact same amount of money, the rich would end up with assets and the poor would end up with big screen tv’s! It’s more mindset and education that’s the issue in my opinion! I come from a ‘poor’ family with a good amount being on benefits, you can give them all the money you want, they spend it faster than it comes in and then moan that they are skint and need more help from the government!
Should have said what a brilliant job you do Gary. This stuff should be taught in school as a priority. Never maths until 18, let's do real economics. I'm 61 and learning.👍
Slight point of confusion - do central bank loans incur interest? If so I don't see how money + debt can add up to zero? Let's reduce it - they make you the first ever loan of £100, interest is 1%. After 1 year, assuming no re-payment, the money owed would be £101. You pay all the money you have to cancel out so £100 + -(£101) = £-1. So now there is no way to cancel out - unless the central bank create £1 and loan it to you?
Central bank loans incur interest, but they also PAY interest, because central banks PAY interest to whichever banks are holding cash at the end of every day. So it balances out.
@@garyseconomics ah okay at the same rate? So for every loan made, they also pay the same amount of interest as they charge? Does this fall apart when the secondary loan is made by banks? Also, if you are ever in Cambridge let me know - would be great for you to give talk in college!!
@@TheRealRazorfane yes it's approximately the same rate. If there is ever a central bank profit it gets given to the government.
@@garyseconomics cool thanks! I'm still a little confused about what happens after the recipient (commercial) bank makes a loan at a higher interest rate - as obviously they don't pay interest to the recipients at the same rate as the interest they charge - this really means things cannot cancel to zero (e.g. You loan me the previous £100 at 10%). It seems like debt pools down the "pyramid" and the people in debt at the bottom would be in perpetual debt that cannot be repaid, so would always be forced to work?
@@TheRealRazorfane poor people have to constantly find ways to convince the rich to give them money, not just to pay debt interest, but also to pay their rent, to buy food, to buy energy, since these all resources owned by the rich. This does tend to lead to increasing inequality of wealth over time, but it is a consequence of unequal prior distribution of wealth, not of the money system (although unequal distribution of money is of course one part of unequal distribution of wealth)
Money is a medium of exchange, plain and simple. All it does is facilitate exchange between parties within an economy.
A theory of money and debt is very important and I'm glad you are talking about them together because I too agree that debt is a huge driver of poverty but I would start with the simple fact that money is a medium of exchange.
Today we also have Bitcoin which has been internationally recognised as Digital Money 🤑 There is No Debt with Bitcoin
Bitcoin is money. Gold is money. Everything else is credit.
Paper money. That is essentially debt. It’s being exchanged for the hard asset of bitcoin.
Ive just started listening to you and I am loving your videos! I have never been able to explain these concepts as simply as you do. Keep up the great work!
How can you talk for 25 minutes about the money creation process without mentioning the word 'interest' one single time ?!? It's fundamental
He did. 9:54
fundamental to what,.. extortion?
It isn't fundamental at all, it's just one other mechanism of transferring money (it's effectively a credit/debt swap between two parties).
Ive just been educated about the meaning of Money.
Great Video.
"what is money"
today: points you can use to bid on goods/assets
2028 after hyperinflation: something to wipe yo arse with ...
Tool of barter. Fixed to goods priced, so in shortage, we get inflation - suddenly borrowing credit costs increase, the economic elasticity of money.
@Jesus
aye its useless if the power goes out
With regards to the title of the video "what is money" I agree with everything you said and if you are not in the financial world it can be a bit of a head scratch, but I also think there is an explanation that comes before what you said (e.g. explaining the concept to young kids) and that in its most basic form, money is a means or tool to facilitate trade, so the baker dont need to give loaves to the fish monger for fish and vice versa etc and also makes it a short term store of value for the baker having spent their time and energy having made the loaf, and what gives it that value is user case, as in everyone agreeing on that standard. I know you touched on it in the vid when you mentioned it being a token. Sorry, im not trying to b smart arse and i dig what u are doing, looking forward to when you get the book out. Respect to you for having come from the other side and trying to change things for the better, nothing but love for that 🙏❤
Love it man. It’s the black pilling I didn’t know I needed. Bought your book to!
I wish they taught this stuff to every kid in school and made it this interesting.
Best channel working now. Keep it up.
My comment above about saving your home from the nursing home bills in the US highlights a major mechanism by which money moves from the middle class to the very rich. High insurance, high medical bills, medical bankruptcies in the US. My middle class family can't afford "affordable care act" insurance because we're not in poverty and still must pay most of our premium. $1500.00 per month for a family of 4 making 120K total per year. And many medical expenses are not covered by that insurance and are paid out of pocket. We did pay the insurance one year to get needed routine tests as my husband and I age, and almost one third of our income went to medical insurance, medical bills, dental, and vision. And we're all healthy. Really. I can't imagine what people who are ill are doing. Taking care of our health is a must. I'm just glad I have a little more time available now that the kids are older and can take better care of my health rather than working and parenting all the time. Increasingly, being able to hang onto a middle class life seems to depend on luck.
Hey Dave, if you appear in my video but say nothing it can be a business expense (this joke might not work because i don’t understand money yet!). Loving your videos. Really helps
Great video to look at on utube . The creation of money
Good explanation. Bear in mind that some people will struggle to process info presented in this way- additional use of visual material may help draw in a larger audience
On my third watch through, and understanding a little more, a little better each time. Thanks Gary!
Hi Gary, thank you for all you do. I work in colleges in East London and Essex and it saddens me to see the way we all get manipulated and I try to motivate very challenging and deprived lads to learn a trade so they can start on the property ladder but it all seems a waste of time when I agree and am inspired by your channel to know about the truth behind inequality.
Thanks boss!
The firewood is the real key point money doesnt disappear some one else just has it. If we are all broke some else got rich
Could you give us your opinion / explanation on blunt tools such as "tax the rich", "increase minimum hourly wage", universal basic income, abolish floating rate loans (fixed only), death duties above $2 million (for example) or other blunt tools the Government might use to re-balance the economy. You have shown the problem, it would be good to investigate / focus on (possible) solutions. Thank you and keep up the battle to protect our mum's houses.
Thank you! The end point is really important too. I keep saying if money is just the means by which goods and services (resources) are exchanged then statements like “there is no magic money tree” are false. The question is are there enough resources?
Are there enough resources including labour power for everyone in the country to have enough food, a home, a decent work life balance, energy to stay warm etc. if there aren’t enough resources for that, then it’s a huge problem that we need to fix (eg with renewable sources of energy, sustainable farming)
If there are enough resources to support each individual in the country yet people are struggling then the problem is distribution of resources not amount of money.
First of all, thank you for these amazing videos. I stumbled upon your channel a few weeks ago and the speech you uploaded is the best speech and most sensible thing I have ever heard about economics.
I do have a questions about how central banks supply money vs private banks, since I thought that with fractional reserve banking, as opposed to full-reserve banking, banks are able to add money to the money supply. From my perspective, this process doesn’t differ significantly from the loans that central banks create, although the motives for this money creation process probably differ (economic policy vs. commercial) and are limited due to government-imposed regulations (e.g., the fraction of liquidity or capital a bank is required to hold). However, this doesn’t change the fact that when private banks issue loans, it affects their total assets and total liabilities, thus adding to the total money supply. If private banks didn’t ‘create’ money, the total assets and total liabilities wouldn’t change; only their structure would change (e.g., cash assets would be transformed into loans). Am I missing something or do private banks create money and add money to the money supply?
This is your best video yet (and that's saying something!). I had so many "aha" moments.
What happens when more assets are added? - for example, I go into my garden to dig up potatoes but instead I find gold. I mine the gold and sell it to others who want it. I have more money but no extra loans have been created in this situation … really love the video
It still doesn't create "money" (it simply moves some to your pocket from the person that buys it from you). You could apply the same logic to anything someone buys as there is always a profit margin somewhere - going back to your potatoes, you could have sold those too. Same basic effect of digging something up and selling it (just less valuable, unless your hungry).
Many thanks Alan. Loving the potatoes comments too. I once spoke to an art gallery owner who said ‘the value of art is all b*llocks, you’d swap a Picasso for a sandwich if you were starving’, (but that’s a different topic I guess)
These education breakdowns are invaluable. It’d be interesting to hear gary look at other alternative financial systems and discuss the pros and cons aswell as how we can make the current system here work more equitably
People now want to invest, becasue they realise money sat in the bank for most people, doesn't accrue enough interest to outrun Inflation. And money just sat in the bank is like an interest free loan you're giving to the bank each month. They invest it and return a minimal to you as an interest rate. But even that is only on savings, not your normal current account.
I'm gonna have to watch this one again.
The Bank of England said in March 2014 private banks create money when they make a loan. The power of private banks was given to them by the Bank Charter act of 1844.
Brilliant! This is the most simple and clear explanation I have ever heard and now I feel better informed. Thank you Gary. 👊
ooh interesting I came too a similar conclusion when I was 16 year old chemistry student. I said that "money" itself was worthless, by which I meant that money itself is imaginary in the mind of humanity. Its value made real through agreements between the people of the world and the centralbanks. My classmates thought I was weird when I said that money is just contracts and agreements of value. I've always said. I never want to be in debt, I want the banks to owe me money instead.
Ofcourse you explain it much better and on a global scale.
Thanks Gary for sharing this video. Criminal the education system does not teach this in our schools.. how much you can learn just for 15 minutes of your video. 👍🏽
Excellent video. At College in the mid 70s I was taught about the, 'Multiplier Effect and Central Banks, at the same time I was reading, 'The Ragged Trousered Philanthropists', read the bit on, 'The Great Money Trick', I've never been the same since.
Money Multiplier is a fiction to "explain" how so much loan money can be created from so little deposits. In truth the commercial banks create money as collateral to borrowers promise to pay aka the "loans book". This is net neutral on the banks books but is new money spent into the economy. Money is also destroyed as the customer repays the bank and the loans book is reduced accordingly. Interest is the dog in the manger because it can only come from future money not yet created, hence the obsessive "growth paradigm".
Is this wildly reductive:
"Whenever there is QE, the money will eventually distribute to everyone, but the path through which that money is distributed creates inequality."
Thank you Gary. God has sent you to teach the ordinary people what is the real economy.
I think you missed 2 things on commercial banks: 1) fractional reserve lending and how that impacts what you said about them having to have the money when you take it out and 2) I'm not sure the bank does need to have the cash available for you to take it out, they just need to have the relevant fractional reserve currency? Is that right? Same point in 2 ways I guess.
Great talk. Thanks for putting it together