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Banking Explained – Money and Credit

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Banks are a riddle wrapped up in an enigma. We all kind of know that they do stuff with money we don’t understand, while the last crisis left a feeling of deep mistrust and confusion. We try to shed a bit of light onto the banking system. Why were banks invented, why did they cause the last crisis and are there alternatives? The music from the video is available here! http://epicmountainmusic.bandcamp.com/track/banking http://soundcloud.com/epicmountain/banking http://www.epic-mountain.com Visit us on our Website, Twitter, Facebook, Patreon or Behance to say hi! http://kurzgesagt.org https://www.facebook.com/Kurzgesagt https://twitter.com/Kurz_Gesagt http://www.patreon.com/Kurzgesagt http://www.behance.net/Kurzgesagt Banking Explained – Money and Credit Help us caption & translate this video! http://www.youtube.com/timedtext_cs_panel?c=UCsXVk37bltHxD1rDPwtNM8Q&tab=2
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Text Comments (4884)
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Lucas Emanuel (16 hours ago)
Make someone of inflation, always there will be with the fiduciary monay.
DOGGOMMANDER (6 days ago)
i feel bad for this comment thread... As someone studying Financial Management in a master's degree right now i can say, you did a good job of explaining! Most people here in the comments have no actual idea of how the financial market works and just repeat the same triggerwords, just like in politics. Needless to say, everyone in this thread thats bitching about banks, has surely their own bankaccount. If you are that much agaist it, dont spit out insults, do something productive!
James Parker (15 hours ago)
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Mokey Harris (20 hours ago)
Quite sending me those music offers
Do more about the finance industry, you explain concepts very well :)
silvervixen007 (1 day ago)
For a second I thought it said "baking instead of banking"
?? (2 days ago)
What on earth.. The title is on my native language! This is odd EDIT : Arghh the description is translated too
Mickiii P (2 days ago)
Hakan Çevik (2 days ago)
At 0.21 it says ASS
sanje rahim (3 days ago)
One day there will be no interest and there will be a lot of charity
KurtTheAwesome (3 days ago)
Replicator technology. Bye bye banks.
Sirius Black (4 days ago)
In the First place banks want to make profit and not help the people
Wojtek The Bear (1 day ago)
Good thing they're one in the same.
jaaa neeein (4 days ago)
Aaaaand it's gone
Fabrice Manzo (7 days ago)
Thomas Frandrick (7 days ago)
Lutherangrants ,com helped me financially when i was going bad times in my business .They sent me a grant of $20,000 yesterday.
MAX Points 099 (7 days ago)
banks the gangsters that rule the world at the majority's expense
Wojtek The Bear (1 day ago)
Rule the world? No. At the majority's expense? No one forces them to take out the loans, so obviously they get some material benefit from it.
John Marlowe (9 days ago)
The answer to bailouts is a public policy to nationalize the next bank that fails. Rinse and Repeat. The other banks will get the message.
Wojtek The Bear (1 day ago)
That's already what happens when a bank fails...… It's just that instead of keeping the bank, the YS government almost always sells its assets off to another bank or gets another bank to merge with them.
Allison Landon (9 days ago)
Lutherangrants com just helped me with a grant of $25,000 to pay off my debt and medical bills.
Albert Renshaw (10 days ago)
2:40 should be amended to say when the US government (Clinton Administration) practically forced banks, via the affordable housing act, to give loans to anyone wanting to buy a house. Pinning this on the banks as opposed to liberal political policies is kind of a half-truth.
Wojtek The Bear (10 days ago)
Except that's not supported by the data or history. Banks were already overly-investing in the housing market due to their need to find a safe asset to hold their money while maintaining a profit. Previously they had been using undeveloped countries with the belief that countries, no matter how imbalanced, couldn't go bankrupt like companies can. Their overeagerness to invest lead to the savings and loan crisis. Afterward they invested into the tech industries on the stock market, believing that, as a new, growing industry, they wouldn't fail. This led to the tech bubble. Their investments then went into the housing industry thanks to the creation of mortgage backed securities, a new asset deemed completely safe,, and, well, you can assume the rest. Ignoring al that though, your narrative completely ignores the major role played by the shadowing banking industry and credit rating agencies in the crisis. The overeagerness of commercial banks to invest in the housing market was only part of the problem.
Svante Lasses (10 days ago)
0.16 pikatchu in the bakground😃
Umair Ashfaq (10 days ago)
Baking is the world's most pathetic scam. It just copy the piece of shit,we know as money, and give us as lend The solution only exist to transfer to metal currency gold sliver and chrome
Wojtek The Bear (10 days ago)
What's wrong with baking? I, for one, like cake! Also banks don't copy crap. All they do is lend money previously deposited. They don't create physical currency themselves. That's illegal, no matter what you believe. Only central banks have permission to print currencies, and they are government institutions, not commercial banks.
Roshan Pradhan (11 days ago)
What I understood is banks take our money with a small interest and give loan with higher interest 🗿is it correct? 👇Thumbs up, for my accuracy
Wojtek The Bear (10 days ago)
On the most basic level, tes.
The Invisible Tom (11 days ago)
How did you not mention the Templars ?
TheOnlyEpsilonAlpha (11 days ago)
Something is not correct, the money in the "backrupt" was not vaporized, it was taken out from the former CEOs of that bank and they went into other countries before police and court could react! That's how it was going down
iliyas10 (12 days ago)
Please make video on Islamic Banking..
Roberto Ribani (10 days ago)
What a bunch of conspiracy bullshit is this comment section xd
Roberto Ribani (10 days ago)
Ops, I corrected it
OnlyFiberz (12 days ago)
Go to 0:18 and just look at the chalkboard....
foxy foxfox 123 (12 days ago)
Great vid and keep making awesome videos :3
Shubham Gupta (13 days ago)
I cannot understand. What exactly this video was saying???😢😢😢😢
Warks (14 days ago)
I love this channel <3
cam hoel (15 days ago)
Leonardo Tosato (16 days ago)
banco means table and not bench
cindy rhodes (18 days ago)
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Fat Burger (19 days ago)
Make a video on central banks
David Jennings (21 days ago)
You forgot to mention Fractional Reserve Banking & the banks creating credit as debt.
CapLightning 75 (23 days ago)
What do you use for the fire part?
AdaM R (23 days ago)
Banks make money - bankers take bonuses Banks lose money - the tax payers bail them out WTF
Max49 Minecraft (7 days ago)
JR (25 days ago)
Anyone saying oh yeah yeah?
David (25 days ago)
you should do updated, batter video on this topic.
Frank TIelemans (28 days ago)
This, ladies and gentlemen is the root of all misery and evil in this world.
Wojtek The Bear (15 days ago)
I'm 14 and this is deep material.
Shandy Sulen (29 days ago)
Pikachu at 0:20
Mininudoalem (29 days ago)
Banks are being irresponsible and going bankrupt so what do we do? give'em bailouts and create regulations so they can be even more irresponsible and keep them safe from free market competition
DarthBalrogTV (30 days ago)
All started from Italy... again.
Nathan Lucas (1 month ago)
We could live exactly like the ants, money it's an imaginary order and we can live without them
Wojtek The Bear (15 days ago)
Not really. The reason we use money is because it's the most efficient means of exchange. Without it we face several problems relating to transaction costs, like the double-coincidence problem.
veera muthu (1 month ago)
I'm so sad that this is very inaccurate.. banks nowadays "make" money by lending not available money .. not just lending savings money
Wojtek The Bear (1 month ago)
No, they just lend deposited money. What you're referring to is fractional reserve banking, which is just the process of lending money deposited in a bank. The repetition of this leads to the creation of new money that doesn't exist physically.
Matthew (1 month ago)
This video is factually inaccurate. Banks don't just loan money deposited to them, many are allowed to create money out of thin air to loan to people. This is how most currency is created. There is more debt in the world than money, and the only way to prop up our financial industry is for banks to make exponentially more loans to pay the interest on the exponentially increasing amount of debt. This is an unsustainable model.
Wojtek The Bear (1 month ago)
Except what you just stated is factually inaccurate. Banks don't just "create money out of thin air", You're referring to fractional reserve banking, but you are fundamentally misunderstanding what the phrase means. Ex: Joe deposits $100 dollars in Bank A. Bank A, as part of the Federal Reserve System, is required to hold 10% of that money in reserves and does so. That leaves $90 to be loaned out. Specifically they loan out the money to Jerry, who deposits it in his bank, Bank B. Bank B goes through the same process as before, holding 10% of it ($9) in reserve, and loaning out the other 90% ($81). If you go through the math, you will see that more money exists than was originally deposited. Now there is $19 kept in reserve and $171 loaned out on an initial deposit of only $100, yet not bank created any money. That's why the process is called fractional reserve banking. Because only a fraction of the deposit is kept as reserves. As for the rest of your claims, you realize money isn't burned after one use, right? It circulates. More specifically, the process of fractional reserve banking can work in reverse, though we generally don't want it to as that would cause a contraction in the money supply, causing economic anxiety.
James Morrison (1 month ago)
((( international banking cartel )))
pizza lovers (1 month ago)
thats how banking works
Ro nald (1 month ago)
O ehh ... I think i missed something "Banks take saving and loan them out for a higher percentage" Well, my ass.. Google it "fractional reserve banking". Banks bring money into existance out of thin air. It is called fiat money.
Wojtek The Bear (1 month ago)
Your explanation is so wrong its not even funny. Banks are not able to create money "out of thin air" that's both not what fiat money is and not what fractional reserve banking is. Fractional reserve banking, as the name implies, is when a bank only keep a fraction of its deposited funds as reserves, choosing to invest/loan the rest. Here's an example: Joe deposits $100 in Bank A. Bank A, a member of the Federal Reserve System, keeps 10% of it as reserves and loans out the rest. So they loan $90 to Jerry, who deposits it in his own bank, Bank B. Bank B does similarly as before, holding 10% of it ($9) as reserve and loaning out the rest ($81). Based on this, we have $19 sitting in reserve and $81 being loaned out, yet no bank actually created money. That's fractional reserve banking. On the other hand fiat money just means money that is backed up only by belief in it. People use the US dollar not because its backed by gold, but because it is guaranteed by the US government and required to pay US taxes. Since the government itself is stable, the supply of USD is stable (only growing at around 2% a year with little fluctuations) and USD is required to pay US taxes, it is a well sought after currency.
King Le (1 month ago)
Does anyone else still not understand a single word of this
Ayoub Elghani (1 month ago)
Where is the fractional reserve explanation ?
Miguel Sarmiento (1 month ago)
the crypto-miners have an intense debate going here If only they knew something about the topic
its too diccicult to image the system.
navashanty krishnasamy (1 month ago)
frustrating!,caLibration. pin&go_, pingo_, eLectric transformers stream qi charging Location!,nearby
navashanty krishnasamy (1 month ago)
never do who!,sriLanka tamiLs, these things in foreign countries
B a n k l e my E
enemy boat (1 month ago)
Fuck BANKS !!! henry ford was right about the international usury system
jimmy chia (1 month ago)
Fractional reserve banking: A reverse Ponzi scheme only legalized for the banks.
Priyansh Verma (1 month ago)
Today at the bank, an old lady asked me to help check her balance. So I pushed her over.
slave trader (1 month ago)
OlymPigs2010 (1 month ago)
....It's kind of amazing that Banks never do turn a Profit ..seeing that Bankers become Multi Billionaires SS$
OlymPigs2010 (1 month ago)
+Wojtek The Bear ...So then why were the Big Banks "Bailed Out" with Billion$ of American Tax Payer Dollars ???
Wojtek The Bear (1 month ago)
Who ever stated banks don't turn a profit? They clearly do, and even report so on their income statements which they are required to make public if they are a publicly traded company. That being said, some banks, like all businesses. Not a surprise..
Alper Aydeniz (1 month ago)
Where is Turkey?
Paul Slowinsky (1 month ago)
What does it mean evaporate? Are you kidding?
Mr. DRACULA (1 month ago)
The only problem is that he's talking too fast and he doesn't give us time to comprehend
raider 126 (1 month ago)
The pikachu is getting spooky
Dorothy Isidro (1 month ago)
I always see that black duck and some random birds in your videos.
Pedro Henrique (1 month ago)
3:31 simoleons
@5Nordics (1 month ago)
IS MISLEADING Money/credit has nothing to do with deposits/savings, is created out of thin air, not backed by anything (securitized assets are also inflated by preceding credits so in reality no securities). This way the total global bank debt exceeds $317 trillion, 4 times the global GDP, some 60% held by non-financial corps. In reality banks are the leverage tools for owners of wealth to exploit all employees and (small) borrowers to grow their asset wealth by "investment management". Some call this modern-day feudalism Capitalism, it is the globalized US banking system. Like it? If not, vote for change!
Mohamed awad (1 month ago)
i wish for more eco and fin videos
Brad Wanhala (1 month ago)
Bagas Pratsya (1 month ago)
Yay sponsors
Rex Hakimi (1 month ago)
3:31 Sims will rise again.
Reiden Lightman (1 month ago)
3:20 Yeah, regulations were put in, and they were extremely weak. Yeah, Wall Street was saved from going bankrupt, but they caused the crisis in the first place and the CEOs got bonuses for it. And now, the regulations are being repealed left and right, and the exact same risks are happening thanks to the banks lobbying the government to do their bidding.
Wojtek The Bear (1 month ago)
You don't know much about finance...….
iwe timer (1 month ago)
Banco = Bench = Bangku (Bahasa)
matej luptak (1 month ago)
this is wrong!!! in the beginning of the video you say that banks take deposits from customers and then lend those deposits at a higher rate to other customers. WRONG!!! Banks take deposits from customer. Use them as reserves. And then lend out money which they create out of nothing. If I put in a 100$ into a bank, the bank can legally create a loan of 900$ and give it to someone else. That 900$ is made out of thin air, just typed into the bank account. It is crucial that this is understood as it changes everything. I recommend watching videos by Richard Werner who explains this very well and very simply. Also how this system can be used for out benefit rather than be damaging to society as it is now.
nosuchthing8 (1 month ago)
Banks keep a small amount of deposits on hand. Most is lent out at higher interest rates.
Vid K. Bucar (1 month ago)
Please make another video called 'Money Explained'.
Unbeatable gaming (1 month ago)
I understood only 20% of it
nando pereira barboza (1 month ago)
LEIF TORBJÖRN (1 month ago)
Keynsians, being retards since inception.
Wojtek The Bear (1 month ago)
Fractional reserve banking (the fundamental process behind banks) has nothing to do with Keynesian economics and has existed LONG before John Maynard Keynes was even born, but sure, keep spreading misinformation because you don't know what Keynesian economics even is.
Shovon Sarkar (1 month ago)
This is one of the most inaccurate interpretation of Banking.... the oldest money ever found in history was 4000 years ago in ancient Sumer.... When the gods came and appointed priests... And the Royalty Emerged... Real Estate is Royal estate in Spanish.. So the Royal only knew how to write obviously and they magically brought in this magical thing with writings on them and called it money... A means of exchange! Before it was co dependence.... So the Royals.... Kings also possessed all the lands... And you had to work on their land and pay taxes,,,,,, And from that the banking system later emerged.... Where a small number of banks just print money out of thin air,,,, literally... And when countries go broke,,,, these private banks comes in and loans a whole fucking country money! and you have to work to pay them off.... and you thought they operate with your money...... lol.. the fed is a group of banks... who are completely independent.... virtually Untouchable... Above the law and responsible for the situation in the world..... of course you won't know about it... you weren't supposed to.... But just asking specific questions and looking for clear answer is the important thing that YOU should be doing right now!
4thworlds (1 month ago)
Douglas Iommi (1 month ago)
Aún con un video condensado, es complicado entender la economía
Man Lil (1 month ago)
Pikachu! That can't be true!
Олег Козлов (1 month ago)
Communism is the answer
Wojtek The Bear (1 month ago)
Correction: The governments always have bailed out banks, therefore banks had made risky investments since they know that the government has their back. I love your channel and watch your videos but this time you're incorrect!
Wojtek The Bear (1 month ago)
Except that's wrong, especially with Dodd-Frank. First, commercial banks are regulated so the above scenario doesn't happen. They are only allowed to invest in assets considered safe by an independent party (the credit ratings agency), one of the main reasons they invest in US Treasury bonds since they are considered the safest asset in existence. The general problem that led to the Financial Crisis was the fact that many bank-like entities were able to exist without being regulated, known as shadow banking. One of the points of Dodd-Frank was to make the shadow banking sector, and any other business which has a large effect on the US economy, susceptible to regulation based on a review the Dodd-Frank Act set up.
Malacki 655 (1 month ago)
I wonder (((who))) was behind the 2008 financial crisis.
Paul Charles (1 month ago)
What many do not understand is that the capitalist system was set up by banks for banks. It is a reflection of the basest aspects of the nature of the white man, conquest, insatiable greed, plunder, callousness. It does not appreciate the earth is God's for mankind to share in love. It mirrors the qualities of Satan. It promotes and utilises those most likely and most inclined to carry out its directives and purposes. It is a means that increases the wealth, power and influence of bankers such that they control governments, people, lands and military by sucking the blood of the populace. They are literally vampires farming humans and countries to maintain their blood stores. Banks play off right against left-wing, citizen against immigrant, black against white, rich against poor, east against west, north against south, male against female, good against bad, all in order to confuse, divide and extract. Revolution is the only solution as greed is a toxic, incurable affliction to these types. David Icke quite rightly defines them as "reptiles"!!
Rain Song (1 month ago)
Dammit! How do we need to communicate and when will The Internet come to a begin?
The Gamerloc (2 months ago)
I see a lit the people getting angry about the video leaving out fractural banking and claiming how the video is terrible because of it. But even the inclusion of that doesnt take away from the end statement which is that banking today is bad anyway. Also they started the way it was supposed to work. Since that practice is shady it just goes along with the other shady tactics they mentioned.
Hartalumii Productions (2 months ago)
Thank you for put the language Catalan
NATIONAL FIL (2 months ago)
Jewing Explained.
Basil Solovyev (2 months ago)
did anyone else notice the Tardis
Robert Martin (2 months ago)
Oh look, more evidence that lobbyists having influence over government shouldn't be a thing.
_Bob McCoy (2 months ago)
*_The Inner Workings of my mind are an Enigma_*
Victoria Veritatis (2 months ago)
Who motivated banks to offer subprime mortgages? The us goverment, who promised to guarantee the mortgages, because of the idea that every american citicen should be able to own a house.
holi (2 months ago)
tr çevirisi olağanüstü olmuş
Dylanrox2335 (2 months ago)
omg i never realized how awesome a bank is. i think im gonna buy one for fun. how much you think ? maybe 5k???
Procrastinator (2 months ago)
Misses the part of the housing crisis where the government forced banks to make these mortgages in hope of lifting blacks out of poverty? Then says that the money vanished into thin air when really it came out of the bank's pocket because they couldnt recoup the money by foreclosing the houses? Then makes it seem like they were evil for asking for money from the government that made them bankrupt? Weird look on banks man.
Wojciech Iwanicki (2 months ago)
This is not true. Modern banks work in critically different way, than explained
spherinder (2 months ago)
The banks didn't cause the financial collapse, the fed bailing out banks was the sole reason.

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