The Truth About MONEY That School Never Taught You

allow me to issue and control the money of a nation and I care not who makes its laws Meer amshel Roth's child father of international finance money money money you either have it or you sell your whole life to get it money is everywhere it's in the chair you sit in it's in the cell phone or computer you're using to watch this video it's in the napkin you use but have you ever thought about where the money comes from who creates it how is it being created and who controls it these questions seem to be

simple but even most economics students and teachers don't know how money is created today the way our money is created is the main reason that you can't afford to buy a house and find a good job it's the root cause of major problems that is the main reason there's a lot of complexity around money to hide the truth in our modern economy we have two two kinds of money paper money and electronic money which is the most commonly used money today electric money is the numbers you see in your account or the payment card you

use when shopping if we think of money in terms of our daily use there doesn't seem to be much difference between these two kinds of money if you buy a cup of coffee it costs the same regardless of whether you pay with a payment card or cash the difference between the two seems to be merely a matter of convenience or preference if however we ask how is money created then we will see that there is a huge difference let's start with paper money paper money is created by the Central Bank in the form of paper

Bank notes or coins you can read that on the bank note if someone else tries to create it they will go to jail for counterfeiting many people believe that the central bank is the main organization that creates the majority of our money but in reality only 3 to 5% of the total money supply is paper money created by the the central bank and the remaining 95 to 97% is electronic money created by commercial Banks electronic money is very tricky many people think that electronic money is just the electronic version of paper money however that's not

true electronic money is created by commercial Banks when they issue new loans imagine that you go to a bank to get a loan for $10,000 this loan will rarely be paid out in cash when you spend this electronic money you simply transfer it from your account in your bank to someone else's account in his or her bank and in this process the electronic money is not transferred into paper money and then transferred back into electronic money when a bank issues a loan let's say $1 million it means the bank simply creates and adds $1 million

to the total money supply in the economy maybe right now you are wondering where did the bank get this $1 million to lend in the first first place is there an army of grandmothers and grandfathers who have put their entire life savings into the bank and the bank is using this money in order to make a loan for $1 million of course not they just typed numbers into your account step one you sign the loan step two bank types the numbers into your account 95 to 97% of our money supply is created in this way

I'm sure some of you are saying come on how's that possible there's no way the bank simply types numbers into my account when I borrow money you might not believe the things mentioned in this video but here is a quote from the Central Bank of England commercial Banks create money in the form of bank deposits by making new loans when a bank makes a loan for example to someone taking out a mortgage to buy a house it does not typically do so by giving them thousands of Bank notes instead it credits their bank account for

the size of the mortgage at at that moment money is created you get excited about all these new smart ways of paying for things such as Internet banking payment cards and smartphones but we have to remember the price we have paid for this convenience we have essentially privatized the creation of money in our society I'm sure you've heard the saying money is power if money is power then what does it mean to give the creation of this power to Banks to profit seeking private organizations I hope you're starting to see why it's a big issue

to let the banks create money first of all let me tell you that I don't hate Banks I'm not saying that banks are evil or Bankers are greedy the main problem is that we have given too much power to the banking industry we've basically allowed Banks to combine two vital processes which are money creation and money lending as a result when Banks lend money they are creating money it's very important that you understand this part because it has a direct impact on you this is the main reason you can't afford to buy a home and

find a good job today just like normal private businesses Banks also want to maximize their profit and minimize their risks which means they have incentives to lend money to certain sectors that are less risky and you know what the sector is that has a lower risk for banks real estate for banks it's risky to lend money to a small business because there's a high chance that it will go bankrupt but mortgages have collateral if the borrower can't pay the bank will take the property to cover its losses since it makes sense for banks to lend

money for mortgages newly created money floods into the real estate market instead of other sectors that Society needs such as renewable energy the creation of new businesses schools hospitals Etc from the surface it may seem like Society benefits from cheap mortgages but we don't imagine that on New Year's Eve Santa Claus comes and doubles everyone's money if you have $10,000 in your account Santa Claus makes it 20,000 suddenly everyone feels rich and rushes to shops to spend it and you know what happens next within a few days prices will rise since Prices rose no one

is going to benefit from the sudden increase of wealth having access to cheap mortgages Works in a similar way how house prices keep getting higher and higher the common belief is that houses are expensive because of immigration the increase in population and the decrease in the amount of newly built homes even though these factors can have an impact today these are not the main reasons for such high house prices the biggest impact comes from the increase in mortgage lending for example in the 10-year period between 1997 and 2007 in England 40% of newly created money

went to the the property Market 37% to financial markets 10% to credit cards and personal loans and only 13% went to business lending that benefits the economy that is why on average every year home prices are going up 7.7% while salaries are only Rising by 0.8% these numbers are for the UK since the author of the books I have used to create this video is from the UK but the situation is similar in most countries as you can see almost 80% of the money went to non-productive sectors that do not benefit the economy and job

creation as a result new jobs are not created and unemployment goes up for example in Italy 40% of Youth under 25 are unemployed in Spain it's 56% and in Greece it's 60% this is a massive waste of Human Resources who want to be doing something useful but can't simply because of how money is created and distributed in the modern monetary system so if you want to solve the housing problem in unemployment you need to look at how our money is created one of the common questions I get is this if banks have created so much

money then why don't we have inflation in the economy as you just saw a big portion of the newly created money does not flow to the economy it flows to the property market and financial markets inflation is created in the direction where the money flows that's why home prices and stocks are going up while the rest of the economy moves like a turtle in the past one member of the family was working and he was able to support the family plus buy a house today both partners are working but despite that they can't afford to

buy a house many young families who qualify for mortgages barely pay their regular expenses and mortgage payments what's going to happen if interest rates go up well the bank will kick them out and take their homes but here's the most important question that no one asks what did the bank do in order to earn the rights to take away the homes of these families except by typing numbers on the screen therefore mortgages are the best selling product on the bank's shelves and why is it a bad idea to let the banks create money and control

it instead of getting excited about all these new electronic ways of payment wait for a second and ask who really benefits from it since everything is electronic banks are closing their branches they are closing ATMs they don't need to hire people and they don't need to buy bulletproof cars to carry the money these all translate to lower costs for banks on top of the massive profit they get from creating money out of nothing I would like to talk about three more problems with our banking system which are inequality instability and accumulation of power in the

hands of a small group of people first let's talk about instability the way Banks lend money is very similar to an umbrella shop that sells umbrellas when the sun is shining but when it starts raining the shop closes when the economy is booming stocks and house prices are going up the banks are very keen to create new money and lend it to the economy this however has the effect of inflating the prices in the economy even more as we know ultimately these bubbles burst and Crisis happen when the Crisis happen the banks become reluctant to

create money and lend it to the economy and this in turn worsens the situation banks have an incentive for creating money when we don't need it and hold it back when the economy actually needs it the second problem is inequality as we all know when we borrow money we must pay interest and we can think of this interest as a kind of tax on the money this tax however works opposite of normal taxes in the normal tax system the higher you earn the higher the taxes you pay however in the banking world the more you

earn the Richer you are the less tax taxes you pay in other words the Richer you are the more assets you have the lower interest you pay to the bank on the other hand if you are poor and have little money you must pay a high interest rate the way money is created is a key explanation for the inequalities in our society and why it keeps Rising the same inequality applies to countries as well we see some countries paying high interest rates and thereby becoming poorer and poorer and we see other countries getting richer and

richer and paying lower interest rates the third problem is about power if you can decide when to create money if you can decide how much new money to create if you can decide the interest rate to charge if you can decide for what purpose to lend the money then you have enormous power over everyone else and this power is not only over the economy but over the society by privatizing the creation of our money we have essentially handed over a very very vital power to the banks that's why many politicians today appear very impotent because

crucial decisions are not made in Parliament they are made in the boardroom of major private banking corporations we need to start questioning the power we have given to the banks we need to start questioning if we really need a big banking industry while other sectors such as Healthcare schools and small businesses suffer one of the common things I hear a lot is that debt is bad but money is good people want the money but not the debt but they don't understand that it's not possible in the current system money is debt if we want more

money we must go into more debt if nobody went into debt then we would not have any money in the economy if there's no money then spending will go down and when spending goes down basically the economy goes down you hear on TV politicians talking about paying off the debt and living debt-free but they don't realize how ridiculous they sound when they make these statements unfortunately most people believe them because they don't understand how money Works money is something we spend our whole life earning we use it every day but we're not educated about it

people don't want to talk about it they think it's taboo they think money is bad or money is evil money is just money it's neither good nor bad saying money is evil is like saying Pizza is evil if you'd like to learn more then check out the book titled modernizing money by Ben Dyson and Andrew Jackson most of the information you heard in this video came from that book and the speeches given by the author Ben Dyson the link will be in the description of the book thanks for watching