never before has there been as much money as there is today and rarely has money been so cheap and yet the central banks continue to pump money into the world we are being flooded by trillions of dollars and euros it can't go on forever it's a ticking time it's never been easier for investors to get their hands on cheap money running up debts is practically free of charge organizations are just borrowing large amounts of money from each other and then using that to make money by lending it to others who are using that to lend it to others a snowball system that lets the rich become even richer savers on the other hand are losing billions every year thanks to low interest rates if you just open a savings account it's almost like burning money this Deluge of money has created deals worth billions companies are bought and sold for vast sums because loans are cheap the employees become the Pawns of the speculators the question is where's all this money going [Music] foreign [Music] Germany this couple faces the same dilemma as many others what to do with their Savings in this world of low interest rates Carl Heinz ice a recently retired Court bailiff knows all about money and debts his life insurance policy is due to pay out soon how should he invest the money in a house they've already got one there's a lot at stake for the cycling Enthusiast he and his wife want Security in old age as well as a good time I was hoping that after the payout I'd be able to invest the money again and earn interest which could be added to a pension but that plan isn't going to work out foreign has always led a modest life he always stayed away from Investments That paid High returns but were risky he never thought it would come to this he doesn't know what to do with interest rates this low and nor do his friends told me they won't keep their money in a bank account anymore instead they'll deposit it as physical cash in a safe Physicians [Music] it's barely worth going to the bank interest on savings is almost zero at just 0. 01 that means that he gets one cent for every hundred euros per year what's happening with his money [Music] people are worried says the director of the local branch of volksbank elmar Schmitz although there hasn't been a run on the safe deposit boxes yet there have been more requests to keep money in cash or gold foreign [Music] we've seen a continuing fall in interest rates over the past eight years I need a crystal ball to tell you whether it'll stay like this for long I think we'll have this situation for another two or three years after that things will change again but we won't have the interest rates we had 10 or 20 years ago the manager knows who he blames for these low interest rates the European Central Bank the remit of the ECB is clear price stability it uses the base rate as its tool to deliver that and it's been lowering the base rates steadily ever since the financial crisis down to zero Savers are left by the wayside but countries with high levels of debt such as Greece are able to get their hands on cheap money so too can ailing banks in southern Europe the cheap money is supposed to fuel growth by buying government bonds the ECB has pumped additional trillions of euros into the markets otherwise the system would face potential collapse the price of all this is a deliage of money the money has to go somewhere into shares and real estate which continue to rise in price the result is a massive concentration of wealth right at the top Bill Gates the world's richest man has a Fortune of 65 billion euros that's the market value of his shares to compare the total value of all of the world's cash is less than 100 times that amount 5 trillion euros the value of all goods and services created every year around the world is 75 trillion Euros that's the real economy the world's debts are far higher than that states businesses and private individuals all have debts a world living on credit 705 trillion that's the value of all derivatives the speculative Financial bets on the future they've got almost nothing to do with real Goods anymore to recap this is the fortune of Bill Gates [Music] what happens when there's too much money in the world Economist Max otter says this Deluge of cheap money isn't just flooding the big Banks he sees low interest rates as the symptom of a massive sickness in the Global Financial system what's more cheap money endangers the entire economy and promotes increasing levels of debt he says those who believe that with the financial crisis of 2008 receding things are now better again are much mistaken this influx of money is extremely dangerous it's slow but at some point the dam will burst and then we'll be in a huge crisis the biggest danger is that this flood of cheap money will split our society it moves money from the bottom upwards he says a gigantic redistribution machine [Music] low interest rates are demanded by many economists they mean that states can borrow on the cheap states can take on more debt it also means the rich can do the same and often without any liability if they default if I as one of the super rich buyer business then I'm only liable to the extent of my holding not with the rest of my wealth that's a blatant Injustice compared to middle-class families and regular people with home construction laws this flood of money doesn't just save states and Banks it also favors the rich who use this cheap money to buy shares companies and real estate with rapidly Rising values while the financial investments of ordinary people lose value the middle the middle classes have savings and insurance policies and these Investments are the losers in a low interest rate World poorer citizens suffer because real estate prices are going up and therefore rents too foreign London the world's largest financial center illustrates very clearly the effect of this monetary Deluge trillions are traded here 300 000 employees in the financial sector are trying to turn money into even more money London's own real estate prices are skyrocketing all the major banks have Offices here this is where the money of the world's rich is invested knows the scene well there are neighborhoods where millionaires are being pushed out by billionaires borisovich is fighting against a sell-off of the city of London to speculators together with colleagues he has researched the anonymous owners of several properties as a former Banker he's familiar with price developments well these amuse houses and again depending on the size it's difficult to say how deep they are but uh anywhere between three to five maybe five to seven million on this on this but in this particular area five to seven million pounds now if you think about Muse houses this is a family place just think about what kind of family can afford to buy a house for three to five for even for five to seven million pounds the expensive houses are all speculative objects and empty London belongs to investors who don't live in the city Roman borisovich discovered that this townhouse was sold to a Ukrainian billionaire for 66 million pounds [Music] on paper the Mansion is owned by a shell company [Music] right now there is an excess of 40 000 properties in London that are owned by Anonymous offshore corporations meaning that we don't know who the owners are it could be decent people they could be Mafia there are four we suspect that a lot of this money that came through London that exploded prices here is actually of dirty origin there's construction underway everywhere speculating with real estate is the big game in town trillions of Euros from Russians Germans Chinese and Indians have poured into London From socio-economic perspective it is not sustainable you cannot have a city where residents and workers cannot cannot live you know this this is a uh this is the problem with bubbles is that nobody knows when they're gonna burst but London doesn't have a monopoly on real estate bubbles they now exist in cities around the world if a real estate bubble were to burst sure it would hit the wealthy who are invested there but they have a diverse Investment Portfolio they seize opportunities around the world if the real estate bubble in Munich were to burst they'll be in Rio or Tokyo they can act globally but the middle class can't as seen in the financial crisis of 2008 the middle class is hit while the rich get richer in times of boom and bust not much has changed the minor regulations introduced into the financial sector aren't very tangible here in London the speculators are looking for new ways to make more money in the world's number one Financial Center many transactions are now taking place in the shadow banking system the bonuses for lucrative deals are as plentiful as ever and brexit will see the regulations relaxed even further The Show Must Go On Alf Townsend has lived through it all he's been driving a taxi for 54 years chauffeuring bankers and Brokers around the city dealing in the world's trillions has become the trump card of the British economy he says optimistically beneficial to London I think it's a various people who invest wherever whatever part of the world they come from if they want to invest their money in the city that's good for the British economy economy yeah he too has profited but in exchange Alf has to live far outside the city center a million pounds for a single room apartment no ordinary local can afford that there's not many landowners that part from us old people who still live in London most of them are have sold their houses as I was saying earlier bought their houses off the Council made a fat profit sold it and moved out to a Suburban um Hideaway yeah some leave the city entirely and forever garant Anderson was one of London's Financial Stars he now lives in Wales he paid the same for his farm as he would have to pay for a tiny single room apartment in downtown London but that's not the only reason why he came here he's had enough of the financial excesses the city is full of greedy ruthless clever people and if they put bit more regulation a little bit more compliance some restrictions these guys work out how to game the system to make sure that it benefits them [Music] screenplay is about the financial world he used to earn a few hundred thousand pounds a year he didn't care who the trades heard that's a few years ago now but nothing has changed says Anderson the system rewards those who make fat deals at the expense of others [Music] I make lots of strange gambles incredible Reckless decisions but they come good then I make huge amounts of money if they go bad maybe I lose my job but that's the only downside so this is what is called an asymmetrical risk it encourages short-term gambling Anderson is certain that the financial system will keep growing and sprawling the prospects of big profits the low interest rates the Deluge of money the former Financial Insider believes these elements make for an explosive mix therapeutic the Ponzi system that exists is such that organizations are just borrowing large amounts of money from each other and then using that to make money by lending it to others who are using that to lend it to others which means that you have a a system where ultimately no one's really got the money that backs up all the money that's being lent out and subsequently um when that system comes crashing down then yeah it's good night attacks on speculative Financial transactions could slow this Merry-Go-Round however this financial transactions tax would need to be introduced globally but even the small-scale version with just 10 EU States failed after years of negotiations even though German Finance Minister Wolfgang scheibler personally pushed for this tax but Britain was against it and will be even more against it in the future London as a financial center would suffer that's most regrettable because this tax would be the necessary surgery for the sick Financial system the ECB and other central banks flooding the world with cheap money isn't a cure it's just pain relief and in the long run it has serious side effects the entire setup is a system that keeps saving itself temporarily but at some point it will inevitably Fall Apart until then it exacerbates the enormous Injustice that already exists those who have benefit a handful of super rich individuals own as much as the poorer half of the world's population combined this flood of money is increasing the gap between rich and poor even further people like these are struggling at the hands of low interest rates Carl Heinz ice and his friends are worried in the past the world was a veritable Paradise for Savers the economy was booming and interest rates were high even if inflation was too nevertheless successive Generations lived by The Motto those who saved get more out of life in the past you could rely on a certain interest rate for your savings account you could live with that but not anymore in the 70s we got a fixed rate of seven percent for a short while we got 11 percent Carl Heinz ice has an appointment with his financial advisor at the bank what should he do with his money we have this account and next year a life insurance policy will mature what can we do with this money um the advisor wants to know about her clients Readiness to take risks he's actually more risk-averse and wants to invest his insurance money as broadly as possible every day it sits in the savings account it loses purchasing power and he knows that since you're getting almost no interest we have to see where we can generate a return and that means stocks and chairs investing more in property bonds and chairs that's what his bank advises what else can he do in times like these I don't feel uneasy or really comfortable with the idea although I've generally had positive experiences to date foreign property bonds higher risk whether he likes it or not Carl Heinz age has to participate in the game of the big Financial world it's an industry in party mood big companies are buying up competitors thanks to low interest rates thereby increasing their share value only shareholders benefit from this strategy and they tend to be affluent German chemical giant buyer bought American Seed supplier Monsanto for example for 65 billion euros [Music] the world's largest Brewery Anheuser Bush inbev swallowed the number two Sab Miller for the equivalent of over a hundred billion euros and software giant Microsoft bought professional networking site LinkedIn for 26 billion companies as the playthings of International Financial interests a less prominent case wmf has been based in geislingen in Southwest Germany since the mid 19th century it's a brand with a world-class reputation wmf manufactures Cutlery and coffee makers it used to be in the hands of German owners and shareholders its operations meant security for thousands of families then the financial gamblers set their sights on wmf the company has changed owners three times in the past 11 years every time it sold the price goes up enormously at the same time wages and working conditions have worsened there were massive protests [Music] when the company was taken over by French group Seb Martin Porsche hoped things would finally get better again he's on his way to a wmf Works meeting on behalf of the IG metal labor union he thinks it's symptomatic of today's age how easily a deal worth billions is made the investors at the big Banks can get their hands on cheap money no problem the new owner paid 1. 6 billion euros it's so easy for investors to buy and sell businesses and Achieve huge profits you'd never achieve that through a company's day-to-day operations the question for me is to what extent is it harmful when jobs become a part of this game is a Works meeting during unsettling times at wmf what are the prospects with the new owner the staff have had bad experiences in the past we've been milked like a cow blood dry when there's nothing left to get out we're sold off it's been that way for years everyone lines their pockets we can only hope the company survives and that calm is restored at least the employees are told today that the new buyers do not intend to cannibalize wmf further before selling it on but union representative Martin porschke knows the only way such deals can be paid for is through extremely low interest rates on loans the deal at wmf went as follows new york-based Equity Firm KKR bought wmf for around 660 million euros via a subsidiary located in a tax Haven KKR used 100 million of their own capital and borrowed 560 million from Banks four years later KKR sold wmf to French household equipment maker Seb for 1.
6 billion a deal supported by very low interest rates KKR made a profit of 940 million euros after repaying the loan and investing just a hundred million of its own Capital that's a return of more than 800 percent a lucrative deal but only for KKR shareholders that's possible because at the moment there's enough money on the global market other investors are able to pay such prices if the money weren't there they wouldn't be able to shift such volumes for almost nothing that's the flip side of the money Deluge Financial investors do deals with huge sums that would have been Unthinkable in the past in a regulated Financial system today many wish for a return to those times the deregulation of the financial world has a long history [Music] until 1971 the world was financially stable currencies were covered by gold the real economy was in balance with the amount of money available then U. S President Nixon needed money for the Vietnam War he switched on the money printing machine not least because OPEC had increased oil prices this money then flooded the world Banks came up with new investment models they now wanted to make money not with Goods but with money alone this was the start of the financial industry of today credit cards and current accounts accelerated Financial transactions former public responsibilities were privatized pensions were a case in point the private sector is better at everything than the state so they said new billions came into play in the 1980s Margaret Thatcher deregulated the banks in London Bill Clinton did the same later on Wall Street Chancellor Gerhart Schroeder in Germany then also bought into the deregulation philosophy money was to earn money and thereby create growth the global Casino was open for business the path of liberalization was a mistake it's the wrong word too if you deregulate markets that need to be regulated then you create chaos you unleash an avalanche of money onto the world you can call that liberalization but it was a policy that benefited only a few people namely the rich it has caused a lot of problems for the world yeah the liberalization or deregulation allowed the deals of the banks to explode they now acted internationally major banks have become investment establishments that fund huge deals more and more money goes into speculation that's where the big money is made this has less and less to do with the real economy are the central banks alone responsible for this influx of money or where does it all come from [Music] economic students in ziegen Germany are investigating just that what do people know about the origin of money that's what they want to find out we're from the University of Siegen we're doing a research project about money what does money mean to you you can't do anything without money where does the money come from not for me that's for sure how was money made through work of course I'm not sure in Banks by the state I couldn't tell you the responses were sobering it was really varied a lot of people had no response at all some said the bank or that it's just printed and some mention manipulation most had no idea for years Financial expert Helga poikert has been annoyed that money plays almost no role in economics many consider it just a neutral means of Exchange it's strange that it's not just the public who are in the dark the students Street survey demonstrated that well enough but the money creation process also seems to be something of a mystery among academics and even in the banking boardrooms the banks are silent for a reason they would have to explain to their customers that these days it's them creating the money and them benefiting hugely as a result as poikert explains money isn't neutral after all it's not the central banks but private banks that generate most of this new money a process also known as deposit money creation money is created when someone goes to a bank to take out a loan the bank opens an account and issues the funds it's then in a contract with the individual who's taken out the loan the bank hopes that person will pay it back someday that means the original impulse to create money comes from private Banks that's new to most people many think alone works like this Savers take money to the bank and the bank loans this money to a customer such as someone buying a house or running a business but that's not the case if someone has savings their money is parked in a savings account the advantage for the bank is that person can't just take it out when the bank issues a loan it's created from nothing these two processes really don't have anything to do with each other even though it looks that way and even though that's what the textbooks say this is how it works a customer wants to take out a loan for 10 000 Euros the bank has to deposit between one and three percent so at least a hundred euros with the central bank that's it in return the bank is allowed to transfer 10 000 Euros to the customer's account at the push of a button the bank generates 10 000 Euros of electronic money from a hundred euros and in return it collects the interest this creation of deposit money is a license to make money the banks are happy of course that they can do this because that gives them a free reign they get to keep the profits the seniorage that's a few billion every year who'd want to miss out on that definitely not them private Banks basically create new money as they wish and that used to be the privilege of the mint of princes and governments it's a privilege to create money and therefore profits out of nothing this privilege has been in the hands of the financial industry for a long time and in recent years it's been unchecked is that really such a good idea the big banks in particular have massively increased the money Deluge in this way as a way of imposing more controls on the financial system again private Banks could be deprived of the privilege of creating money developments are already underfoot in Switzerland Zurich is a popular location with banks there's an initiative here that Advocates reining in the Swiss banks in future it says only the National Bank should be allowed to create money not private Banks anymore the initiative is fighting for fully backed money and an end to the privilege of big Banks to generate electronic money at the push of a button used to be City Treasurer in Saint Gallen it was then he understood that we can't carry on with Limitless loans and debts 19.
