Watch videos with subtitles in your language, upload your videos, create your own subtitles! Click here to learn more on "how to Dotsub"

Money As Debt (2 of 5)

0 (0 Likes / 0 Dislikes)
Money As Debt 2 The Money System Today Translated By Brian Kim Over the years, the fraction of reserve system and its integrated netwok of banks backed by central bank has become dominent money system of the world. At the same, the fraction of gold backing the debt money has steadly shrunk to nothing. The basic nature of money has changed. In the past, the paper dollar was actually received it could be redeemed for fixed way to gold or silver. In the present, a paper or digital dollar can only be redeemed for another paper or digital dollar. In the past, privately created bank credit existed only in the form of private bank notes which people had the choice to refuse just as we have the choice to refuse someone's private check today. In the present privately created bank credit is legally convertible to government issued fiat currency. The Dollars, lunes and pounds, we habitually think of as money. Fiat currency is money created by government fiat or decree, and legal tender laws declare that citizens must accept this fiat money as payment for debt or else the courts will not enforce the obligation. So, now the question is: if government and banks can both just create money, then, how much money exists? In the past, the total amount of money in existence was limited to the actual physical quantities of whatever commodity was in use as money. For example, in order for new gold or silver money to be created, more gold or silver had to be found out and dug out of the ground. In the present, money is literally created as debt. New money is created whenever anyone takes a loan from the bank. As a result, the total amount of money that can be created has only one real limit, the total level of debt. TOTAL AMERICAN DEBT Government place an additional statutory limit on the creation of new money by enforcing ruls known as "Fractional Reserve Requirements" Essentially arbitrary, "Fractional Reserve Requirements" very from country to country and from time to time In the past, it was commmon to require banks to have at least one dollar worth of real gold in the vault to back 10 dollars worth of that money created Today, reserve Requirement ratios no longer apply to the ratio of new money to gold on deposit. but merely to the ratio of new debt money to existing debt money on deposit in a bank. Today a bank reserves consist of two things: The amount of Government issued cash or equivalent that he bank has deposited with the Central Bank plus, the amount of already existing debt money that bank has on deposit To illustrate this in a simple way, Let's imagine that a new bank has just started up and has no depositors yet. However the banks investors have made a reserve deposit of US1,111.12. of existing cash money at the Central Bank The required reseve ratio is 9 to 1 Step 1 The doors open and the new bank welcome its first loan customer He needs 10 thousand dollars to buy a car At the 9 to 1 reserve ratio, the new bank reserved at the Central Bank also known as "high powered money" allows it to legally cojure into existence 9 times that amount or 10 thousand dollars. on the basis of the borrower's pledge of debt. This 10 thousand dollars is not taken from anywhere. It's a brand new money simply typed into the borrower's account as bank credit. the borrower then writes a check on that bank credit to buy the used car. Step 2 The seller then deposits this newly created ten thousand dollars at her bank unlike the high powereed government money deposited at the Central Bank this newly created credit money can not be multiplied by the reserve ratio instead, it is divided by the reserve radio At a ratio of 9 to 1 a new loan of nine thousand dollars can be created on a basis of the ten thousand dollar deposit. Step 3 If that 9 thousand dollars is then deposited by a third party at the same bank that created it or at a different one it becomes a legal basis for a third issue of bank credit. this time for the amount of eighty- one hundred dollars. Like one of those Russian dolls for each layer contains a slightly smaller doll inside, each new deposit contains the potential for a slightly smaller loan in an infinitely decreasing series. Now... if the loan money created is not deposited at the bank, the process stops. That's the unpredictable part of the money creation mechanism. But more likely at every step the new money will be deposited at a bank and the reserve ratio process can repeat itself over and over until almost a hundred thousand dollars of brand-new money has been created within the banking system. All this new money has been created entirely from debt. and the whole process has been legally authorized by the initial reserve deposit of just one thousand one hundred and eleven dollars and twelve cents. which is still seated untouched at the Central Bank. What's more, Under this ingenious system, the books of each bank, in a chain, must show that the bank has ten % more on deposit than it has out on loan. this gives banks a very real incentive to seek deposits in order to be able to make loans supporting the general but misleading impression that loans come out of deposits. Now..unless all the success of loans are deposited at the same bank, it can not be said that any one bank got to multiply its initial high powered money reserve almost 90 times by issuing bank credit out of nothing. However, the banking system is a close loop. Bank credit created at one bank becomes a deposit in another and vice versa. In a theoretical world of perfectly equal exchnges the ultimate effect woud be exactly the same as if the whole process took place within one bank. That is... The bank's initial Central Bank Reserve of a little over of eleven hundred dollars allows it to ultermately collect interests up to a hundred thousand dollars the bank never had. Bank loan money, they DO NOT HAVE!! If that sounds ridiculous! Try this: In recent decades as a result of steady lobbing by the banks, the requirements to make a reserve deposit at the nation's Central Bank have all but disappeared in some countries. and actual reserve ratios can be much higher than 9 to 1 for some types of account 20 to 1 and 30 to 1 ratios are common. NO RESERVE AT ALL in some cases. And even more recently, by using loan fees to raise required reserves from the borrower, banks have now found a way to circumvent reserved requirement limitations entirely. So, while the rules are complex, the common sense reality is actually qiute simple. Banks can create as much money as we can borrow. Everyone sub-consciously knows banks do not lend money when you draw on your saving account, the bank doesn't tell you, you can do this. because it has lent the money to somebody else. - Mark Mansfield, economist and author - Despite the endlessly presented mint footage; Government created money typically accounts for less than 5% of the money in circulation. More than 95% of all the money in existence today, was created by someone signing a plege of indebtedness to a bank. What's more, this bank credit money is being created and destroyed in huge amounts everyday as new loans are made and old ones repaid. Principal payments "uncreate the loan, ceasing to exist as money. PAID I am afraid that the ordinary citizen will not like to be told that banks can and do create money, and they who control the credit of the nation directly the policy of Governments and hold in the hollow of their hands the destiny of the people. - Reinald MacKenna - Past Chairman of the Board Midiands Bank of England - DEBT Banks can only practice this money system with the active cooperation of the government First, government passes legal tender laws to make us use the national fiat currency. Secondly, government allows private bank credit to be paid out in this government currency. Thirdly, government courts enforce debts and lastly, governments pass regulations to protect the money systems functionality and credibility with the public while doing nothing to inform the public about where money really comes from. The simple truth is that when we sign on the dotted line for a so called loan, Brian Kim

Video Details

Duration: 9 minutes and 59 seconds
Country: South Korea
Language: English
Genre: Animated
Views: 207
Posted by: pound on Sep 12, 2010

Paul Grignon's 47-minute animated presentation of "Money as Debt" tells in very simple and effective graphic terms what money is and how it is being created. It is an entertaining way to get the message out. The Cowichan Citizens Coalition and its "Duncan Initiative" received high praise from those who previewed it.

Caption and Translate

    Sign In/Register for Dotsub to translate this video.