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How Commercial Banks Really Create Money (the Money Multiplier is a MYTH).

Frames How Commercial Banks Really Create Money (the Money Multiplier is a MYTH).

Description How Commercial Banks Really Create Money (the Money Multiplier is a MYTH).

Comments How Commercial Banks Really Create Money (the Money Multiplier is a MYTH).

Would it be possible in theory to prevent this from happening? For example by forcing banks to only lend out money they received from deposits and banning fractional reserve banking? Would this be desirable? Why have banks been granted this "privilege"? is there an economic advantage or is it just the banking "cartel"? Does the ability of banks to create new money distort markets and affect inflation? Comment from : @zwanzikahatzel9296

Great vid, reminds me of Prof Richard Werner's vids Comment from : @andresrashti7138

But this video doesn't explain at all the creation For example the 10000 they give to you as a loan all they did was to pay a small fee to the central bank And this is what allows them to type 10K in their computer It's book money There are no real 10K anywhere Comment from : @wreckage-vs5jv

Thanks for this It's annoying that the same myths are still taught in business courses It's no wonder the public doesn't understand economics, when so many economists either also don't understand it, or are lying to them Comment from : @crawkn

How is fractional reserve banking a myth when the US federal reserve published Modern Money mechanics where they outline exactly that and state that is what they do??? Comment from : @nancycrawfordsheir2051

Hey Joeri! brLove your content, very happy it was recommended to me (1Dime brought me here initially)brbrI have been learning a lot about banking, central banking and Macroeconomics in general And I really really appreciate you using your specialised knowledge and make it so accessible!brbrThanks, keen to be watching more of your backlog and future videos 🙂 Comment from : @DeFlekkie

I don’t understand If the bank lends you money but you repay it isn’t that money not created?brbrIf the money goes to the seller of a house isn’t that money real? Comment from : @jonathanlivingston7358

Thank you for this explanationbrcan somebody explain why banks need people to deposit money and why they pay interest on customer savings? Comment from : @DOC884

Usury is unlawful legalised fraud Comment from : @michaelmccreadie5162

So what about the difference between currency and money? Seems like an oversight Banks create currency, not money Comment from : @mitchellsteinke8045

Thanks for this explanation Comment from : @titusojar2461

Great video! Thank you! Somehow the last point of this wasn't clear to mebrbrbut that ultimatley translates to "the people feelings about the future" from the Johnny Harris, that you commented on ->brlet me explain:brIf not reserve requirements is the limit to the money creation (but still - in the countries with bigger requirements it might be? -> could you confirm/deny that that could ever happen that the teoretical limit from the Money Multipilier Story was ever hit?) than all the individual decisions of the people (if people feel like they want to go for run-bank -> the banks are forced to limit their creation, lowering amount of the money in the economy -> eventually lowering prices/firing people etc), same with "loan Demand" -> if people (or institutions) doesn't feel like the investment is worth their money - they would not lend money and ultimatley the amount of money in the economy would fall as wellbrbrbrSomehow I just got entirely new light on "economic news" -> they have MUCH more power than I ever thought that they actually have Going against the flow is in fact much harder than I tought (on a macro scale at least, for small average Joes there's still a lot of room to exploit any situation) Comment from : @radoslaws1373

I have watched your video a few times, you do not discredit that banks create money You just explain some extra steps involved in the money creation, but they do create money still Comment from : @didiermodica7336

Fed made the fractional reserve percentage from 10 to 0 ,banks can now actually print infinite money 🙂 Comment from : @mdsohailhaque8513

I don't understand this part: if a customer takes a loan from the bank, bank borrows money from customer and customer borrows from a bank at the same time? Comment from : @markociprijanovic7520

I think i watched something like modern monetery theory before Bascally, it says money is tradable debt I guess, u were saying that individual bank and individual person has risk and reward to consider when it comes to adjusting the mount of debt I guess governments have many ways too Building new projects, collecting less taxes or giving out pandemic benefits I have a question, why US and Japan can print out more money out of thin air compared to other weak states ? Comment from : @deepmemequiz

Hasn’t QE put enough money in the system ? So banks don’t look for funding after the loans most big banks have the reserves to meet payment obligations How does Fed add more reserves ? Comment from : @jaymills1720

A quick question, Is this also how banks work in some developing countries, where people don't rely on credit and loans to make purchases And mainly use bank accounts for deposits Because I still think some countries do money multiplier and even have deposits of cash reserves in their central bank eg my country Nigeria Comment from : @aderounmubamgbose7005

🎯 Key Takeaways for quick navigation:brbr00:00 💰 Understanding Money Creationbr02:04 💵 How Banks Create Moneybr05:26 🕒 Timing and Money Creationbr07:15 💳 Constraints on Money Creationbr11:20 📚 Further Reading and RecapbrbrMade with HARPA AI Comment from : @kenethchua2507

the link to the blog is broken! Comment from : @mionome501

I have a question -brAre banks in the United States under the control of the Gov or can it interveen!! as we know 567 banks have failed since 1974 its a disaster brbrMalpracticing banks:br1Wells Fargo: In 2016, for opening millions of unauthorized accounts on behalf of customers without their consent br2Bank of America:Its role in the subprime mortgage crisis br3JPMorgan Chase: The London Whale trading scandal br4Goldman Sachs: Its role in the 208 financial crisis br5HSBC:2012 for money laundering and other financial crimesbrbrWhy havent the Gov not canceled their licences ? Comment from : @ashishkarumbiah1365

We the People is securities! You must explain that to plus all other assets in the land! Comment from : @dansoderstrom9585

What is the difference with a full reserve or let's say 90 reserve system? Comment from : @Eskiriatai

This video is correct but is incompletebrbrBanks create money - indeedbrBanks create RISK b*/bbrbrThis means that we need to associate each change in the money supply with a change in total economic riskbrbrBankers create Risk Comment from : @robertblandford

I don't understand the point about how reserve requirements DO NOT constrain money creation You say that almost all central banks facilitate reserve creation on demand Why is that? Why DO central banks "almost always" lend money to banks? Comment from : @gabis2603

The money multiplier theory doesn't assume the bank simply "has" assets it can use as a backing for potentially defaulted loans That's the step which is being missed in this new theory They're using the fed model on a commercial level, except the fed has the faith and trust of US taxpayers as its backing Do commercial banks? Apparently that's the new status quobrbrSo, the money multiplier isn't a myth; it's nothing more than a sane way to view economics; ithis new status quo is fully divested from reality/i I guess we really are headed for another 1929 Comment from : @Mavendow

So banks are middle men between people and fed, where fed’s goal is increasing the size of the economybrAnd this job of middle man is very lucrative due to lender privilege and scale Comment from : @eve_______

If people accept your checks at par to cash, you can technically create money Comment from : @ProfAzimov

Essentially, banks create money because they manipulate their ledger When they give a loan, they change a few numbers on the bank account statements, and record on their spreadsheet that they owe bank account A $1M, and Bank Account A owes them $1M When you want to spend your money, the bank debits a few digits off your end of the spreadsheet, and credits the account you pay Since people accepts bank obligations at par to cash, the bank can create money by changing their spreadsheet to add points to someones account Comment from : @ProfAzimov

Huh To be honest I thought I was being taught something fundamentally different But what is the difference with the ''other youtube videos''? I've watched this video 3 times but have to admit I can't tell the difference Banks just create money, right? Isn't this also told in other videos? Comment from : @user-rl3vq1zt7w

The amount they lend us, the bank gets 10x the credit…… Comment from : @dougbillman2333

Research public law 73-10 … government will pay your debt, dollar for dollar… Comment from : @dougbillman2333

It’s against the law for banks to lend money… Comment from : @dougbillman2333

Banks steal our credit…… Comment from : @dougbillman2333

focusing on the fractional reserve element hoodwinks people to not see the elephant in the room, which is private entity's having the extreme privilege of money creation and receiving the interest payments on that newly created money which of course is the primary cause of inequality and poverty on a global scale Comment from : @Danster82

So your video admits/confirms most economists and bankers do not understand how money creation and the economy works Doesn't seem much original research has been done over the decades to find proof about how the economy works - so much for economics being called a science Comment from : @SueFerreira75

commercial banks do not pay interest? Comment from : @whoisabdalle8295

En Colombia las "leyes de encaje" son bastante rígidas respecto a las que tú mencionas allí Resulta que acá hay unos requisitos de liquidez respecto a la cantidad de depósitos, pero la verdad es que ese fue el tema que más me ha costado entender en mi carrera profesional y este video me dejó peor Igual gracias, tus videos la vacilan aunque tengamos posturas muy distintas a veces Comment from : @juanmercado7706

I don't understand how there can be a myth, and needing "research" to disprove something like this? brEither the banks loan money they don't have, or they don't brSo all this time economists and bankers have thought banks loan money they don't have, but in reality they've had the money all the time? brHow can thousands of banks exist, who's main mission and expertise are loans, money, and ledger, been surviving without even knowing how much money they have and how mush they have lended out? brIf I Gonnaga Bank have 1 million, and I loan out 2 million, I've done the Money Multiplier trick But I haven't? I've actually earned my money by loaning 1 million and getting 1,2 back over the course of 20 years brHOW has this NOT been common knowledge if that's the case? HOW can you run a company that only needs to know plus and minus, and not knowing basic plus and minus? HOW can tens of thousands of companies whos only criteria is knowing plus and minus not knowing plus and minus, at the same time?? Comment from : @gonnaga9302

Love a good throwback to see humble origins Comment from : @nicolascorrea708

Svb failed cuz it couldnt fund customer deposit demand What did they do with that deposit money ? use to buy securities that lost value with interest rate rising? Comment from : @mjsmcd

So its just fractional reserve banking but the reserve requirement is 0😂😂😂😂 Comment from : @bilalbaig8586

Tbe fed has eliminated reserve requirements now so that leads to what? Comment from : @mjsmcd

Why when explaining this sort of things there are no clear numbers involved in simple form, "explain it like I am between 5 and 15 years old" or are they scared people will find it easy to point out their errors or/and maybe it would be just a lot of very hard work to make it clear? as always it is best starting at the beginning Comment from : @rickyardo2944

not healpfull Comment from : @user-lu3sv1xw8s

I didn't get it Comment from : @user-lu3sv1xw8s

As per my understanding, reserve requirements are based on the capital or equity of a bank If a bank is valued high, it needs to have more reserves Deposits have no role in reserve requirements Comment from : @hariomhari6181

It's not a myth, it's a lie Comment from : @jeffreychongsathien

So basically a Ponzi scheme Comment from : @fieryfirevivin

I have been curious if the lack of lending post-2008 was driven by the supply or demand side of the lending market? It seems the idea "lower rates will spur lending" is a purely demand-side phenomenon, but what about the compensation for risk on the supply side? We could clearly see examples where banks undervalued expected inflation by offering extremely low rates even when a simple quantity of money theory predicts long periods of sustained inflation, which was what I called since I saw the spike in 2020 Did markets get such a simple concept wrong or is there some other market force that can explain why banks kept interest rates so low despite the largest creation of money in history? I can think of reasons why Moral Hazard might offer an explanation but I am curious to hear if anyone has any other bright ideas? Comment from : @ITFA

While I comprehend the information, there is a question which comes to mind after watching twice to examine carefully With regards to the “other side” of the banking operation as a depository for customer savings, why does the bank not have the required reserves on hand to offset a bank run in the first place?brbrIf loans are solely “created by federal allowance” as you’ve demonstrated, that would suggest there would be an excess of reserves available for depositors, which we know for a fact is not the casebrbrIt seems default is inevitable and the system is wired to bust no matter what occurs Comment from : @BeeBrownUniversal

Good video title Joeri 😮 Comment from : @LuxusHauserGroup

Money is created with debts You go at the bank for a mortgage etc… They will lend you money that doesn’t even exist but it will when you will be done paying it That’s how they create money Simple as that Comment from : @francisbilodeau3295

How timely Comment from : @clemfarley7257

Coming here to hear "Bank run still take place" right after the SVB falling due to a bank run is just incredible 😂 Comment from : @GameplayerCanal

they publicized the G20 Nations banking definitions for savings accounts so you have no excuse Comment from : @ophiuchus6721

it was never there money you are the money the ENERGY currency ????? the cash flow Comment from : @ophiuchus6721

Banks is not stealing money you see because when you deposit or sign (your)money by your (signature) you transfer title of that money over to the bank you become an unsecured creditor ?? Comment from : @ophiuchus6721

I watched the movie "ECONOMIA" more recently IT is interesting Oeconomia - ZDFmediathek br wwwzdfde/filme/dokumentarfilm-in-3sat/oeconomia-104html Comment from : @anjaseidl4003

What is the difference between reserve requirements and capitol requirements/liquidity? Comment from : @bgriffin317

What is being obfuscated by our very language is: banks create credit, not currency Credit is a claim on currency, not the currency itself When a bank loans me $200k to buy a house, a real claim on real central bank currency must be transferred from me to the seller, either in the form of hard cash, or a claim on hard cash in a checking account In exchange, I must retrieve $200k plus interest over the term of the loan by working for it, and giving the money I receive to the bank In this way, banks don't really create money insofar as they create currency, banks create money insofar as they create future claims on currency: the central bank is still the one who creates the actual currency Comment from : @TheRepublicOfUngeria

That is not how fractional reserve works! Banks lend money over long periods even after the interest is collected the value of the interest would be diminished by inflation and devaluation depending on the currency and the time All banks would go bankrupt by this logic Comment from : @seeker2118

I have a question, what stops people of starting their own bank and doing dumb loans to their friends if the money doesn't exist at the beginning? Or simply starting your own bank to finance yourself? Comment from : @grafh2732

A hard thank you! I am not an econ major so the original money multiplier theory has puzzled me for years -- it just doesn't make sense to me! Comment from : @calebtheragdoll9629

This is the only guy who looks for the truth and tells the truth Comment from : @Ayo22210

Really interesting to see this video in 2022 with this hyperinflationary environment I don't get something, in Romania banks are now giving a better rate on your deposit, than they receive on a credit for housing purposes This contradicts what this video states Comment from : @valentindanielbara548

how do you even start with an incorrect premise here if not for disinformation, we’d assume that the people who run the system knows how it works… Comment from : @rickjames4727

Can and/or does a bank create new money to pay their own employees? Comment from : @DankAudioStash24

Dank voor de heldere uitleg Btw, je lijkt op Elon Musk 😄 Comment from : @random-archives

He did his post-doc at UCT?❤❤❤ Comment from : @ntombi105

What is the difference between the 7-8 loan/cash requirement, and the fractional reserve requirement? seems the same Comment from : @harftimer4789

Great video Was the UK banking bailout funded by taxpayers or was the money created ? In the US The Head of The Federal Reserve confirmed the money for the bailout of AIG came from the Federal Reserve not US taxpayers Was it the same in the UK ? Comment from : @NFFC-su8he

So the banks still create money out of thin air and demand more of it back from the borrower Comment from : @prolarka

Is that still the case here in the US & that’s super interesting? Comment from : @sdp5368

The federal reserve which there is nothing federal about it and above the US congress creates money from nothing, lends it to the US Government and we the people pay the interest for generations to come Printing money from nothing devalues the currency and creates inflation There not you know more than 10 seconds ago Comment from : @Kevin-mk6jo

@MoneyMacro Brilliant video Thank you so much for your hard work! Comment from : @kamilo4989

as an undergrad studying to enroll on a master's, this video is most welcome (although it won't be used for ANPEC, but it's still cool to learn about it before getting into a program) what model describes this idea? would you have any studying recs for it? I ask this because I'm never fully comfortable with a theory before learning its formalization I tried going to your in-depth discussion, but the blog link is broken 😭brbredit: I know there are other recs (besides the blog post) on the description, but what I'm excited about is to learn about a formal model, not necessarily the (informal) ideas that surround this theory Comment from : @urieldaboamorte

wow just found out the truth about money creation and it's crazy I don't know why I took so long to watch your videos even after subscribing your channel long ago thanks for the video! looking forward to your other videos also your reference about the CORE is fantastic The Comment from : @malithdissanayake2032

нле⁸ Comment from : @user-jn6nn6wl2e

that's not really much different than double entry accounting brbrDebit your cash, credit your liability, money is created from nothing (and gets destroyed when you remove cash to pay liabilities) Comment from : @SerifSansSerif

i love how this incorporates the facts of accounting in regards of bank and customer creating "debt" to each other Comment from : @Artonox

Great video! Just discovered your channel and the content is great Pardon my ignorance but it’s one thing to have the reserve ratio of the bank at 0, but the central bank still creates the £1 out of nothing and lends that to the bank to dispense Doesn’t that £1 have to be paid back to the central back (crucially) with interest?…where does that interest come from? From what I understand it’s an impossible equationbrMany thanks for reading and your response Comment from : @philipgardiner145

So Banks do not create money, but rather the Central Bank providing money to banks through repos Central Banks are creating money, not private banks Comment from : @Gold_d_lion

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