How Money REALLY WORKS – An Eye Opening Exercise
For todays financial news article I’m going to introduce you to a little exercise I found on the website Positive Money.
The really interesting thing about this article is that it’s not really an article but a series of six videos that will give you a better understanding as to how money really works.
Video #1 – Misconceptions Around Banking
Before we discover how banks really work, and how money is created, first to clear up any confusion, we need to see what’s wrong about the way that most people think banks work.
Video #2 – What’s Wrong with the Multiplier Model
Most students and graduates get taught about something called the ‘money multiplier’. In this video we’ll show that it’s an inaccurate and outdated way of describing how the banking system works.
Video #3 – How Money is Really Created by Banks
See how commercial banks can create money through the accounting process they use when they make loans, how banks make payments between each other using specially created central bank money, if the Bank of England really can control how much money is in the economy …and more.
Video #4 – How much money can banks create?
What actually limits how much money the banks can create? Reserve ratios, Liquidity ratios, Capital Adequacy Ratios and/or the Basel accords? Explained in an easy to understand way.
Video #5 – Do banks create ‘money’ or just ‘credit’?
You might hear some people say that “Banks don’t create money – they just create credit”. This response often comes from civil servants and people trying to deny that banks now create the nation’s entire money supply. So let us show you why the numbers that banks create are money, and not just ‘credit’.
Video #6 – How money gets destroyed
Remember how new money is created when a bank makes a loan? Well, when someone repays the loan, the opposite process happens, and money is actually destroyed. It effectively disappears from the economy entirely. This video explains how.
To read this article in it’s entirety please click on the link below:
Posted by YSF STAFF