Banking Explained – Money and Credit

Banking Explained – Money and Credit

The international banking system
is an enigma.
There are more than 30,000 different banks
and they hold unbelievable amounts
of assets.
The top 10 banks alone account for roughly
25 Trillion U.S. Dollars.
Today, banking can seem very complex,
but originally, the idea was to make life
11th century Italy was the center of
European trading.
Merchants from all over the continent met
to trade their goods.
But there was one problem:
too many currencies in circulation.
In Pisa, merchants had to deal with
seven different types of coins
and had to exchange their money constantly.
This exchange business, which commonly
took place outdoors on benches,
is where we get the word “bank” from.
>From the word “banco,” Italian for bench.
The dangers of traveling, counterfeit money,
and the difficulty of getting a loan
got people thinking.
It was time for a new business model.
Pawn brokers started to give credit
to businessmen,
while Genoese merchants developed
cashless payments.
Networks of banks spread all over Europe
handing out credit,
even to the church, or European kings.
What about today?
In a nutshell, banks are in the risk
management business.
This is a simplified version of the way it
People keep their money in banks
and receive a small amount of interest.
The bank takes this money and lends it out
at much higher interest rates.
It’s a calculated risk, because some of
the lenders will default on their credit.
This process is essential for our
economic system
because it provides resources for people
to buy things like houses,
or for industry to expand their business
and grow.
So banks take funds that are unused
by savers
and turn them into funds society can use
to do stuff.
Other sources of income for banks include
accepting saving deposits, the credit card
business, buying and selling currencies,
custodian business, and cash management
The main problem with banks nowadays is
that a lot of them have abandoned
their traditional role as
providers of long term financial products
in favour of short term gains
that carry much higher risks.
During the financial boom,
most major banks adopted financial
constructs that were barely
comprehensible and
did their own trading
in a bid to make fast money
and earn their executives and traders
millions in bonuses.
This was nothing short of gambling
and damaged whole
economies and societies.
Like back in 2008,
when banks like Lehman Brothers
gave credit to basically anyone who
wanted to buy a house,
and thereby put the bank in an
extremely dangerous risk position.
This lead to the collapse of the housing
market in the US and parts of Europe,
causing stock prices to plummet,
which eventually lead to a global banking crisis
and one of the largest financial crises in history.
Hundreds of billions of dollars just evaporated.
Millions of people lost their jobs and lots of money.
Most of the world’s major banks had to pay billions in fines
and bankers became some of the least trusted professionals.
The US government and the European Union
had to put together huge
bailout packages to purchase bad assets
and stop the banks from going bankrupt.
New regulations were put into force
to govern the banking business.
Compulsory bank emergency funds
were enforced
to absorb shocks in the event of
another financial crisis.
But, other pieces of tough new legislation were
successfully blocked by the banking lobby.
Today, other models of providing
financing are gaining ground fast,
like new investment banks, that charge a
yearly fee and do not get commissions on sales,
thus providing the motivation to act in
the best interests of their clients.
Or credit unions: cooprative initiatives
that were established in the 19th century
to circumvent credit sharks.
In a nutshell, they provide
the same financial services as banks,
but focus on shared value,
rather than profit maximization.
The self proclaimed goal is to help members create opportunities like starting small businesses,
expanding farms, or building family homes
while investing back into communities.
They are controlled by their members, who also
elect the board of directors democratically.
credit union systems vary significantly,
ranging from a handful of members
to organizations worth
several billion US Dollars
and hundreds of thousands of members.
The focus on benefits for their members
impacts the risk credit unions
are willing to take.
Which explains why Credit Unions,
although also hurting,
survived the last financial crisis way
better than traditional banks.
Not to forget the explosion of
crowdfunding in recent years.
Aside from making awesome
video games possible,
platforms arose that enabled people to get
loans from large groups of small investors,
circumventing the bank as a middle man.
But it also works for industry.
Lots of new technology companies
started out on Kickstarter or Indiegogo.
The funding individual gets the satisfaction
of being part of a bigger thing,
and can invest in ideas they believe in.
Whilst spreading the risk so widely
that if the project fails,
the damage is limited.
And last but not least: micro credits.
Lots of very small loans,
mostly handed out in developing countries
that help people escape poverty;
people who were previously unable
to get access to
the money they needed to start a business
because they weren’t deemed
worth the time.
Nowadays, the granting of micro credits has
evolved into a multi‐billion dollar business.
So, banking might not be up your street,
but the bank’s role of providing funds to
people and businesses
is crucial for our society,
and has to be done.
Who will do it, and
how it will be done in the future,
is up for us to decide, though.
Subtitles by the community

100 thoughts on “Banking Explained – Money and Credit”

  1. I heard my economy professor say once. "if people understood how our financial system actually worked, it would stop working and be torn down in days." most bankers and economists don't even understand the mechanisms of their own work, and if they do they desperately try to keep it secret, or rationalize its utter illogicality in overly complex nonsense.
    the system is not actually that complex, its not an enigma, a great mystery. its simply utterly divorced from reality and counterintuitive to any logic.

  2. While the banks did take advantage of the situation, the US government did sorta tell them that they had to lend to otherwise unqualified people in an attempt to better disadvantaged people since property ownership is the best way to build generational wealth. They fucked up by bunching the subprime mortgages into investment packages, then selling them off.. And AIG really fucked up by insuring the investments without the capital to actual cover the policies.

  3. It seems clear now why you won't do a crypto / Bitcoin video. Whilst I agree with why banks and credit came about in the first place, I don't believe they're the most effective system moving forward. Your criticisms of Bitcoin (via reddit) now appear idealogically motivated.

  4. Dear lord watching this video after black mirror bandersnatch was a mistake… WHY TF IS PROGRAM AND CONTROL MAN EVERYWHERE

  5. This is totally incorrect, everything changed in 1933, with the "New Deal". Money became DEBT in TRANSIT. It's all based on promises to pay (Promissory Notes) The banks don't lend you investors deposits, and/or savings, that's illegal!! Banks only provide a service to allow you to create your own CREDIT. Your SIGNATURE on the MORTGAGE (Promise to pay) creates the CREDIT.

  6. This is the same nonsense taught in schools, no wonder people are so clueless as to the true meaning of banking.

  7. This is not true. Banks CREATE money, even if they don’t hold anyone else’s money. They simply input numbers into the system and the money is there on the basis that when the money is paid back it will go back into the ether

  8. So what about the assholes at insurance companies that won't provide their services to an already ill person?

  9. So cute, “how banking will be done in the future will be up to us”. If the past 106 years are anything to go by, that’s a very naïve perspective.

  10. The description of how banking works in this video is not accurate. There's no mention of fractional reserve banking at all. Banks lend out your savings at interest sure but, they can lend out many times what their actual deposit reserves contain. They essentially conjure money out of thin fucking air! An important detail overlooked by this poorly researched video.

  11. А что тут сложного? Возьми 1 и отдай 2. Делим на 2. 1 в банк 1 в карман. Вот и все. Вы придурки.

  12. This is a terrible explanation! Blows over all of the basics and spreads VERY wide with no depth of details and explanation.

  13. So Banks where invented in Italy ??? Woow! So… Roman Empire first, Renascence and then Banks! They made 1/3 of Word history by themself just right there! 🤣😂🤣😂🤣 But better question is… what happened then ???? 😂🤣😂 why they don’t control the world?!?!

  14. I rather work and have money and invest from my own pocket than ask for a loan and no its not impossible to do that cuz i kn plenty of people who have a nice home a good job and some own a business and none owe the bank so its not the banks fault because many Americans are in dept its just like drugs the dealer offers you dope and its your choice if you want to take it which can lead towards addiction


  15. No mention that the Democrats in the US government pressured banks to loan money to poorer families who are high risk. There is hours of CPAC footage of Democrats calling for this in the house and senate. There are also the lawsuits and threats of future lawsuits against banks by lawfirms acting on behalf of Democrat action groups to get banks to approve loans to minorities.
    No mention that the Democrats in the US government made this possible by allowing banks to sell these bad loans as securities, thereby providing lenders with an out so they would go along with giving loans to high-risk borrowers.

    GFC happened because of bad Democrat financial policy.

  16. 💵💵💵💵💵💵💵💵💵💵💵💵💵💵

  17. I’m a child and I know absolutely nothing about banking. I came to this video to help but I understood nothing! It was too fast paced, went into detail too much detail for the basic things, and gave no insight into things that most people wouldn’t really know about. If anyone has any videos that could help I would be very thankful if you would share them with me.

  18. Hello guys I want to thank Shawn gray for helping me get my credit score up to 820 he cleared all my debts and loaded my account with money all for FREE his services are for only USA citizens contact him today on WhatsApp +1 (619) 387-7180 I’ve not been in a more comfortable financial situation prior to meeting him don’t pass up this opportunity

  19. The fundamentals of how banks work explained in this video is incorrect. This may have been the way it worked before the great depression but not today.

  20. Finally!this is something I know more than the nutshell! Unfortunately it’s because my job as a investor and the current economy really worries my , I give u guys a hint look into the central banks

  21. Banking is the most stupidest thing ever period this video just hides this fact and honestly how can anybody buy this crap.

  22. 💵💵💵💵💵💵💵💵💵
    so much money !1!1!1!1

  23. What new regulations? Nothing is in force to avert EXACTLY the same crisis 2008 over and over again. Two of the most evil people on the planet: Lloyd Blankfein of Goldman Sachs and Jamie Dimon of Chase are STILL in charge and basically give Congress the finger every time they testify.

  24. Omg 😮 it worked . I just receive a wire transfer of $40,000 in my bank account which we shared 60-40 with no upfront charges or sending money to anyone. I will continue to sing his praise WhatsApp +1(619)720 0748

  25. Sorry, but this is the least helpful explanation of banking I've ever seen.

    If you don't start the question of banking from where 'the money' is coming from, then you are not explaining banking.

    Moreover, I just saw your video about UBI where you say that 'money is not created by magic or on printers', therefore I did expect this one to tackle where money was coming from.

  26. High Voltage Political Power! It might even be possible to apply electrical engineering formulas to politics. There is a potential difference, right- wing versus left-wing. There is resistance to various Bills. Capacitance pent-up animosities between parties. Inductance influencing others and transformers converting others to their political beliefs. And there is the Federal Reserve the battery (accumulator)storing the electric charge (money). The generator is the workforce. And even electromagnetic radiation is the Media. Flip Flopping and many other ideas could also be included such as digital logic etc. Add some statistical information figures and facts, put it all into a supercomputer and see what it comes up with. Possibly more confusion, but who knows? Politics seems to be an art as well as science, and computers aren't too good at the art of doing things yet. But maybe AI (artificial intelligence) computers will be. If they can come up with ideas such as this one.

  27. They didn't even mention the part about central banks and the fed being the most powerful banks on the planet so we now know who's (((really)) controlling this channel

  28. Except Lehman Brothers and others were giving away mortgages to everyone during ‘08 because the government was subsidizing them, thereby tipping the banks risk-reward calculations.

  29. Back in the past trading was great but one problem was Too many currencies to deal with then why did u nit just get rid of currencies and traded manually I think when currencies when introduced banking begin and we all know how this system is fraud.

  30. [ the international banking system is an enigma…
    Are you sure, that it is an enigma, or is it rather a ligma? ]

  31. This guy has no idea how banking Works has no idea the Federal Reserve Bank generates debt and it gets paid back by the tax payers we are the ones that bailed them out

  32. This is your WORST video… you made no mention of the fiat fractional reserve system… aka… creating money out of nothing. ALL BANKS ARE A SCAM, THE WHOLE SYSTEM IS!

  33. What a load of old tosh. This doesn't explain banking. Banks create digital money in their account when you sign a security (a'loan' agreement). This is then transferred to your account. They now have an asset. (Promissory Note etc) You pay them back with interest and they destroy the'loan' figure but keep the interest. This is why the 'money ' in circulation has increased over time. So many people still can't accept that banks create ' money' out of thin air on screen (97% digital, 3% actual currency).

  34. You forgot to mention that the Banks are getting their Cash from the various National Governments "quantitative easing" practices

  35. this isn't even remotely accurate. Money is debt that is created from thin air now, not assets that are held and lent

  36. Just the fact that "banking lobby blocked further legislation" negates the notion that legislation can do anything good. Under the influence of banking lobbies, banking legislation is only working for big banks and limiting the competition.

  37. Banks do not necessarily lend the money that was deposited by customers. If it would be this way, a bank could not give a loan if there is not enough money deposited by other customers. But it does not work like this. Actually, banks can create view credits out of nothing and this is what they do when you take out a loan.

  38. I wonder if it's because of the digitization of money that allows for ever larger crisis of does it allow it to be fixed easier

  39. Lot of banks demand a fee to let you have your money in them.
    So essential, you have to pay them for borrowing your money.

    Unless you have multi millions placed in them, then you might get a small interest instead.

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