There’s a lot of confusion about how banks work, most university economics courses still teach a model of banking that hasn’t applied to the real world for decades. While banking may seem like a complicated subject, anyone can learn the basics.
Do you really want to understand how banks create money, and what limits their ability to do so? Then our 6-part video course ‘Banking 101′ is for you!
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.
Most of these 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 In this video we’ll show that it’s an inaccurate and outdated way of describing how the banking system works.
In this new video you can learn 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.
What actually limits how much money the banks can create? Reserve ratio, Liquidity ratio, Capital Adequacy Ratios, Basel accords? Explained in an easy to understand way.
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’.
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.
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