Prof. Richard Werner explains how banking works. (money creation)

Prof. Richard Werner explains how banking works. (money creation)

[survileerin]

He's brilliant every time. We need his knowledge at high school, latest.

[mbseeking]

The most brilliant commentary on how money works you will ever here.

[crouchhill]

Good God, I am new to learning about Macro, I have to say how Richard explains it, its perfect.

[omBrezeeNamaha]

The question is why we let private bankers make the decision how and where they loan/create the money. If the demographic problem can be solved by banking, then it is greated by banking, which means that the private banking sector and its decion makers are the public enemy number 1.

[bluecafe]

Bank credit shouldn't be a mysterious secret of the universe, something that requires big fancy theories. There is a bank on every other street, issuing credit cards. Why not just go to a bank and ask them how they create credit? ... I guess that is what Werner eventually did. Still, it really should be common knowledge how credit is created.

[KetogenicGuitars]

Man what a golden stuff! It is very important invent method to define a loan that supports real GDP. Suppose it can be done by standard set of transparent accounting procedures.Then how about creating banking system where all the speculative loans would be only allowed on research and develpement startups and such separate departments? That would enchance all kinds of creativity on earth. Then the speculative instruments would have solid link to real human action. That is kind of what is happening in China. They first allow all and then come in and say if startup is too wild. If it is not too wild they multiply it in other parts of country or even steal it and make it big. Some big private agent could also do this as internal guidance without anyone forcing because it is good long term business.

[adeldizz]

Brilliant explanation. How about the deposits what’s being done by those?

[pinkpalmsmusic]

As I understand it

1. „How is new money created?“

And

2. „How is creation of new money limited, so banks do not create too much credit that will go into unproductive use?“

Are two separate questions.

The technical way to create new money is as Werner showed ex-nihilo, out of nothing by the commercial banks, and in that process they are not limited by their reserves per se. They do not check if there are existing reserves they can lend out, they create the deposit themselves.

But still there are rules in place (basel3) that demand capital requirements and the commercial banks have to follow these.

I would be very interested to hear more on that.
I doubt the only reason these rules are in place is because lawmakers believe the wrong theory of money creation.

It seems like even though technically commercial banks do not require reserves in the money creation process, it is these rules that make them limit their lending.

It does seem these rules are in place to put a limit on new money creation, not out of technical necessity, but as a management tool. banks would create even more loans used for unproductive asset purchase and would be totally unchecked in the creation of new money as long as some borrower is found.

To prevent that, rules like basel3 were put in place. So in the end, banks are artificially “constraint”.
What do you think?
Where can I learn about this exact topic?

[alfredmolison]

Is it possible for my company to buy majority control of a "systemic" bank? I would use federal employees to run it. I would spin off small sections that were honest and profitable.

[DistributistHound]

I also believe that C. H. Douglas was aware of the money creation theory although it's promotors may seem to be unsure about the fractional or the ex nihilo theory

[KC]

Hmmm quantitive easing may work in theory if the money created is truly spread among the people in order to stimulate the money chain. That however doesn’t happen, it is stored at the top

[alfredocosta]

And the human bank operation mistakes risk? What is the risk of asset bubble explodes? If the bank choose the equirt market as asset and they grow years and years, the risk of grow too much can creat inflation?

[Mikesworld]

Whose deposit are they lending? Mutual funds or is the bank the transfer agent that accesses the ss account and “loans” you your own money? What about bills of exchange where the bank transfers the securities to the federal reserve agent for exchange ?

[santiagolat]

If banks do create money "out of nothing" what justifies the charging of compound interest? (to the tune of several times the initial loan) Also, where does the money to pay back the interest come from?, as it was not issued into the economy at the time the loan was issued.

[sadiauddin]

So Is the economy and world economy a zero sum game where if one person is rich it means that another person is poor

[stevieboy]

where can I purchase his book on this subject?

[CliffRoyal]

A great man with a moral compass, QE has yet to be implemented as it was originally designed, to stimulate ONLY the productive sectors of the economy, small -medium businesses, manufacturing, R & D, agriculture (not GMO, crisper, mRNA) not the top down distributions to the housing market

[jaguarcheatcode]

15:20 How money is created. You're welcome.

[santiagolat]

I get the feeling Professor Werner is being very careful on how he explains money creation so as to avoid a red dot appearing on his well shaped forehead. For example, I have not heard him explain how taxation, at all levels, fits into this money creation scheme.

[aribbonatatime]

Sounded like he was saying when a bank "gives" you a loan what is actually happing, in fact, is that you are issuing a security for the bank to buy but instead of them buying it from you you are the one paying for it. Did I miss something? Maybe I got lost somewhere.