geldschepping en de reële economie

econlokaal

27 May 201405:12

Summary

TLDRThis script delves into the medieval origins of paper money and its evolution into modern banking systems. It explains how banks create money through lending, which initially was backed by gold but now operates on a debt-based system. The video highlights the Netherlands' role as a global leader in mortgage debt, illustrating the connection between money creation and debt crises. It contrasts the real economy, including everyday businesses and services, with the financial sector, which includes banks and investment firms. The script also touches on the dangers of the asset market, exemplified by the Lehman Brothers' collapse, and how financial crises can impact the real economy, leading to a situation where the real economy serves the financial sector rather than the other way around.

Takeaways

🏰 In medieval times, gold and silver coins were used for payment, and when people had too many coins, they could store them with a goldsmith who would issue a paper receipt for the amount of gold deposited.
📜 This paper receipt became a precursor to paper money, as it was more convenient than carrying around physical coins, and it started to be used as a medium of exchange.
💼 The goldsmith noticed that people rarely came to exchange their receipts for gold at the same time, which allowed him to issue more paper receipts than he had gold in reserve.
🏦 The role of the goldsmith evolved into what we now know as a bank, where loans are given, and value papers (loans) are issued with a promise to repay with interest within a certain time.
💵 Banks create money by lending. When a business requests a loan, the bank creates new money by registering a new asset, effectively creating money out of thin air.
🔄 The newly created money from loans enters the economy, is used for transactions, and circulates, becoming as real as any other form of currency.
🌐 The financial sector, which includes banks and other financial institutions, plays a crucial role in the economy by facilitating payments, savings, investments, and risk spreading.
🏢 The wealth market deals with shares, bonds, derivatives, real estate, and other investment and speculative instruments. It can be both beneficial and perilous, as seen with the case of Lehman Brothers during the financial crisis.
📉 The financial crisis can have a significant impact on the real economy, affecting the value of homes, the performance of pension funds, and the availability of loans.
🏛 The relationship between the financial sector and the real economy has become inverted, with the real economy now largely serving the financial sector and the wealth market, rather than the other way around.

Q & A

How did paper money originate in Europe during the Middle Ages?
-Paper money originated in Europe during the Middle Ages when goldsmiths offered to keep people's excess gold and silver coins safe. In return, they issued paper receipts that represented the amount of gold deposited. These receipts were more convenient than carrying coins and started to be used as a medium of exchange.
What was the role of the goldsmith in the early form of banking?
-The goldsmith played the role of an early banker by issuing paper receipts for the gold and silver coins kept in their safekeeping. They also began to lend money and issue loans, which led to the creation of more value papers than they had gold to back them up.
How does the process of banks creating money through loans work?
-Banks create money by lending out more than they have in deposits. When a loan is approved, the bank creates a new account with the loan amount, which did not exist before, by simply entering numbers into a computer system. This new money enters the economy and circulates as real currency.
What is the difference between the real sector and the financial sector of an economy?
-The real sector consists of tangible goods and services like housing, supermarkets, and schools. The financial sector includes banks and other financial institutions that facilitate payments, savings, investments, and risk management. The financial sector is meant to support the real sector.
Why do banks lend more money than they have in deposits?
-Banks lend more money than they have in deposits because they rely on the fractional reserve system. They only need to keep a fraction of their deposits as reserves to meet the demand for withdrawals, allowing them to lend out the rest and create new money in the process.
How does the creation of money through loans affect the total amount of money in circulation?
-The creation of money through loans increases the total amount of money in circulation. As banks lend money, the borrowed funds are used for transactions, which increases the money supply without changing the ownership of the existing money.
What is the significance of the statement 'money is actually debt'?
-The statement 'money is actually debt' signifies that the money in circulation is created as a result of loans, which are a form of debt. If all debts were repaid, the corresponding money would effectively disappear, highlighting the interconnectedness of money and debt.
How did the housing market crash in the United States affect the global financial system?
-The housing market crash in the United States led to a failure of banks like Lehman Brothers, which had speculated heavily on the market. This triggered a global financial crisis as the real economy was impacted, with houses losing value, pensions and savings yielding less, and reduced lending capabilities.
What is the role of the asset market in the economy, and how can it be dangerous?
-The asset market deals with trading shares, bonds, real estate, and other investable assets. It can be dangerous because it involves speculation and leverage, which can lead to bubbles and crashes. The 2008 financial crisis was partly due to the collapse of the asset market, affecting pensions, savings, and overall economic stability.
How has the relationship between the real economy and the financial sector changed over time?
-The relationship has shifted so that the real economy, which should be served by the financial sector, is now largely in service to the financial sector and the asset market. This is evident in the way government bailouts of banks were funded by cuts to the real sector, reflecting a prioritization of financial interests.
What are the implications of the financial sector's dominance over the real economy?
-The dominance of the financial sector can lead to an economy that prioritizes speculative activities over productive investments, potentially leading to economic instability and crises. It can also result in wealth concentration and reduced funding for public services and infrastructure.

Outlines

00:00

💰 The Origin and Function of Paper Money

This paragraph explains the historical origin of paper money in medieval Europe. It describes how people used to pay with gold and silver coins, and how the excess of coins led to the need for storage. The role of the goldsmith, who offered to keep the coins in his secure workshop and provided paper receipts as proof of the stored gold, is highlighted. These receipts eventually became a more convenient form of payment than physical coins. The goldsmith noticed that people rarely came to exchange their receipts for gold, leading him to issue more value papers than he had gold in reserve. This practice evolved into the modern banking system, where banks create money by lending and the concept of loans is introduced. The paragraph also touches on the idea that money is essentially debt, and how banks create money through lending, which is a fundamental aspect of the economy.

05:02

🏦 The Shift from Serving to Serving the Financial Sector

Paragraph 2 discusses the current state of the economy, where the financial sector and the capital market have become dominant over the real economy. It suggests that instead of banks serving the real economy, the real economy is now largely in service to the financial sector and the capital market. This shift implies a change in the relationship between the financial industry and the economy, where the latter is now more influenced and controlled by the former, potentially leading to imbalances and vulnerabilities in the economic system.

Mindmap

Keywords

💡Medieval

The term 'medieval' refers to the Middle Ages, a period in European history that lasted from the 5th to the late 15th century. In the context of the video, it sets the historical stage for the origin of paper money and banking practices. The script mentions that in the Middle Ages, people sometimes had too many coins, leading to the need for a secure place to store them, which the goldsmith provided.

💡Goldsmith

A goldsmith is a craftsman who specializes in working with gold and other precious metals. In the video's narrative, the goldsmith played a pivotal role in the early financial system by offering to store excess coins for people, issuing paper receipts as proof of the stored gold, which eventually led to the concept of paper money.

💡Paper Money

Paper money is a form of currency consisting of banknotes that are used as a substitute for coins of metal in standard circulation. The video explains how paper money originated in Europe as a more convenient alternative to carrying around heavy coins, with the goldsmith issuing paper receipts that represented the gold deposited with him.

💡Bank

A bank is a financial institution that accepts deposits, extends credit, and provides a range of other financial services. The video describes how the role of the goldsmith evolved into that of a bank, as he began to lend out more value in paper receipts than he had gold on hand, effectively creating money.

💡Loan

A loan is the act of providing money or property to another party in exchange for future repayment of the loan amount with interest. The script uses the example of a loan to illustrate how banks create money by lending out more than they have in deposits, which is a fundamental concept in modern banking.

💡Money Creation

Money creation refers to the process by which new money is introduced into an economy. The video explains that banks can create money by extending loans, which is done by simply recording a new credit on the borrower's account, effectively increasing the money supply without waiting for deposits.

💡Debt

Debt is an obligation that arises when one party receives money or other goods or services from another party, with the expectation that the first party will repay the equivalent amount at a later date. The video points out that money is essentially debt, as it is created when a bank extends a loan, which the borrower is expected to repay with interest.

💡Financial Sector

The financial sector encompasses the economic industry that is composed of businesses that manage money, including credit unions, banks, credit-card companies, insurance companies, accountancy companies, consumer-finance companies, stock brokerages, investment funds, and some government-sponsored enterprises. The video discusses how the financial sector, including banks and other financial institutions, serves to facilitate the real economy through payments, savings, investments, and risk management.

💡Real Economy

The real economy refers to the economic activities that produce goods and services, as opposed to the financial economy, which deals with money and financial instruments. The script contrasts the real economy, which includes everyday businesses and services, with the financial sector, highlighting the interdependence and potential conflicts between the two.

💡Asset Market

An asset market is a market where financial assets such as stocks, bonds, and real estate are traded. The video describes how asset markets, including the trading of shares and derivatives, can be both beneficial for investment growth, as seen with pension funds, and risky, as exemplified by the case of Lehman Brothers which contributed to the global financial crisis.

💡Subprime Mortgage Crisis

The subprime mortgage crisis was a set of events and factors that led to a financial crisis, characterized by a rise in mortgage delinquencies and foreclosures, peaks in home mortgage loan categories, and a sharp decline in housing prices. The video uses the crisis to demonstrate the impact of asset market failures on the real economy, such as the devaluation of homes and the subsequent global financial turmoil.

Highlights

In the Middle Ages, people paid with gold and silver coins, and sometimes had too many coins at home.

The Smith offered to keep the excess coins in his well-secured workshop and provided paper proof for the amount of gold deposited.

People began to use these paper proofs as a medium of exchange, which was more convenient than using loose coins.

The Smith noticed that people rarely came to exchange their paper proofs for gold, allowing him to issue more value papers than he had gold in reserve.

The role of the Smith evolved into that of a bank, as we know it in modern capitalist times.

When people asked for loans, they received value papers that stated they had to repay the Smith with interest within a certain time.

The more loans given out, the more money was in circulation.

The concept that banks use deposited money to give loans is common, but banks actually create money through loans.

When an entrepreneur wants a loan, the bank creates the money by registering a new account without waiting for deposits.

The money created through loans is as real as any other money and circulates in the economy.

Money is essentially debt, and if all debts were repaid, there would be almost no money left.

Since 2000, banks have been creating more money than ever, mostly in the form of mortgage debts.

The Netherlands is a world leader in mortgage debts, linking money creation to debt crises.

In 1982, there was approximately 00 billion euros in circulation in the Netherlands, and now there is 800 billion.

The economy consists of a real sector and a financial sector, with the financial sector including banks and other financial businesses.

The financial sector is supposed to help the real sector with payments, savings, investments, and risk spreading.

There is also a capital market where shares, bonds, derivatives, land, houses, and offices are traded.

The capital market can be dangerous, as seen with the collapse of Lehman Brothers due to speculation in the mortgage market.

The financial crisis affected the real economy, with houses losing value, pension funds not performing well, and savings yielding less.

Banks were bailed out with government money, which was then cut from the real sector.

The situation is now reversed, with the real economy largely serving the financial sector and the capital market.