Weaknesses of fractional reserve lending | The monetary system | Macroeconomics | Khan Academy

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Weaknesses of Fractional Reserve Lending
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Опубликовано:

21 авг 2024

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Комментарии : 101

@prayfortruejustice 12 лет назад

(Unless you already covered it) Discuss how money is originated (created) via a loan (like a mortgage) using fractional reserve models. Then show how twice lent (or multiple lent) money can be repaid -- in other words if the same money is lent multiple times, where does the interest originate to repay the loan.

@SirTenenbaum 12 лет назад

The alternative is full reserve banking. With full reserve banking, bank runs would be impossible, and you would have the most stable banking system in the world. Fractional reserve banking also contributes to the business cycle since it expands the supply of credit without an increase in savings. Full reserve banking does not do this.

@richardunderwood4158 7 лет назад

SirTenenbaum Would Bubbles be possible in Full Reserve?

@binarytv2904 6 лет назад

Exactly...who wants temporary fake growth made on the back of FRL?

@gunesfb1907 5 лет назад

How about lets just allow both fractional- and full reserve banking together while definitely not saving any bank and their depositors during a bankruptcy? Lets let the people putting their money into fractional reserve banks lose all their money with every crash, and so that more and more people will put their money into full reserve banks. That will lead to the creation of more full reserve banks as well!

@authenticallysuperficial9874 10 месяцев назад

There would still be a black market of fractional reserve banking. But yeah it should at least be illegal so they can be charged with fraud, which is what it is.

@dapop1001 12 лет назад

# 2 Bad incentive is turned into crony capitalism.You are very smart but you never mentioned that an influx of bad investment ( fed money ) into the money supply takes away all incentive to save good investment ( peoples saveings ) in the way of interest rates. Very good video on what is happening.

@Xerathiel 3 года назад

Its like going to a casino with the money your friend gave you and keeping the profits. 10/10 business.

@PatGunn 12 лет назад

It's a perfectly reasonable system, regardless of how many insults you choose to fling at it.

@PatGunn 3 года назад

@@dans2971 I am familiar with lateral thinking. The metaphors that apply to high finance don't analogize well to talking about your friends.

@testbench985 11 месяцев назад

🎯 Key Takeaways for quick navigation: 00:00 📉 Fractional reserve lending can be unstable, as banks promise depositors immediate access to their money, but a portion of it is being lent out. 02:22 A run on banks can occur if customers lose confidence in a bank, leading to potential bank failures and economic instability. 03:19 Governments address this by insuring banks (e.g., FDIC), but this can create a lack of market discipline and incentives for banks to be transparent about their operations. 05:12 Fractional reserve lending gives private banks control over the money supply, which can lead to unintended consequences during economic cycles, such as exacerbating recessions and booms.

@DWAtwood 8 лет назад

This guy has a great speaking voice but repeating most of his thoughts twice is kind of comical.

@Kiwinnit 7 лет назад

haha true, it is a bit irritating but he's just thinking of what to say next

@MyLegsAreKindaLong 2 года назад

I think it is the habit of a teacher.

@DanKxxx 12 лет назад

It's how the economy works. What are the other options?? Investment would be arse if we didn't have fractional reserve banking.

@melkenhoning158 4 года назад

it's called periodic decentralization of money supply. Don't be a tool.

@fraz006 3 года назад

how economy could work before this fractional reserve system?

@newman571 12 лет назад

digitised is right about the central bank. In addition, an increase in the money supply can potentially benefit all by shifting aggregate demand to the right

@selvmordspilot 12 лет назад

True!! But at least he's making sure to point out that "stable" does not mean sustainable in this context. He does make it pretty clear that there is no proper solution to an over heating economy, nor any way pf actially preventing it, and the banks have no proper cause of action in case of a "run on the banks" But it is "stable" in the sense that they are getting away with it, and they have been, for quite some time now.

@ChristopherMarlowe 12 лет назад

I don't recall asking for a review of the zeitgeist movie. The video I posted cites the Federal Reserve's own book and it shows you the text. You can download a pdf of "modern money mechanics" and read it yourself. You can compare that with the books in your cupboard if that make you happy.

@JosePablo24 8 лет назад

love your videos thanks!

@ChristopherMarlowe 12 лет назад

yes the ability to reason helps to keep me safe from sophistry I would recommend that you read "Web of Debt" by Ellen Brown. That might clear up some of the murkier issues of fraudulent fractional reserve lending. Did you ever notice that Shylock still wants a pound of flesh even after the money is offered to pay the debt? "If every ducat in six thousand ducats were in six parts, and every part a ducat, I would not draw them. I would have my bond." Shylock is a vampire.

@ChristopherMarlowe 3 года назад

@@dans2971 Try not to get so butt-hurt about Shakespeare

@freedomfight1933 11 месяцев назад

Nice job

@omgiheartpie 12 лет назад

@MASK81 Yes.

@lineikatabs 10 лет назад

This is currently happening in Bulgaria.

@2leet2cheet 12 лет назад

Every major economy (to my knowledge) runs on a fractional reserve system.

@transon6655 4 года назад

what about north korea?

@jaysant6958 9 месяцев назад

2:04 What if everyone was already aware that the banking system did fractional reserves? It should be more common knowledge if it isn’t so that no one is surprised that they can’t cover 100% of their money in the case of a bank run.

@amanvds 12 лет назад

Yeah u r right

@techungry1 12 лет назад

KHANNN!

@ilredeldeserto 4 года назад

...so money is endogenous!

@Gguy061 10 лет назад

I think its a non sequitur to say FDIC or any "safety net" will cause banks to be careless in how they lend money. I think the use of fractional reserve banking is separate from how money in banks are insured. In theory, money could still be insured without the use of fractional reserve banking, which I believe it should. The causes of bank failures aren't limited to careless lending alone

@amanvds 12 лет назад

Well mr khan to tried u r best to paint FRB system is not that bad as ppl's out there think about it .... but sadly that's not true

@Matt-lq7gd Год назад

Couldn't be more true today, 10/2022. Recession is hitting, interests rates keep climbing, harder for people to access capitol. Bail INs coming?

@randyzabel 12 лет назад

Are you saying the ripple effect has never happened? The Depression comes to mind not to mention the bank crisis in the 1980's, the collapse of Russian banks in 1998.

@Vintexen 12 лет назад

Can you please reupload your video on Austrian Business cycle?

@rahuldinesh2840 4 года назад

It's like Futures trading in the market, where you can buy instruments with 5% deposit. I have done that and it is extremely risky job. It always ends up the trader getting bust eventually.

@MS-uu8xg 6 лет назад

the only way to watch khan academy with sal khan narrating is at 1.25 speed

@AnonYMouse-ky4sg 6 лет назад

michael sohl I so it at 2x

@FermiGBM1 7 лет назад

The scammer bank lol

@abz998 12 лет назад

What happened to your Austrian school video? Can't seem to find it anywhere.

@giordanobruno9106 12 лет назад

Good question. The money to pay the interest on all outstanding loans DOES NOT exist. This means that commercial banks, governments, corporations, and individuals must constantly return to borrow more money in order to service the debt currently in existence. The resulting negative feedback loop of constant new money creation results in the inflation of the money supply and the devaluation of the currency. I recommend you watch the documentaries Zeitgeist 2 and 3. It's free on youtube.

@amanvds 12 лет назад

Well .... the money came from DEBT which was bought by Federal bank in the form of treasury bond's

@kenzienguyen3631 3 года назад

To the moon! 🚀🌕 (maybe)

@Diamonlord 12 лет назад

5 rd i guess but am not so sure

@picalhead 8 лет назад

At the risk of sounding like an idiot... What is the reason to dial back a boom in the economy? what would happen if the central bank did not sell their securities (remove money from circulation) in a boom?

@samwood4733 8 лет назад

+picalhead The main reason is inflation, when an economy is booming, more resources are employed which increases inflation. Inflation has costs to it which is why governments want to avoid it. I think a longer boom can also lead to a longer recession but i actually am not sure about that.

@Deelipkumar-zf5kh 3 года назад

BITCOIN IS THE ANSWER PERIOD.

@viritrilbiaslayerofargus.6691 7 лет назад

so in a recession whom ever has the most cash on hand is king?

@djdedan 12 лет назад

why don't you explain what fractional reserve banking means, if it doesn't mean synthesizing money out of thin air, why even have the term? what is the true history of fractional reserve banking? why is it possible to lend out more money than you actually have? where does this money come from?

@MASK81 12 лет назад

does Australia have a fractional reserve lending system?

@isawaturtle 6 лет назад

FRB ended in the US in 1934 ...

@gshooting 12 лет назад

Whhhooooooosssshhhh!!!!

@bobbyrobmaxey 3 года назад

Thank god we have cryptocurrency now

@ChristopherMarlowe 12 лет назад

See Dorothy M Nichols, Modern Money Mechanics, (Chicago: Federal Reserve Bank of Chicago 1961, rev. 1992) at page 8. Loaned out money that is deposited can become the basis of another loan. Bank1 Loan A = 10K; Deposited in Bank2 B2 LoanB = 9K; Dep Bank3 B3 Loan C = 8.1K; so far 17.1 K created from 10 K loan. 10 K loaned in this fashion can become 100K; 10 to 1. Money created by fraud.

@marcosabait 9 лет назад

24 July 2015 Staff Working Paper No. 536 The impact of liquidity regulation on banks www.bankofengland.co.uk/research/Pages/workingpapers/2015/swp536.aspx

@flamespotter 8 лет назад

Mr. Khan. Your teachings and terminology are similar to those of Harry Browne's. He was a great teacher. Curious.. Do you support free-market economics? btw - Harry Browne was a presidential candidate for the Libertarian party in 2002 & 1996. Also a published author.

@christopheb9221 4 года назад

the reason bank runs are possible and to fix it they decided to make the fed to loan the bank money rather than change the system. now that money is digital bank runs shouldnt be possible. (along with them being so large). we should instead have the federal reserve part of the treasury. private companies shouldnt be able to do this legal fraud.

@HereticAdam 11 лет назад

Fucking awesome!

@sniksder21 12 лет назад

Second

@Thegamemakur 12 лет назад

@mahamood23 He uses a tablet.

@williamchamberlain2263 3 года назад

Stay in debt to beat the system :)

@ChristopherMarlowe 12 лет назад

Here is a video explaining the process for you: watch?v=eWl7Mb49vSk

@abuyiesir 12 лет назад

3rd :P

@ChristopherMarlowe 12 лет назад

Putting aside the idea of a central bank... If a bank loans money that it does not have, then that money is CREATED. Period. It doesn't matter whether there is a piece of paper to represent it. Bank A loans Mr Laymens 20,000 dollars, that Bank A doesn't have. Mr Laymens buys a car. Car Dealer puts 20,000 dollars in his bank account. Now there are 20,000 more dollars in the system, and there is interest due on that magical money. But the interest was not created. FR lending is a fraud.

@ChristopherMarlowe 12 лет назад

Money is created when non-existent money is loaned out. Why do private banks have the power to create money this way? Private banks are ensured by the government. Therefore, the people of the US are guaranteeing the debts of the private banks. The profits from these loans are not shared with the people. If this sort of lending is necessary, as you say, then all of the people should benefit from money creation. Banking should be a public utility. Private FR banking is a fraud.

@mdlittle5466 12 лет назад

*snerks* 'investment'...*chuckles* Going to tell me about the 'tooth fairy', next...save the cute comments for uneducated children, son. I'd rather be right then continue appending this delusional game of let's fuck up thousands of peoples lives...

@ChristopherMarlowe 12 лет назад

watch the video so you can understand what we are talking about. watch?v=eWl7Mb49vSk ALL money is debt with interest due, and this is a foolish thing. You don't need to PRINT money for it to be fraudulent. Most money exists only on computers, but it is just as much a fraud.

@ChristopherMarlowe 12 лет назад

when a barber cuts hair he doesn't create money. the $20 to pay the barber comes from my pocket. Interest is not created at the same time the fictional money is created. That interest has to come from somewhere. Our system is based on money that is created by debt watch?v=eWl7Mb49vSk

@giordanobruno9106 12 лет назад

The alternative is debt free, interest free money as a transition away from monetary systems. Money is created out debt (something that is totally ignored in these lectures). Governments don't create money on their own prerogative (in accord with Article I, Sec 8 of the Constitution), instead they borrow it from central bank at interest. And most importantly is that the interest required to pay off the loan does not exist in the money supply at the time the loan is made.PRETTY AMAZING SCAM.

@ChristopherMarlowe 12 лет назад

you are distracting yourself with this barber example. I have already explained twice over why all money is debt with interest due, but you don't want to deal with that fact.

@NinkasiDelight 12 лет назад

look at all the mad in here.

@mdlittle5466 12 лет назад

Is money really created that cannot be paid back?...you should've added, '...in our lifetime or the lifetime of our children'. To that, the answer is a resounding 'NO'...not even our grandchildren or great grand children. You might want to work a little more at basic remedial math, son. I'm not too sure you know who you're talking to...

@2leet2cheet 12 лет назад

Let me get this straight. You deposit money into the bank and you believe it sits there in a vault awaiting your return?

@2leet2cheet 12 лет назад

Tone down your arrogance kid. You aren't the only one educated in economics & finance.