Introduction to the thought of the haven bank.
Banking 11: A reserve bank
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Sal, shoring up the interbank accounts can happen at the reserve bank, or over the counter MM. During “normal” times of risks in underlying assets, the central bank can float “mistakes” to reduce systemic risk.
However, as you stated before the central bank cushion is only one part of the overall banking confidence equation. I would argue that the primary “security blanket” for most depositors, which is now essentially broke itself, is the FDIC.
wish i could play on paint this well
The Central Bank sets the Reserve Requirement, but what about the leverage ratio? Do they set that?
tHanks for posting thgese videos. There is a lot of misinformation about the motives of centralizing currency and this is a simple view that opposes all the conspiracists
how could too much gold reserves be bad ? i do not undestand your point “FranceParisian”
gold reserve? Since when… lol
So if the (non-central) banks no longer have gold but have checking accounts with the central bank, what interest is at play (do banks loan the money from the federal reserve at interest, or does the federal reserve pay interest to the banks for the gold deposits)? I’m guessing this will be answered later but I thought I’d post now in case anyone else was thinking about the same thing. Thanks for this vid series.
thx dude u r better than all those boring teachers!!
Sal, thanks for another wonderful video that explains how banking works. I have learned far more from your presentation than from any other source.
I do like that your presentation is very neutral and unbiased but essentially just logical.
Along with the other viewers, I’d like to hear your opinions about the current economic/financial crisis and what more optimal systems are available for us to choose.
….inflation…and hyper-inflation. Let me coin a word. How about MALFLATION!
This is why I say thank you Sal.
Agree on your comment and yes Sal is very much neutral to this. I just wonder what is Sal’s motivation of being too nuetral when he can actually critique the present crisis and effectively make a comparison and in the process people will understand more what is facing us in our economic climate at present.
The problem with this system (video above) is that it is very much open to manipulation and fraud. Exactly what’s happening now in our current financial crisis (depression 2008 to present).
Let’s say in our body system, gold equals to fat in your belly, a little bit of fat is good for the body system to work in times of crisis (as fat can be converted to sugar/energy if the body need it so). However, what is happening is too much fat in the system that the body can not sustain it anymore.
The whole system is unstable and fraudulent, and propped up by government. Reserve ratio = how much can you lie about total funds available to depositors.
Initially regional banks and their notes could not create many more notes than they had reserves. If they did, people would begin to notice an excess of notes and would look to invest it. Since it was likely that it was locally saturated with capital they would invest outside the region. Since the notes were only good for the region, bank notes would be redeemed for specie and gold would begin to leave the bank since only gold was accepted outside the region.
Because too many people would find out about it.
Very, very well explained. Watch also MONEY AS DEBT, if you haven’t yet, to really understand the implications of such a banking and monetary system which basically leaves the money we use at the mercy of the banking cartel. Sal is somehow neutral to that. But very good work indeed.
This is very interesting, thanks, Sal, for expaining! Just why all this is not taught in business schools, formal education? Any ideas?
at this point, i dont think it wud solve run on bank problem, since the loss of repute on bank will make people to withdraw money from all the bank(if not gold). the option left with centrl bank is to print more note leading to inflation??
I’ve been watching all the banking videos and thank-you Mr. Khan. I have been trying to figure this stuff out for awhile and this is the best explanation out there.
No where in my education here in Canada did they cover this even remotely. And it is hard to find a good explanation of it just by googling.
Thank you God bless you sir.
So what do you see in store for U.S. Banking System do you think that inflation will be a big issue.
I can’t wait..
He’s demonstrating how the banking system has evolved… he’ll get to the modern banking system in later videos.
I’m trying to get to modern central banks incrementally. We’ll get to the workings of the modern Fed in a few more videos.