The Most Important Economics Video You'll Ever See
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Fund Accountant here. This video is a head ache, and its bombastic approach makes me think your other videos suffer from the same mistreatment of their topic.
So despite the 1 simple terminal, 'the fed' do issue treasury bonds, which are privately held and then sold (to all manner of people, you can buy them, or parts of them if you want) they yield money. the bonds have an obligation tied to them (the interest rate)
When the interest rate of treasury bonds is low, banks buy lots of them as they have to pay less interest back to the fed when those bonds 'end' (they can expire or be renewed, they are usually renewed)
likewise, when the interest rate is high, (banks have to pay back a lot of money) they tend to sell them to others, or stop buying them.
This issued money that the the bank owns allows banks to fund ventures (and also keeps them liquid) from there they hope the money they use can be used to make deals which in turn make them money.
fed -> issues bond 5% to bank with principle of 1 billion dollars
Bank -> makes contracts with others to make 1billion dollars + +5% (i.e more than 5%) and thus a profit
The contracts -> allow the vast majority of the economy to work.
interest rate go up and down based on: inflation, mal-investment, and tempering cashflow expectations
is the excess-demand for goods and services. This applies to everything, automotibles, food, houses etc. Its not as simple as 'inflation means all things go up' and vice versa, things go up and down depending on their demand. if my food costs go up 10x, i still have to eat and thus will pay, but i may skip buying a car or buying a fancy house. inflation is WIDE not a specific set of goods. poor people (anyone not making 200k annual) must spend a great deal of their money on living expenses which are effectively obligations, thus when those expenses rise in price, they get very poor very fast. Poor people tend to over-borrow and over-buy, then complain when the economy tanks and they have to pay it back at a greater price, buy small and smart, not big and useless.
This is anything which has been built but is only being kept around because someone believes it'll make money EVENTUALLY. this is basically 'calling a bluff' of bad investments. think 'bridges which lead to no-where'. a non-USA example of this is the hundreds of thousands of shoddy built tofu-dreggs in china. non of those are valueble, but people keep pretending they are, eventually the losses must be realized.
Tempering Cashflow-expectations –
This is more complex, but basically reduces the 'fast-growth' of the economy. Think if an investor buys an app from someone in silicone valley, and they're hoping lots of people download it, but no one has yet. They may make money if in 5 years it gets lots of downloads and makes lots of money, but till then the rise in interest rates, generally means to do so is 'more expensive' for the investor as opposed to making more 'guaranteed' money within 5 years. basically it reduces the amount of investment in non-proven businesses. This 'causes' a recession, in the sense that firms which were unproven go bust, but frankly you can't make a company and tell investors 'it'll make money eventually' and then wait forever. THE CASH MUST FLOW.
You completely mischaracterize the great depression. The depression has LOTS of causes, one of the main problems was that people had TONS of mal-investment. the 'roaring 20's' were called so because you could basically buy any business and sell it later for heaps of cash, regardless of its actual profitability or cashflow; combine this over thousands and thousands of businesses and even more speculation and you have a disaster. Lots of people sold their belongings to get a chance at this, and even more were employed by these bad businesses either directly (factories) or indirectly (doing the construction for bad businesses). Crypto might be a similar comparison, but thats its own topic and im sure crypto-types will lay into me.
The fed can start buying back treasury bonds and 'destroy' money, often referred to 'reducing/off-loading the books' but this process is not so common. Instead they usually issue a pause in issuing or a change interest rates.
That's why the CIA killed JFK the gold standard
These videos you’ve made are phenomenal. You do an excellent job simplifying complex subjects.
Sadly this is probably not that important fos someone that is from east europe, or maybe it is?
Fedboys boutta btfo
I think that article 1 section 1, 8 & 9 of the us constitution should be enforced… not forgotten. we have laws. we need only enforce them.
Hope you have a great day & Safe Travels!
This channel is dangerously based, be careful comrade
This is genuinely crazy to think about. Hopefully one day the mossad agents at YouTube slip up and let one of your videos hit a couple million views
could we get more sources on this stuff? amazing videos dude.
The manipulation of interest rates is to slow economic growth. Excessive growth is bad.
if voters are interested in social progress, the FED is there to punish everyone for it. as it is run by the financiers of all of the largest anticommunist/antisocialist massmurder programs
They aren’t “punishing the economy” they are controlling inflation which is what happens when prices rise too high and there is too much money …
Any attempt to remove bankers from the converstation will only be gaslighting as they will undoubtedly be replaced by elected officials sponsored by these banks to keep status quo
This blew my mind
If only there was a man who fought this system.
Look up the documentary the greatest story never told.
Tax policy is one way they keep people poor in Australia using payyg where they calculate your estitmated gross income every quarter and send you a income and gst bill, so unless you take on thier debt through lones or make enough money to retire with in a few months youll be playing thier game till your an old man, if only everyone voted with thier taxes by collectively withholding them.
Also, quantitative tightening doesn't erase money. This is all still a free market system, it doesn't function based on dictates from the Fed. For banks, tightening simply raises the attractiveness of holding US government debt (risk free) compared to making loans to the public (risky). So QT simply makes banks less inclined to lend. It does not erase money, it slows the creation of new money (which comes from bank loans to the public, individuals or businesses, those loans come from excess bank reserves).
Ramping up interest due to inflation is the correct thing. It's basic MMT 101… If you borrow money and create inflation under low rates the only way to contract the money supply you have to increase rates.
The Fed doesn't create money if bank reserves aren't lent out. The Fed has no power to force banks to lend and recent history shows US banks are (rightly) reluctant to lend.
For example, between 2010 to 2019 the Fed wanted higher inflation (they wanted it around 2%) and they wanted more money out in the economy, however the banks sat on their reserves and did not create money. As, from the bank's perspective, any individual banking firm would still go out of business if they made bad loans. So even though the Fed pulled US gov. bonds off the banks' balance sheets, and left banks with high reserves, those excess reserves which could have been lent out, weren't, and much of that money did not leave the banking system.
Edit:This comment is a discussion on geopolitical climate and what could be happening in the world. I only brought it up because the video made me to think about this idea.
I'm not defending anything here but certain things are smart but not morally good moves. The interest rates and loans to another countries especially in Africa and South America were smart. They get to abuse the system they created and profit or destroy continents. This is especially the case with South America and Africa, which contribute to a 1/5 of the world population. That is why China is starting to develop these continents because it is such a vital apart of the world. Although they do not bolster the wealth of western world, it is far easier to convert populations trust to the eastern world especially the history of western civilization screwing them over in the last 50 years. Europe and USA are an empire of 1st world countries that make the non western countries clash. I believe China has recognize that and are using this advantage to convert neutral nations to support the east. Economy and population is at the for front of it. France controls most of West African's economy but very in a profit centric sense, which china is doing as well, but many of these countries weren't screwed over by the east. I believe there will be a great shift in the next decades that spilt the world in half not politically or morally, but by the neoliberal agenda that the west has created. I'm not Chinese and not from the west, just previewing what is happening before our eyes in the world. The only problem to this is the muslim's world and the occupation of lots of the world. The thing is psychological there is a recent bias in our brains the typically overwhelms history. Sorry I know this wasn't what the video was about, but you can definitely discuss wealth of nation in terms of prosperity and power through money.
I think gold should be back
Never stop making videos , its an order
As you note at 4:40, money is supply is controlled from the the buying and selling of government bonds to private companies. So how would private companies meet their removal from the interest rate setting bargaining table (the FOMC)? Would the private banks stop buying &/or selling bonds from the fed now that they no longer have a say in interest rate policy?
Incredibly important and nuanced video exposing the coup that is the private control of money supply nonetheless.
Gdf = gosh darned fed
Its strange really… the least respected laws in the united states are constitutuonal laws
Love that Johnny Harris wild shot 😂😂tired of his lies