Summary of Money

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00:00:00 - 01:00:00

In this video, the presenter explains how money is created and how its value is derived. They also discuss the concept of a "store of value" and how it is difficult to achieve.

  • 00:00:00 In this video, historian and educator Lyn Yang discusses the history of money and how different forms of currency have functioned throughout the years. Yang then discusses Bitcoin, explaining how it differs from traditional currencies and how its value is still growing.
  • 00:05:00 In west Africa, glass was much harder to make than it is today, because the technology in Africa was not that advanced. Glass was used as currency, but when Europeans came into west Africa, they noticed that west Africa was very rich in resources and they could produce glasses at a much cheaper price. Europeans imported glass cheaply and gave it as money, which lost its value over time in west Africa because more and more glasses were being imported without much work. Finally, cigarettes were used as money in jail, where they acquired or got the contraband item from the inmate.
  • 00:10:00 The video discusses the idea of a "store of value," which is a concept that is difficult to achieve. The examples given are cigarettes, rice, and rye stones. The store of value for these items was destroyed when someone came up with a new idea (e.g. cigarettes being banned in jail). Modern currencies, such as the rupee, have a difficult time maintaining their value over time.
  • 00:15:00 In this video, the presenter explains the three main characteristics of money: units of account, store of value, and saleability. They also discuss the concept of scalability. Finally, they provide an analogy for the concept of soft money and hard money.
  • 00:20:00 This video explains how money is created and how it derives its value. The main point is that gold is more valuable than other metals, which is why it was typically used as money.
  • 00:25:00 This video presents the stock-to-flow ratio, a metric used to measure how hard a money is to produce. The presenter explains that, during the past 110 years, technology has advanced while gold supplies have not increased as much. In 2006, the price of gold increased, but the supply of gold did not increase much. In order to maintain a hard money, the stock-to-flow ratio must be high. The presenter also discusses copper, silver, and oil, and their stock-to-flow ratios.
  • 00:30:00 In this video, financial expert Tony Robbins discusses the history of money. He points out that even when metals were used as currency, coins were clipped (made smaller in weight) to devalue them. He then goes on to describe the development of paper money, which is backed by gold. This system works well until the paper money loses its value. Merchants adapt by raising prices accordingly. Robbins concludes the video by discussing the current issue of negative interest rates.
  • 00:35:00 During World War I, governments needed to spend a lot of money to fight the war, which led to inflation and a depreciation of national currencies. For example, the German mark lost a lot of its value against the Swiss franc. In the world of fiat money, which is not backed by anything, this is a common occurrence. Today, we still see inflation and devaluation of national currencies, but it is done electronically through central banks printing more and more money.
  • 00:40:00 During World War I, the government had to spend more money to fund the war effort, and resorted to printing more money. This led to the Great Depression, and the devaluation of the US dollar relative to other currencies. Later, Franklin D. Roosevelt passed an order to get back all the gold and gold certificates from people, and repriced it at thirty five dollars an ounce. This allowed the government to print more money without restrictions, boosting the economy. However, as the money supply increased, the interest rates on notes went down, leading to a deep recession.
  • 00:45:00 In the early days of the US dollar, it was fixed with gold at a rate of one ounce of gold to one dollar. This system worked smoothly until other countries started becoming more competitive and began exporting more than the US was. This caused the demand for US dollars to go down, and the US's competitive position weakened. Countries started exchanging their dollars for gold, which broke the fixed exchange rate, and the US dollar became the global reserve currency. Today, most currencies are exchanged on US dollars, which means that the US can print as much money as it wants.
  • 00:50:00 In this video, Lynn and I explain how fractional reserve banking works. We start with one bank, and convince one villager to deposit 100 dollars. The villager only spends 20 dollars of the 100, and leaves the rest in the bank. We then loan out 80 dollars, and another person spends the 80 dollars on something and puts the money back into the bank. This process continues, and by the end, we've created 500 dollars. This 500 dollars comes from the inverse of our reserve ratio, which is 1 divided by 0.2, or money multiplier. When money is not backed by anything, like in a world of fiat currency, banks can create loans out of deposits as long as they keep within a reserve ratio.
  • 00:55:00 In this video, a marketer explains how a bank's reserve ratio affects its liabilities. For example, if a bank has 10% reserves, it can increase its deposits by 9000 and still maintain a 10% reserve ratio. This leaves an "excess" of 900 dollars which can be lent out as a loan.

01:00:00 - 01:20:00

The video discusses how the Federal Reserve uses open market transactions to manage the money supply and keep the economy stable. It also discusses how the central bank prints money to keep interest rates low and how this can lead to inflation.

  • 01:00:00 The goal of the Federal Reserve is to manage the money supply and keep the economy afloat. By buying and selling securities, they are able to increase or decrease the amount of money in circulation. This is done through open market transactions, which are known as monetary policy.
  • 01:05:00 The video discusses the concept of money and how it works in the context of economic policy. The Federal Reserve uses a variety of methods, including buying and selling securities, to control the amount of money in the economy and keep prices stable. When the reserves held by banks become too large, the Federal Reserve raises the Federal Funds Rate to make it more expensive for banks to borrow. This helps to reduce the amount of money available to be loaned, which in turn reduces the amount of borrowing and investment that takes place. This in turn can help to maintain a stable economy and moderate rates of inflation.
  • 01:10:00 The video discusses how the Federal Reserve, in an effort to prevent a collapse of the economy and global financial crisis, printed large quantities of money in order to buy financial assets. This increased the demand for these assets, leading to an increase in their prices and a decrease in the interest rates on these investments. This has helped to stabilize the economy and keep interest rates low.
  • 01:15:00 The presenter discusses excess reserves at two banks, how this affects the short-term interest rate, and how central banks are printing money to keep interest rates low. He also explains how a monetary sovereign can print without any issues and it does not depend on tax dollars.
  • 01:20:00 The speaker discusses money printing, inflation, and the risks associated with it. He recommends investing in stocks, bonds, real estate, and reserves in order to minimize risks. He does not own any bitcoins himself, but he is a believer in their potential.

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