How Money & Banking Work (& why they're broken today) - Lyn Alden

00:32:30
https://www.youtube.com/watch?v=jk_HWmmwiAs

Resumo

TLDRThe video explains the breakdown of the current financial system due to excessive money printing and centralized banking practices, resulting in inflation and a loss of savings. It highlights the transition from barter systems to various forms of money, including commodity money, fractional reserve banking, and the rise of central banks. The narrative points to the failures of currencies around the world, emphasizing the urgent need for a decentralized financial alternative, like Bitcoin, which offers peer-to-peer transactions without reliance on traditional banking structures. The speaker advocates for an open-source, decentralized monetary system as a potential solution to the ongoing issues in today's economic landscape.

Conclusões

  • 💔 The financial system is broken due to excessive inflation.
  • 💵 Inflation dilutes savings and purchasing power.
  • 🏦 Fractional reserve banking leads to instability.
  • 📉 Centralized systems create dependency on banks.
  • ⚖️ Bitcoin offers an alternative to traditional banking.
  • 🔍 Transparency and decentralization are crucial for future money.
  • 🌍 A global financial system is needed to unify currencies.
  • 📜 History reveals the risks of centralized currency systems.
  • 💻 Technological advancements may enable a decentralized future.
  • 🤝 Open-source money could empower individuals globally.

Linha do tempo

  • 00:00:00 - 00:05:00

    Current global financial issues stem from the rapid increase in money supply across over 160 currencies, leading to currency devaluation and erosion of the public's savings. Central banks' policies focus on inflation, compounding the problem as wealth concentrates and political polarization escalates.

  • 00:05:00 - 00:10:00

    The foundation of money is trading via efficient methods like credit systems and commodity exchange. Barter systems are inefficient as economies scale, leading to the need for universally accepted money, which initially took the form of commodities like shell jewelry and evolved into gold and silver coins.

  • 00:10:00 - 00:15:00

    Ancient monetary systems balanced commodity money and credit. Inefficiencies led to formal banking systems in medieval times, exemplified by hawala networks that enhanced trust and safety in money transfer. The evolution of banking included the transition to paper instruments and increasingly complex credit systems.

  • 00:15:00 - 00:20:00

    Historically, banking evolved from full Reserve to fractional Reserve systems, where banks lend out more money than they hold in reserves leading to instability. Central banks emerged to manage these systems, yet their control has led to crises and the dilution of currency value through excessive money printing.

  • 00:20:00 - 00:25:00

    The monetary system transformed thrice over the last century, starting with the gold standard, transitioning through Bretton Woods, and reaching the current phase of unbacked currencies dominated by the US dollar, a situation that has allowed for significant government control and currency instability.

  • 00:25:00 - 00:32:30

    The emergence of Bitcoin and decentralized currencies offers a potential solution to the centralized financial system, advocating for a system that is transparent, open-source, and decentralized to counteract vulnerabilities in the existing financial structures.

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Vídeo de perguntas e respostas

  • What is the main issue with the current banking system?

    The current banking system is flawed due to its centralized nature and the way it dilutes the value of money, eroding savings and wages.

  • How does inflation affect people's savings?

    Inflation, driven by increasing money supply, persistently reduces the purchasing power of people's savings and wages.

  • What alternative to traditional banking does the video suggest?

    The video suggests Bitcoin and decentralized financial systems as alternatives to traditional banking.

  • What is fractional reserve banking?

    Fractional reserve banking allows banks to lend out a portion of deposits while keeping only a fraction in reserve, leading to instability.

  • How has technology impacted the finance system?

    Technology has led to increased centralization and abstraction in the financial system, complicating the money transfer process.

  • What are Central Bank digital currencies (CBDCs)?

    CBDCs are digitized versions of fiat currencies controlled by central banks, representing a trend towards greater centralization.

  • What does full reserve banking mean?

    Full reserve banking requires banks to keep enough reserves to cover all demand deposits, ensuring stability.

  • How is Bitcoin different from traditional money?

    Bitcoin is decentralized, not subject to inflationary pressures, and allows for peer-to-peer transactions without intermediaries.

  • What role do banks play in the current financial system?

    Banks facilitate transactions and hold deposits but often operate with little transparency and can mismanage trust.

  • Why is a more decentralized financial system needed?

    A decentralized financial system can strengthen individuals, promote transparency, and reduce reliance on corrupted institutions.

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Rolagem automática:
  • 00:00:00
    how money and banking work and why
  • 00:00:02
    they're broken
  • 00:00:04
    today there are over 160 currencies in
  • 00:00:07
    the world today and the money supply
  • 00:00:09
    from most of them increases rapidly
  • 00:00:11
    which persistently and invisibly dilutes
  • 00:00:14
    people's savings and wages and siphons
  • 00:00:16
    that value away towards
  • 00:00:18
    others money can be printed or lent into
  • 00:00:21
    existence for corporate interests
  • 00:00:23
    Bankers or corrupt officials and this
  • 00:00:25
    purchasing power is taken away from the
  • 00:00:27
    public in ways that are purposely more
  • 00:00:29
    subtle and harder to detect than
  • 00:00:31
    Taxation and as people try to reach
  • 00:00:33
    outside of their regions for better
  • 00:00:35
    money elsewhere Capital controls and
  • 00:00:37
    other points of friction are often used
  • 00:00:39
    to keep them in even in wealthy
  • 00:00:42
    countries all is not well while
  • 00:00:45
    inflation may not be as high the money
  • 00:00:47
    concentrates toward a smaller and
  • 00:00:49
    smaller number of hands over time and
  • 00:00:52
    more and more debt is piled up on the
  • 00:00:53
    government Ledger political polarization
  • 00:00:56
    grows as nobody can agree on who is
  • 00:00:58
    causing it or why it's happening
  • 00:01:01
    improving technology should make things
  • 00:01:02
    cheaper over time but Central bank's
  • 00:01:05
    inflation mandates are to ensure that
  • 00:01:07
    prices continually increase instead by
  • 00:01:10
    continually expanding the amount of
  • 00:01:11
    money in the system money affects us all
  • 00:01:14
    it's how we make contracts how we
  • 00:01:16
    coordinate economic activity and how we
  • 00:01:19
    store our purchasing power for the
  • 00:01:20
    future and while the world has improved
  • 00:01:23
    in many ways money itself continues to
  • 00:01:26
    be broken for most people worldwide
  • 00:01:30
    I'm Len Alden and this is a problem I
  • 00:01:32
    have invested countless hours into
  • 00:01:34
    understanding I grew up in poverty which
  • 00:01:37
    from a young age gave me a strong
  • 00:01:39
    interest in Saving and investing in my
  • 00:01:41
    adult life my husband and I split our
  • 00:01:43
    time each year between the United States
  • 00:01:45
    and Egypt since our shared Roots
  • 00:01:47
    families and friends are in both places
  • 00:01:51
    so I see firsthand the troubles that
  • 00:01:53
    broken money can cause both subtly in a
  • 00:01:56
    developed country and more overtly in a
  • 00:01:58
    developing one
  • 00:02:00
    I currently analyze and invest in the
  • 00:02:02
    Global Financial system as a profession
  • 00:02:05
    but before that I was an engineer
  • 00:02:07
    building taking apart and understanding
  • 00:02:09
    complex systems I view money as another
  • 00:02:12
    system I must take apart to understand
  • 00:02:15
    this video aims to distill the knowledge
  • 00:02:17
    I've gathered on this topic for a deeper
  • 00:02:20
    dive refer to my book broken money why
  • 00:02:23
    are Financial system is failing Us and
  • 00:02:25
    how we can make it
  • 00:02:27
    better for us to understand our monetary
  • 00:02:29
    system from the top down we must start
  • 00:02:32
    at the bottom and work our way up let's
  • 00:02:34
    rip away the complexities and pose a
  • 00:02:36
    fundamental question what is
  • 00:02:39
    money trading Goods on the spot is a
  • 00:02:42
    challenge as there are more ways a trade
  • 00:02:44
    can fail than succeed if you have extra
  • 00:02:47
    Spears but lack Furs and I have extra
  • 00:02:50
    Furs but lack Spears that's a relatively
  • 00:02:54
    rare scenario where our needs align when
  • 00:02:57
    this barter system scales to an economy
  • 00:02:58
    that produces five different products it
  • 00:03:01
    results in 10 unique trading pairs with
  • 00:03:03
    20 different products there are 190
  • 00:03:06
    trading Pairs and with 100 different
  • 00:03:08
    products that number of trading pairs
  • 00:03:11
    grows to
  • 00:03:13
    4,950 clearly a more efficient trading
  • 00:03:16
    method is needed one way to address this
  • 00:03:18
    is by making the timing of a transaction
  • 00:03:20
    more flexible suppose you have extra
  • 00:03:22
    Spears and are short on Furs while I
  • 00:03:25
    have extra Spears and Furs but I don't
  • 00:03:27
    need anything from you if you ask me for
  • 00:03:29
    refers I could give you some in exchange
  • 00:03:31
    for an unspecified favor at a later date
  • 00:03:34
    this is called flexible social Credit in
  • 00:03:37
    settings with family and friends gifts
  • 00:03:39
    are exchanged as a form of social credit
  • 00:03:41
    with no specific expectation of
  • 00:03:43
    repayment and outside of close relations
  • 00:03:46
    people keep track of who is helpful and
  • 00:03:48
    who is a burden when a well-liked
  • 00:03:50
    Community member needs help others are
  • 00:03:52
    more generous with their offerings
  • 00:03:54
    because of the social history attached
  • 00:03:56
    to the person in need in larger settings
  • 00:03:59
    credit systems adhere to a more formal
  • 00:04:01
    type of credit in these systems a person
  • 00:04:04
    can borrow some value in the present but
  • 00:04:06
    they must promise to repay it later and
  • 00:04:09
    there's often some local Authority that
  • 00:04:11
    sets the rules regarding how credit is
  • 00:04:14
    handled suppose a baker needs meat from
  • 00:04:16
    a butcher but the butcher already has
  • 00:04:18
    bread the baker can create quote bread
  • 00:04:21
    credits where each credit is a promise
  • 00:04:24
    that could be exchanged for bread in the
  • 00:04:25
    future if the butcher trusts these bread
  • 00:04:28
    credits will hold that promise they make
  • 00:04:30
    a transaction still the butcher takes on
  • 00:04:33
    some risks in this case trusting that
  • 00:04:35
    the baker will remain in business
  • 00:04:38
    another solution is to use a commodity
  • 00:04:39
    as money rather than finding a person
  • 00:04:42
    who has what you specifically need and
  • 00:04:44
    where you also have what they
  • 00:04:46
    specifically need people can use a
  • 00:04:48
    portable divisible durable scarce and
  • 00:04:51
    widely desired Universal good as one
  • 00:04:53
    side of every transaction among hunter
  • 00:04:56
    gatherers shell jewelry beads served as
  • 00:04:58
    a common form of money they were small
  • 00:05:01
    long lasting wearable hard to make and
  • 00:05:03
    widely desirable people frequently found
  • 00:05:05
    use in acquiring more shell jewelry than
  • 00:05:08
    they currently possessed due to its size
  • 00:05:10
    wearability aesthetic appeal and the
  • 00:05:12
    value it holds over time so if you find
  • 00:05:15
    yourself short on Spears and I have no
  • 00:05:18
    immediate need for your goods I might
  • 00:05:20
    request shell jewelry in exchange even
  • 00:05:23
    if it's not an immediate necessity for
  • 00:05:25
    me I can wear the jewelry and later when
  • 00:05:27
    I come across something I desire I can
  • 00:05:30
    offer the jewelry for trade as commodity
  • 00:05:33
    money evolved gold and silver coins
  • 00:05:35
    gained popularity across numerous
  • 00:05:37
    Empires these slender discs adhere to
  • 00:05:40
    standardized shapes weights and finess
  • 00:05:43
    simplifying their ability to be verified
  • 00:05:45
    by anyone using them which in turn
  • 00:05:48
    enhance the efficiency of
  • 00:05:50
    transactions coins establish dominance
  • 00:05:52
    over all other forms of commodity money
  • 00:05:55
    for three primary reasons first gold and
  • 00:05:58
    silver are harder to INE increase the
  • 00:06:00
    supply of relative to other Commodities
  • 00:06:02
    due to their unique properties second
  • 00:06:05
    coinage with guaranteed size and Purity
  • 00:06:07
    makes gold and silver easier to use in
  • 00:06:09
    transactions than raw bits of metal
  • 00:06:12
    third the acceptance and liquidity of
  • 00:06:14
    coins issued domestically would
  • 00:06:16
    generally be higher than that of foreign
  • 00:06:18
    coins which would ensure widespread
  • 00:06:20
    acceptance of a standardized unit within
  • 00:06:22
    that region ultimately the answer to the
  • 00:06:25
    question of what is money is that money
  • 00:06:27
    is a ledger for payments and savings
  • 00:06:30
    ancient monetary systems usually
  • 00:06:32
    consisted of a blend of commodity money
  • 00:06:34
    and credit commodity money represents a
  • 00:06:36
    ledger whose attributes and constraints
  • 00:06:38
    are governed by the laws of nature and
  • 00:06:40
    was useful for determining a society
  • 00:06:42
    standard unit that transactions would be
  • 00:06:44
    denominated in holding commodity money
  • 00:06:47
    in one's own possession also served as a
  • 00:06:49
    way to store value independently without
  • 00:06:52
    relying on anyone else's ongoing memory
  • 00:06:54
    or liability meanwhile various credit
  • 00:06:57
    agreements represent a shared LED
  • 00:06:59
    governed by humans either orally or in
  • 00:07:02
    writing and were used to make
  • 00:07:03
    transactions more efficient either
  • 00:07:05
    between known entities or at the backing
  • 00:07:07
    of a shared Authority and this is what
  • 00:07:09
    led to the rise of
  • 00:07:12
    banking in medieval times a popular
  • 00:07:15
    paper-based Financial instrument in the
  • 00:07:16
    Middle East and North Africa was the
  • 00:07:18
    suaga playing a pivotal role in the
  • 00:07:21
    development of a system known as
  • 00:07:23
    haala under this Arrangement a hawaladar
  • 00:07:26
    money changer operated in one city while
  • 00:07:28
    their business part partner worked at
  • 00:07:30
    another to transfer money between cities
  • 00:07:32
    an individual could deposit gold with
  • 00:07:34
    their local hallar and either they or
  • 00:07:36
    their recipient could redeem the same
  • 00:07:38
    amount of gold from a hawaladar in
  • 00:07:40
    another city this system relied on a
  • 00:07:42
    network of trust and credit among
  • 00:07:44
    hawaladars enhancing the efficiency and
  • 00:07:46
    safety of long-distance money transfers
  • 00:07:49
    hawaladars with established
  • 00:07:50
    relationships conducted regular credit
  • 00:07:52
    based transactions on behalf of their
  • 00:07:54
    clients while settling with each other
  • 00:07:56
    less frequently but under more secure
  • 00:07:58
    conditions without this system Merchants
  • 00:08:01
    would have had to transport bulky and
  • 00:08:03
    unsafe quantities of gold between cities
  • 00:08:05
    more
  • 00:08:06
    frequently this idea of a paper-based
  • 00:08:09
    credit system eventually made its way
  • 00:08:10
    into Europe through trade and warfare
  • 00:08:12
    interactions between Christians and
  • 00:08:14
    Muslims with the Advent of the
  • 00:08:16
    Renaissance in Europe the development of
  • 00:08:18
    Double Entry bookkeeping facilitated
  • 00:08:19
    increasingly intricate credit
  • 00:08:21
    arrangements and the emergence of
  • 00:08:23
    well-known financial institutions the
  • 00:08:25
    invention of the printing press further
  • 00:08:27
    enabled the creation of more complex
  • 00:08:29
    fincial paper instruments based around
  • 00:08:31
    increasing levels of
  • 00:08:33
    negotiability in financial jargon
  • 00:08:35
    negotiability means that a financial
  • 00:08:37
    instrument can be transferred to another
  • 00:08:39
    party which makes it more broadly
  • 00:08:41
    applicable and liquid in the initial
  • 00:08:43
    stage a simplistic non-negotiable paper
  • 00:08:46
    instrument can only be Redeemed by the
  • 00:08:48
    specific party as specified in its
  • 00:08:50
    original Creation in the second stage a
  • 00:08:53
    paper instrument is issued to a specific
  • 00:08:56
    party and is intended for their
  • 00:08:57
    Redemption yet it possesses
  • 00:08:59
    negotiability allowing it to be signed
  • 00:09:01
    over to another party who can then
  • 00:09:03
    redeem it instead this involves a more
  • 00:09:06
    intricate and trusted Financial Network
  • 00:09:08
    connecting a larger number of
  • 00:09:10
    counterparties in the third stage a
  • 00:09:12
    paper instrument such as a bank note is
  • 00:09:15
    an asset that is owned by whoever
  • 00:09:17
    possesses it enabling it to be freely
  • 00:09:19
    exchanged between parties with no need
  • 00:09:21
    for ownership transfer Beyond physical
  • 00:09:24
    possession this third form relies on the
  • 00:09:26
    existence of large and widely recognized
  • 00:09:28
    Institution
  • 00:09:30
    otherwise Merchants would not accept
  • 00:09:31
    these Bank
  • 00:09:32
    notes the foundational issue with
  • 00:09:35
    banking lies in the necessity for
  • 00:09:37
    customers to Trust Banks to effectively
  • 00:09:39
    manage their reserves in the gold-based
  • 00:09:41
    banking systems of past centuries
  • 00:09:43
    customers expected that their deposits
  • 00:09:45
    and Bank notes could be redeemed on
  • 00:09:48
    demand however Bankers frequently
  • 00:09:50
    betrayed that trust as they recognized
  • 00:09:52
    that most individuals did not redeem all
  • 00:09:55
    their gold at once which allowed Bankers
  • 00:09:57
    to lend out some of their gold while
  • 00:09:59
    maintaining only a fraction for customer
  • 00:10:02
    redemptions one way around this problem
  • 00:10:05
    is with full Reserve banking in this
  • 00:10:07
    approach all demand deposits which can
  • 00:10:09
    be Redeemed by depositors at any time
  • 00:10:11
    must be fully backed by liquid reserves
  • 00:10:14
    and any loans that a bank makes must
  • 00:10:16
    instead be funded by time deposits with
  • 00:10:18
    an equal or longer duration so if a bank
  • 00:10:22
    offers a 2-year loan it should be
  • 00:10:24
    supported by certificates of deposit
  • 00:10:26
    with at least 2 years of duration this
  • 00:10:28
    practice of M matching durations leads
  • 00:10:30
    to a more stable system because it
  • 00:10:32
    avoids making commitments about
  • 00:10:34
    liquidity that cannot always be
  • 00:10:36
    fulfilled much of History has decided
  • 00:10:38
    against full Reserve banking in favor of
  • 00:10:40
    fractur Reserve banking where demand
  • 00:10:42
    deposits can be redeemed at any time
  • 00:10:44
    even though only a fraction of them are
  • 00:10:46
    kept in reserves for immediate
  • 00:10:48
    Redemption this approach hinges on the
  • 00:10:50
    assumption that not many people will
  • 00:10:52
    redeem or withdraw their money at the
  • 00:10:54
    same time however during crisis they
  • 00:10:57
    often do when money is borrowed from a
  • 00:11:00
    bank it leads to the creation of
  • 00:11:02
    additional fractionally reserved
  • 00:11:04
    deposits these deposits can then be
  • 00:11:06
    placed in another bank where they're
  • 00:11:08
    once again subject to fractural reserve
  • 00:11:10
    practices and can be lent out
  • 00:11:12
    immediately repeating the process this
  • 00:11:15
    cycle results in the double counting
  • 00:11:17
    triple counting quadruple counting and
  • 00:11:19
    so on for base money causing the system
  • 00:11:21
    to be burdened with many times more gold
  • 00:11:24
    claims than there is actual gold while
  • 00:11:27
    this system functions well most of the
  • 00:11:28
    time it occasionally experiences
  • 00:11:31
    catastrophic
  • 00:11:32
    failures central banks were established
  • 00:11:34
    to mitigate the impact of fractional
  • 00:11:36
    Reserve banking crises and to provide
  • 00:11:38
    financial support to governments during
  • 00:11:40
    times of conflict in the absence of a
  • 00:11:43
    central bank a system is typically
  • 00:11:44
    referred to as free banking under a free
  • 00:11:47
    banking Arrangement Banks Safeguard
  • 00:11:50
    their own gold issue deposits and
  • 00:11:52
    distribute Bank notes redeemable for
  • 00:11:54
    gold although they still normally have
  • 00:11:56
    to follow regulations placed on them by
  • 00:11:58
    the government in contrast when a
  • 00:12:00
    central bank is established and granted
  • 00:12:03
    Monopoly status by the government all
  • 00:12:05
    banks are required to deposit their
  • 00:12:07
    reserves with the central bank which
  • 00:12:09
    holds the gold on their behalf this
  • 00:12:11
    setup involves fractional Reserve
  • 00:12:13
    practices even within the central bank
  • 00:12:15
    that manages the reserves when a
  • 00:12:17
    fractional Reserve Bank faces a run on
  • 00:12:19
    its reserves it can borrow from other
  • 00:12:22
    Banks using its loan assets as
  • 00:12:24
    collateral but during Financial crises
  • 00:12:26
    Mutual distrust among Banks can lead to
  • 00:12:29
    system failures due to excessive claims
  • 00:12:31
    on money compared to available reserves
  • 00:12:34
    to counter this central banks often
  • 00:12:36
    resort to printing more currency causing
  • 00:12:39
    currency devaluation breaking gold picks
  • 00:12:41
    and inflation eventually many central
  • 00:12:44
    banks and governments abandoned gold
  • 00:12:46
    back currency alog together to create a
  • 00:12:49
    new type of Global Financial
  • 00:12:51
    system the rails that move money and
  • 00:12:54
    credit are highly intricate and their
  • 00:12:56
    structure evolves over time due to
  • 00:12:58
    technological Advan ments and shifts in
  • 00:13:00
    geopolitical Dynamics at its core the
  • 00:13:03
    Global Financial system facilitates
  • 00:13:05
    international trade settlement and
  • 00:13:07
    external financing between different
  • 00:13:09
    countries in a system where each country
  • 00:13:11
    maintained its own separate Central Bank
  • 00:13:13
    currency Ledger often with mutual
  • 00:13:15
    distrust regarding the soundness of each
  • 00:13:17
    other's currency a global Reserve asset
  • 00:13:20
    becomes essential to unify various
  • 00:13:22
    currencies for international trade since
  • 00:13:25
    1871 this system has undergone three
  • 00:13:28
    structural transformations
  • 00:13:30
    after the First Transformation the
  • 00:13:32
    modern Financial era began with the
  • 00:13:34
    international gold standard which
  • 00:13:36
    spanned from 1871 until the early 20th
  • 00:13:38
    century by the 1860s the telegraph
  • 00:13:41
    revolutionized communication with the
  • 00:13:44
    completion of the first cross-atlantic
  • 00:13:45
    cable enabling instant communication
  • 00:13:48
    across continents a feat previously
  • 00:13:51
    unimaginable the end of the Franco
  • 00:13:53
    Prussian war in 1871 marked the onset of
  • 00:13:56
    a period of European peace and the wise
  • 00:13:59
    adoption of the international gold
  • 00:14:01
    standard at the same time the United
  • 00:14:04
    States centralized its banking system
  • 00:14:06
    during the Civil War and joined Europe
  • 00:14:08
    in adopting the gold standard while the
  • 00:14:11
    telegraph created new possibilities it
  • 00:14:13
    also introduced a challenge transactions
  • 00:14:16
    could now occur at the speed of light
  • 00:14:17
    across countries and continents but
  • 00:14:19
    physical settlements of money were
  • 00:14:21
    constrained by the limitations of
  • 00:14:23
    physical matter this mismatch created
  • 00:14:26
    Arbitrage opportunities which banks and
  • 00:14:28
    central banks capitalized on they held a
  • 00:14:31
    monopoly over fast longdistance value
  • 00:14:33
    transfers utilizing paper and
  • 00:14:35
    telegraphic communication to update each
  • 00:14:37
    other's ledgers with minimal need to
  • 00:14:39
    ever physically send and verify actual
  • 00:14:41
    gold in 1875 William Stanley Jans
  • 00:14:45
    published a book titled money and the
  • 00:14:47
    mechanism of
  • 00:14:49
    exchange similar to my 2023 book broken
  • 00:14:52
    money jevans explored the history of
  • 00:14:54
    money and the technological advancements
  • 00:14:56
    surrounding it he highlighted that
  • 00:14:58
    thanks to to the Telegraph and other
  • 00:15:00
    rapid communication methods transactions
  • 00:15:03
    could frequently occur with minimal
  • 00:15:04
    Reliance on physical metal the Global
  • 00:15:07
    Financial system was gravitating towards
  • 00:15:10
    centralization particularly around
  • 00:15:11
    London where Bankers could efficiently
  • 00:15:14
    transact through a centralized Clearing
  • 00:15:16
    House jbans also recognized the
  • 00:15:18
    substantial risks accompanying this
  • 00:15:20
    growing efficiency he emphasizes that
  • 00:15:23
    there are approximately 20 times more
  • 00:15:25
    claims for gold than actual gold
  • 00:15:27
    reserves he caution that Bankers should
  • 00:15:30
    never forget that these fractionally
  • 00:15:32
    reserved claims essentially represented
  • 00:15:34
    promises for gold even though they were
  • 00:15:37
    rarely redeemed as such even if just 5%
  • 00:15:40
    of people simultaneously demanded their
  • 00:15:43
    gold the system would crumble fast
  • 00:15:46
    forward four decades and this scenario
  • 00:15:48
    unfolded during World War I the era of
  • 00:15:51
    European peace came to an end leading to
  • 00:15:53
    money printing for wartime purposes and
  • 00:15:55
    widespread defaults on gold Redemption
  • 00:15:57
    within a heavily leverag Financial
  • 00:15:59
    system taxing for Wars is unpopular and
  • 00:16:02
    can lead to revolts and revolutions by
  • 00:16:04
    the people so governments often turn to
  • 00:16:07
    currency dilution and other less
  • 00:16:09
    transparent methods to pay for them in
  • 00:16:12
    earlier centuries when governments aimed
  • 00:16:14
    to De base their currency for war
  • 00:16:16
    financing the process unfolded slowly
  • 00:16:19
    there is no Swift method to diminish the
  • 00:16:21
    value of coins held by people instead it
  • 00:16:25
    requireed taxation melting renting and
  • 00:16:28
    re introducing lower quality coins into
  • 00:16:31
    the
  • 00:16:32
    economy however in a scenario where
  • 00:16:34
    individuals predominantly hold deposits
  • 00:16:36
    and paper claims backed by gold stored
  • 00:16:39
    in Central Bank faults the ability to
  • 00:16:41
    sever gold Redemption becomes a matter
  • 00:16:43
    of a stroke of a pen allowing for the
  • 00:16:45
    rapid printing of vast amounts of money
  • 00:16:48
    governments were no longer restricted by
  • 00:16:49
    the quantity of gold in their reserves
  • 00:16:51
    they could continue fighting until they
  • 00:16:53
    depleted the liquid Savings of their
  • 00:16:55
    entire
  • 00:16:57
    citizenry the second period of the
  • 00:16:59
    modern Financial era unfolded after
  • 00:17:01
    World War II and extended until
  • 00:17:04
    1971 during the War years gold pegs
  • 00:17:07
    collapsed worldwide with some Nations
  • 00:17:09
    even outlawing gold ownership for their
  • 00:17:12
    citizens following the war most
  • 00:17:14
    countries except the United States faced
  • 00:17:17
    severe Devastation so the United States
  • 00:17:20
    representing over 40% of the global
  • 00:17:23
    economy assumed a central role in a new
  • 00:17:26
    International Financial system in 1944
  • 00:17:30
    as the Allied Forces neared Victory
  • 00:17:32
    representatives from 44 countries
  • 00:17:34
    convened in Bretton Woods New Hampshire
  • 00:17:37
    to design the future Global Financial
  • 00:17:39
    system Britain advocated for a system
  • 00:17:41
    centered around a neutral Reserve asset
  • 00:17:43
    called a banker while the United States
  • 00:17:46
    pushed for pegging all currencies to the
  • 00:17:48
    dollar with the dollar itself tied to
  • 00:17:51
    Gold the US proposal prevailed leading
  • 00:17:54
    to the establishment of what we now
  • 00:17:56
    recognize as the Breton wood system
  • 00:17:59
    under this system it remained illegal
  • 00:18:02
    for Americans to own gold and they
  • 00:18:04
    couldn't redeem dollars for gold but
  • 00:18:06
    foreign central banks had that privilege
  • 00:18:09
    the creation of the World Bank and
  • 00:18:11
    international monetary fund followed the
  • 00:18:13
    Breton Woods conference serving as key
  • 00:18:15
    components for enticing enforcing and
  • 00:18:18
    regulating the system once again the
  • 00:18:21
    Achilles heel was fractional Reserve
  • 00:18:23
    banking between 1950 and 1970 the number
  • 00:18:26
    of dollars in circulation tripled due to
  • 00:18:29
    bank lending and government deficits
  • 00:18:31
    even as us gold reserves diminished
  • 00:18:34
    through foreign redemptions offshore
  • 00:18:36
    dollars further multiplied essentially
  • 00:18:39
    forming one fractional Reserve System on
  • 00:18:41
    top of another by the late 1960s it
  • 00:18:44
    became evident that the system was
  • 00:18:46
    destined to fail prompting President
  • 00:18:48
    Nixon to terminate gold redeemability in
  • 00:18:53
    1971 the third and current ERA of the
  • 00:18:56
    modern Financial system commenced in the
  • 00:18:57
    1970s following the collapse of the
  • 00:19:00
    bretonwood system after 1971 the world
  • 00:19:03
    found itself in an entirely unbacked
  • 00:19:06
    monetary system marking a significant
  • 00:19:08
    departure from previous eras while
  • 00:19:11
    governments could compel their citizens
  • 00:19:12
    to use currency for domestic
  • 00:19:14
    transactions the challenge lay in
  • 00:19:16
    trusting other government's unback
  • 00:19:18
    ledgers for global trade during this
  • 00:19:21
    period the United States still held the
  • 00:19:24
    world's largest economy military power
  • 00:19:26
    and Global dollar Network effects from
  • 00:19:28
    the Breton Woods era in 1974 the Nixon
  • 00:19:32
    Administration struck a deal with the
  • 00:19:34
    Kingdom of Saudi Arabia requiring that
  • 00:19:36
    Saudi Arabia would exclusively sell its
  • 00:19:38
    oil in dollars accumulate dollar
  • 00:19:40
    surpluses and invest those surpluses in
  • 00:19:43
    US government bonds as reserves in
  • 00:19:46
    return the US would offer lucrative arms
  • 00:19:49
    deals and Military protection this
  • 00:19:51
    practice extended to other OPEC
  • 00:19:53
    countries giving rise to the Petra
  • 00:19:55
    dollar system and for a substantial
  • 00:19:58
    period almost all Global energy trade
  • 00:20:00
    was denominated in dollars throughout
  • 00:20:03
    these three eras the gold standard where
  • 00:20:06
    Nation supported their currencies with
  • 00:20:07
    gold reserves the BR and wood system
  • 00:20:10
    characterized by the United States
  • 00:20:11
    substantial gold Holdings and other
  • 00:20:13
    countries pecking their currencies to
  • 00:20:14
    the dollar and the Petra dollar system
  • 00:20:17
    where the US dollar and US government
  • 00:20:19
    bonds serve as the pillars of global
  • 00:20:21
    trade one can see a gradual shift toward
  • 00:20:24
    two defining features centralization and
  • 00:20:27
    abstraction
  • 00:20:29
    [Music]
  • 00:20:31
    since the invention and deployment of
  • 00:20:33
    the telegraph in the latter half of the
  • 00:20:35
    19th century the Global Financial system
  • 00:20:37
    has witnessed a consolidation of power
  • 00:20:39
    and a separation from reality the
  • 00:20:42
    ability for transactions to occur
  • 00:20:44
    globally at the speed of light while
  • 00:20:46
    physical monetary settlements can only
  • 00:20:48
    happen at the pace of material transfer
  • 00:20:50
    requires a level of credit abstraction
  • 00:20:52
    to
  • 00:20:53
    work this shift granted Banks and
  • 00:20:56
    central banks significant power as they
  • 00:20:58
    effectively monopolize fast longdistance
  • 00:21:00
    value transfers eventually they could
  • 00:21:03
    just drop material transfer from the
  • 00:21:05
    system altogether and to find money
  • 00:21:07
    entirely around Central Bank ledgers
  • 00:21:10
    central banks took on the role of
  • 00:21:12
    managing the ledgers for their
  • 00:21:13
    respective countries and notably the
  • 00:21:15
    bank of England in the past and the US
  • 00:21:18
    Federal Reserve in the present have also
  • 00:21:20
    served as the global ledgers that bound
  • 00:21:22
    International Trade together as a result
  • 00:21:25
    there are approximately 160 different
  • 00:21:27
    currencies world wide each holding a
  • 00:21:30
    local Monopoly within its own
  • 00:21:31
    jurisdiction with limited or no
  • 00:21:34
    acceptance Beyond its borders currencies
  • 00:21:36
    of wealthy Nations tend to lose value
  • 00:21:38
    slowly While most currencies lose value
  • 00:21:41
    quickly the anchor of This Global
  • 00:21:43
    Financial architecture between all these
  • 00:21:45
    currencies is the US dollar countries
  • 00:21:48
    maintain dollar denominated assets in
  • 00:21:50
    reserves denominate significant portions
  • 00:21:52
    of international trade contracts in
  • 00:21:54
    dollars and access dollar denominated
  • 00:21:57
    financing from forign creditors this
  • 00:22:00
    greatly benefits the United States
  • 00:22:01
    geopolitically even though it doesn't
  • 00:22:03
    necessarily benefit all Americans for
  • 00:22:06
    instance the United States can devalue
  • 00:22:08
    the dollar through softer monetary
  • 00:22:10
    policies thereby diminishing the
  • 00:22:12
    purching power of currency reserves held
  • 00:22:14
    by creditor Nations or the United States
  • 00:22:17
    can strengthen the dollar through
  • 00:22:19
    tighter monetary policies increasing the
  • 00:22:21
    value of liabilities owed by dettor
  • 00:22:24
    Nations and sending them into financial
  • 00:22:27
    crisis the failure failure rate for
  • 00:22:29
    currencies around the world is very high
  • 00:22:31
    in the 1990s Brazil at the time the
  • 00:22:34
    fifth most populous country in the world
  • 00:22:36
    experienced severe hyperinflation since
  • 00:22:39
    the 1980s or later hyperinflation has
  • 00:22:42
    impacted other nations such as Argentina
  • 00:22:44
    Yugoslavia Zimbabwe Venezuela Poland
  • 00:22:48
    Kazakhstan Peru Bulgaria Ukraine Lebanon
  • 00:22:52
    and several others additionally
  • 00:22:55
    countries like Israel Mexico Vietnam
  • 00:22:58
    Ecuador Costa Rica and turkey grappled
  • 00:23:01
    with triple digit inflation during this
  • 00:23:03
    period which is on the brink of
  • 00:23:05
    hyperinflation many other countries
  • 00:23:07
    experienced recurring periods of double-
  • 00:23:08
    Digit inflation Nigeria with a
  • 00:23:11
    population of over 200 million people
  • 00:23:13
    has witnessed an annualized price
  • 00:23:15
    inflation rate of 133% over the past
  • 00:23:18
    decade turkey and Argentina both
  • 00:23:20
    esteemed members of the G20 nations with
  • 00:23:23
    a combined population exceeding 130
  • 00:23:25
    million people have struggled with
  • 00:23:27
    runaway inflation for years in 2016
  • 00:23:30
    Egypt home to over 100 million people
  • 00:23:33
    drastically devalued its currency by
  • 00:23:35
    half relative to the dollar and repeated
  • 00:23:37
    this devaluation again in
  • 00:23:40
    2022 both actions taken at the bidding
  • 00:23:42
    of the international monetary fund when
  • 00:23:45
    such devaluations occur not only do
  • 00:23:48
    people see their savings lose value but
  • 00:23:50
    their ongoing wages denominated in local
  • 00:23:53
    currency units also suffer over the past
  • 00:23:56
    50 years very few develop ing countries
  • 00:23:59
    have attained developed status the
  • 00:24:01
    absence of currency stability forces
  • 00:24:03
    them to rely on external currency
  • 00:24:05
    financing which ironically contribut
  • 00:24:07
    significantly to their currency
  • 00:24:09
    instability creating a destructive and
  • 00:24:11
    nearly inescapable
  • 00:24:12
    cycle even in wealthy countries money
  • 00:24:15
    often doesn't make sense from 2016 to
  • 00:24:18
    2021 Europe and Japan grappled with
  • 00:24:20
    negative yielding bonds valued at over
  • 00:24:22
    18 trillion instead of earning interest
  • 00:24:26
    for Lending to governments and major
  • 00:24:27
    corporations
  • 00:24:29
    individuals had to pay for this
  • 00:24:30
    privilege this upheaval in the financial
  • 00:24:33
    system inverted incentives and a global
  • 00:24:36
    inflation surge in the ensuing years
  • 00:24:38
    greatly eroded the purching power for
  • 00:24:40
    those Bond holders between 2020 and 2022
  • 00:24:44
    the United States increased its public
  • 00:24:46
    debt by over $8 trillion a significant
  • 00:24:49
    portion of which was effectively printed
  • 00:24:51
    by the country's Central Bank this
  • 00:24:53
    equates to more than
  • 00:24:54
    $60,000 per American household however
  • 00:24:57
    the average American family has not
  • 00:24:59
    received anywhere near this amount of
  • 00:25:01
    stimulus with more than 160 currency
  • 00:25:04
    jurisdictions worldwide these
  • 00:25:06
    governments including the United States
  • 00:25:08
    possess substantial authority to erode
  • 00:25:10
    the value of people's savings and wages
  • 00:25:13
    often channeling this value opaquely to
  • 00:25:15
    various parties situated closer to the
  • 00:25:17
    source of money
  • 00:25:19
    creation as money is continually diluted
  • 00:25:22
    with ever growing Supply sometimes value
  • 00:25:24
    is funnel to corrupt government
  • 00:25:26
    officials other times it is is funnel
  • 00:25:28
    toward Finance years with privileged
  • 00:25:30
    access to credit and bailouts the
  • 00:25:33
    details vary by country and although
  • 00:25:35
    there is plenty of blame to go around
  • 00:25:37
    the important point is that the
  • 00:25:38
    incentives themselves are corrupt the
  • 00:25:41
    heart of the problem does not lie with
  • 00:25:43
    specific individuals taking advantage of
  • 00:25:44
    the system or even those maintaining the
  • 00:25:46
    system the problem is that the system
  • 00:25:49
    itself is simply broken and outdated
  • 00:25:51
    perhaps what is needed is an entirely
  • 00:25:53
    new system one that cannot be changed at
  • 00:25:55
    the flip of a switch one that is
  • 00:25:57
    decentralized ized one that is
  • 00:25:59
    permissionless one that is open
  • 00:26:02
    source since the development of the
  • 00:26:05
    internet cryptographers have sought
  • 00:26:07
    methods for creating decentralized
  • 00:26:08
    digital currency in 1982 David cha
  • 00:26:12
    published a research paper on how
  • 00:26:14
    mutually distrustful groups could use
  • 00:26:16
    cryptography to maintain a shared
  • 00:26:18
    database or Ledger during the 1990s and
  • 00:26:21
    early 2000s figures like Adam back Nick
  • 00:26:24
    Zabo and Hal fny explored ways to create
  • 00:26:27
    digital tokens supported by electricity
  • 00:26:30
    and processing power a concept known as
  • 00:26:32
    proof of work in 2008 an anonymous
  • 00:26:36
    programmer using the name Satoshi
  • 00:26:38
    Nakamoto published the Bitcoin white
  • 00:26:40
    paper which expanded on these earlier
  • 00:26:42
    ideas it outlined a method for creating
  • 00:26:45
    a decentralized digital currency using a
  • 00:26:47
    distributed network of nodes and
  • 00:26:49
    transaction timestamping through
  • 00:26:50
    cryptography and proof of work in 2009
  • 00:26:54
    Nakamoto released the open source
  • 00:26:56
    application to implement his design and
  • 00:26:58
    thus the Bitcoin time chain was
  • 00:27:01
    born what makes Bitcoin remarkable is
  • 00:27:04
    its ability to enable beer asset final
  • 00:27:06
    settlements at the speed of light it
  • 00:27:09
    effectively closes the speed gap between
  • 00:27:11
    transactions and settlements that has
  • 00:27:13
    persisted since the late 19th century in
  • 00:27:16
    other words it's the first workable way
  • 00:27:18
    to quickly send money long distances
  • 00:27:20
    without relying on centralized
  • 00:27:22
    intermediaries and credit and it comes
  • 00:27:24
    with its own finite unit of account that
  • 00:27:26
    cannot be diluted for the past 15 years
  • 00:27:30
    Bitcoin has been refined in various ways
  • 00:27:32
    tested to see how robust it issue
  • 00:27:34
    attacks and copied by competitors to see
  • 00:27:36
    if there's any way to do it better so
  • 00:27:39
    far it has continuously remained the
  • 00:27:41
    largest most liquid most decentralized
  • 00:27:43
    and most secure
  • 00:27:45
    cryptocurrency although it has been
  • 00:27:47
    volatile Bitcoin has reached higher
  • 00:27:49
    highs and higher lows of market value
  • 00:27:51
    and adoption cycle after
  • 00:27:54
    cycle Bitcoin works because anyone can
  • 00:27:57
    run an open node on a simple device such
  • 00:28:00
    as a laptop and these nodes all store
  • 00:28:02
    the full history of The Ledger users
  • 00:28:04
    possess private Keys enabling them to
  • 00:28:07
    sign transactions and pay fees to move
  • 00:28:09
    coins or fractional coins between
  • 00:28:11
    addresses miners contribute electricity
  • 00:28:14
    and processing power to add new
  • 00:28:16
    transaction blocks to The Ledger in
  • 00:28:18
    exchange for receiving transaction fees
  • 00:28:20
    and new coins that are generated in each
  • 00:28:22
    new block during the early years of the
  • 00:28:25
    network no individual entity including
  • 00:28:27
    the network Net's Creator can change the
  • 00:28:29
    rules dilute people's coins or censor
  • 00:28:32
    transactions the network can however be
  • 00:28:35
    updated over time in a backwards
  • 00:28:37
    compatible Way by a revolving set of
  • 00:28:39
    contributing open source developers
  • 00:28:41
    Whenever there is enough consensus by
  • 00:28:43
    the node operators and the miners to do
  • 00:28:45
    so while additional layers can enhance
  • 00:28:48
    Bitcoin speed transaction throughput or
  • 00:28:50
    programmability the base layer remains
  • 00:28:52
    simple and robust with an eventual fixed
  • 00:28:55
    supply of 21 million Bitcoins generated
  • 00:28:58
    by miners over time in a pre-programmed
  • 00:29:00
    deflationary pattern since Inception
  • 00:29:03
    value can be sent to anyone with an
  • 00:29:05
    internet connection or brought with
  • 00:29:06
    anyone globally Bitcoin is decentralized
  • 00:29:09
    digital money offering a viable
  • 00:29:11
    alternative to inflationary centralized
  • 00:29:13
    banking ledgers this technology is
  • 00:29:16
    helping to pierce the 160 different fiat
  • 00:29:18
    currency bubbles that people are trapped
  • 00:29:20
    in cash and gold can be blocked in
  • 00:29:22
    airports and Bank transfers are tightly
  • 00:29:24
    controlled but people can send Bitcoins
  • 00:29:27
    directly to other across Borders or
  • 00:29:29
    bring their Bitcoins with them as they
  • 00:29:31
    move around the world just by writing
  • 00:29:33
    down or memorizing 12 words representing
  • 00:29:35
    their private key people can protect
  • 00:29:38
    themselves against monetary dilution and
  • 00:29:40
    financial
  • 00:29:41
    censorship in a world where half of the
  • 00:29:43
    population lives under varying shades of
  • 00:29:45
    authoritarianism and billions of people
  • 00:29:47
    live with persistently High inflation
  • 00:29:49
    the ability to fracture these 160
  • 00:29:51
    currency silos and connect them together
  • 00:29:54
    should not be
  • 00:29:56
    underestimated however this te
  • 00:29:58
    technology has also catalyzed the
  • 00:29:59
    development of more centralized digital
  • 00:30:01
    currencies private stable coins for
  • 00:30:04
    instance enable collateralized dollar
  • 00:30:06
    tokens to trade on multiple blockchains
  • 00:30:08
    providing people in numerous highly
  • 00:30:09
    inflationary countries easier access to
  • 00:30:12
    US dollars for savings additionally
  • 00:30:15
    governments have explored and sometimes
  • 00:30:17
    launched Central Bank digital currencies
  • 00:30:19
    which are digitally native even more
  • 00:30:21
    centralized versions of Fiat currencies
  • 00:30:25
    this era marks a fork in the road
  • 00:30:27
    offering two distinct paths going
  • 00:30:28
    forward over the past Century and a half
  • 00:30:31
    within the telecommunication age the
  • 00:30:33
    Global Financial system has gravitated
  • 00:30:35
    toward increased centralization
  • 00:30:37
    abstraction and inflation driven by the
  • 00:30:39
    Gap and speed between transactions and
  • 00:30:41
    settlements and relying on ever
  • 00:30:43
    expanding credit to bridge this Gap most
  • 00:30:46
    Technologies in the past that made money
  • 00:30:48
    more efficient have come at the cost of
  • 00:30:50
    making it more centralized and
  • 00:30:52
    controlled on One path going forward
  • 00:30:55
    Central Bank digital currencies can
  • 00:30:56
    continue the prior trend of ever more
  • 00:30:58
    centralized systems that enable precise
  • 00:31:01
    control and authority and dilution by
  • 00:31:03
    nation states over their citizens on the
  • 00:31:06
    other path the emergence of Bitcoin and
  • 00:31:08
    other open- source cryptographic
  • 00:31:09
    Technologies facilitating rapid digital
  • 00:31:11
    settlements without the need for credit
  • 00:31:13
    in a peer-to-peer manner charts a course
  • 00:31:16
    that diverges from this trend leading
  • 00:31:18
    toward a more decentralized streamlined
  • 00:31:20
    and deflationary monetary system money
  • 00:31:23
    is a shared Ledger prompting the central
  • 00:31:26
    question of who governs this Ledger
  • 00:31:28
    early Credit Systems were governed by
  • 00:31:30
    local communities commodity money abided
  • 00:31:32
    by natural laws Fiat currencies came
  • 00:31:35
    under the jurisdiction of Banks and
  • 00:31:37
    nation states and open- Source
  • 00:31:39
    decentralized money like Bitcoin is
  • 00:31:41
    governed by its users and selected by
  • 00:31:43
    market forces in modern times our money
  • 00:31:46
    has been broken because it has been
  • 00:31:48
    centralized closed and corrupted in 160
  • 00:31:51
    different ways if we're going to fix it
  • 00:31:53
    in the digital age a powerful method
  • 00:31:56
    would be to make it more decentralized
  • 00:31:57
    open and transparent so that it can
  • 00:32:00
    strengthen people as individuals while
  • 00:32:02
    at the same time shattering the
  • 00:32:03
    financial silos that separate us with
  • 00:32:06
    open- Source money anyone can hold it
  • 00:32:08
    anyone can send it anyone can bring it
  • 00:32:11
    with them anyone can build new
  • 00:32:13
    technologies that make it better and
  • 00:32:15
    everyone across borders can be connected
  • 00:32:17
    by it if you enjoyed this video share it
  • 00:32:20
    with a friend if you want to learn more
  • 00:32:21
    about these topics check out my book
  • 00:32:23
    broken money why our financial system is
  • 00:32:26
    failing Us and how we can make it better
Etiquetas
  • Finance
  • Banking
  • Inflation
  • Bitcoin
  • Decentralization
  • Money Supply
  • Currency
  • Fractional Reserve
  • Economic System
  • Central Banks