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97% Owned: The Money System | Finance Documentary Film (Netflix)

Independent POV・96 minutes read

Money creation and its origins are shrouded in secrecy, impacting national and international levels significantly, necessitating preparation for economic crises beyond government intervention efforts. Goldman Sachs is highlighted for its global dominance, with a majority of money in circulation created by private banks through loans rather than the government.

Insights

  • The majority of money in circulation is digital, created by private banks through loans, not by the government.
  • Seigniorage, the profit from issuing currency, is a significant revenue source for the government.
  • The collapse of the Bretton Woods system in 1971 led to the modern era of fiat money.

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Recent questions

  • What is the significance of the establishment of the Bank of England in the 1700s?

    The establishment of the Bank of England in the 1700s marked the beginning of cyclical economic issues. The bank played a crucial role in shaping the monetary system and influencing economic trends. It centralized the power to issue bank notes, shifting the control from private banks to a centralized institution. This move had far-reaching implications on the economy, setting the stage for the complexities of money creation and circulation that we see today.

  • How does the majority of money in circulation come into existence?

    The majority of money in circulation is digital, created by private banks through loans, not by the government. Commercial bank money constitutes a significant portion of the total money supply, with only a small percentage existing in physical cash. When individuals or businesses take out loans from banks, new money is effectively created through this process. This highlights the role of private banks in generating the bulk of the money supply, showcasing the intricate dynamics of money creation in the modern financial system.

  • What led to the surge in banking sector assets from 1980 to 2006?

    The banking sector assets surged from $2.5 trillion in 1980 to $40 trillion by 2006, indicating a significant growth in the industry. This expansion can be attributed to various factors such as increased lending activities, financial innovations, and globalization. Banks capitalized on opportunities for growth, expanding their operations and investments on a global scale. The rise in banking sector assets reflects the evolving landscape of the financial industry and its impact on the broader economy.

  • How did the collapse of the Bretton Woods system in 1971 affect the monetary landscape?

    The collapse of the Bretton Woods system in 1971 marked a pivotal moment in the history of monetary systems. This event led to the transition to the modern era of fiat money, where currencies were no longer pegged to gold or the dollar. The shift towards fiat money allowed for more flexibility in monetary policies and exchange rates, shaping the global financial landscape. The aftermath of the Bretton Woods collapse had profound implications on international trade, currency valuations, and economic stability.

  • Why is monetary reform crucial in preventing financial crises?

    Monetary reform is essential in preventing financial crises caused by the unchecked power of private banks in money creation. The current system allows banks to extract wealth without contributing productively, leading to excessive debt and financial instability. By democratizing the money supply and establishing transparent and accountable mechanisms for money creation, the risks of financial crises can be mitigated. Reforming the monetary system is crucial to ensure that banks operate in the public interest, promoting economic stability and equitable wealth distribution.

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Summary

00:00

"The Secret World of Money Creation"

  • Money creation and its origins are shrouded in secrecy, impacting national and international levels significantly.
  • The current economic crisis is likened to cancer, necessitating preparation and not relying solely on government intervention.
  • Goldman Sachs is highlighted as a dominant force in global governance.
  • The establishment of the Bank of England in the 1700s marked the beginning of cyclical economic issues.
  • The documentary aims to uncover the complexities of the monetary system and its effects.
  • In 2010, the UK money supply totaled 2.15 trillion pounds, with only 2.6% in physical cash.
  • Commercial bank money constitutes 97.4% of the total money supply, created through the Central Bank.
  • Seigniorage, the profit from issuing currency, is a significant revenue source for the government.
  • Bank notes were initially created by private banks until a law in 1844 centralized the power to the Bank of England.
  • The majority of money in circulation is digital, created by private banks through loans, not by the government.

17:10

Bank-Created Money Surpasses Treasury Money Supply

  • For every pound of Treasury-created money, 37 pounds of bank-created money exist.
  • UK commercial bank money supply grew by 7-10% annually before the 2007 crisis.
  • A 7% growth rate doubles the money supply every decade.
  • Banks generated 1.2 trillion in the last decade.
  • Banking sector assets surged from $2.5 trillion in 1980 to $40 trillion.
  • Global bank assets rose from 20 times the global economy in 1980 to 75 times in 2006.
  • UK bank assets as a percentage of GDP spiked dramatically post-1960s.
  • Speculation, not production, is the most lucrative economic activity today.
  • Banks can create unlimited money through lending.
  • Banks incentivized to create more money through loans, leading to excessive debt.

32:54

"Banking Crisis and Monetary Policy Evolution"

  • A one pound coin could make a billion pounds of payments if circulated a billion times.
  • Before the crisis in September 2007, there was only 20 billion in the central bank accounts.
  • Northern Rock faced a run by customers in 2007, the first on a British bank in 140 years.
  • The Bank of England had to step in as the lender of last resort for Northern Rock.
  • Banks' reserve requirements have changed since 1947, with the introduction of the Corridor System in 2006.
  • Quantitative easing was introduced in March 2009, providing settlement banks with central reserve currency for free.
  • The Bretton Woods agreements in 1944 pegged all currencies to the dollar and gold.
  • The collapse of the Bretton Woods system in 1971 led to the modern era of fiat money.
  • The World Economic Forum called for a $100 trillion credit expansion to boost investments.
  • Rapid credit expansion can lead to inflation, with the housing market being heavily impacted.

49:45

Financial History: Tulip Mania to Debt Dependency

  • Tulip mania in the Netherlands in the 1630s led to bulbs being traded at ten times the average annual salary.
  • Houses are both a necessity and luxury, ideal for money and bubble creation.
  • Inflating house prices allows a nation to expand its money supply without affecting inflation data.
  • The US deliberately slashed interest rates to fuel expansion through easy borrowing against houses.
  • Financial innovation in the Netherlands, like public lotteries, led to independence and financial strength.
  • Efficient financial systems allowed the Netherlands to compete against larger countries.
  • Inflation can be avoided by regulating money issuance for productive investments.
  • Central banks historically regulated credit creation to control inflation and promote growth.
  • Bank-created fiat currency leads to a decrease in the standard of living and increased debt dependency.
  • Privatisation and debt transference from public to private sectors create regressive policies and financial risks.

01:06:12

"Monetary system reform crucial for economic stability"

  • Increasing the money supply leads to more funds for productive activities and consumption, potentially causing a boom.
  • Uncertainty exists regarding the recession's end and the subsequent debt increase.
  • Economic growth correlates with rising debt, potentially leading to future financial crises.
  • Reforming the monetary system is crucial to prevent banks from causing financial crises.
  • The current monetary system allows banks to extract wealth without contributing productively.
  • The banking sector's growth may indicate inefficiency or parasitic behavior.
  • The banking crisis drove over 100 million people back into poverty, impacting mortality rates.
  • The Bristol Pound Project aims to build community, support independent businesses, and prevent wealth from leaving localities.
  • Bank runs can involve cash withdrawals, shifting funds to smaller banks, or international transfers.
  • International bank runs can have severe global economic consequences, as seen in the September 2008 meltdown.

01:21:41

"Currency Exchange, Trade Balances, and Reserves"

  • UK bank agrees on an exchange rate of 1.15 euros to the pound with a Euro-area bank.
  • £1000 of central reserve currency is transferred to the UK partner bank of the European bank, while 1150 euros are transferred to the European partner bank of the UK bank.
  • Accumulation of foreign reserve currencies occurs in cases of trade surpluses, while spending of own reserves happens in cases of negative trade balances.
  • Balance of trade is the difference between a country's exports and imports, with the UK having a visible balance of trade deficit.
  • Foreign exchange reserves cannot be used for domestic spending, only for imports or spending abroad.
  • John Maynard Keynes proposed an international clearing union post-World War II to reconcile trade imbalances, but no such mechanism exists.
  • Currency wars involve countries competing for lower exchange rates, boosting domestic industry demand.
  • Central banks can decrease the value of their national currency by selling reserve currency into the market.
  • The modern financial system lacks a gold standard, allowing market forces to determine exchange rates.
  • Developing countries facing speculative attacks are pressured to deregulate their markets and align with dominant financial systems.

01:37:13

Global Debt Crisis: Monetary Dominance and Inequality

  • Countries are burdened by debt repayments, surpassing spending on health and education, leading to escalating debts.
  • Large corporations exploit natural resources and workforce in countries, turning them into vassal states.
  • Financial Imperialism is maintained through monetary dominance, with no secrecy in its operations.
  • Neo-Liberalism, prevalent for three decades, advocates for floating exchange rates, weak regulation, and minimal government interference.
  • The IMF enforces conditions like Structural Adjustment Programs to alleviate debt issues in countries.
  • These programs, seen in countries like Greece and Portugal, instruct reducing public sector spending and liberalizing trade and capital markets.
  • IMF advises lowering taxes for multinational corporations to attract more investments, but this leads to profit outflows from countries.
  • Private debts are transformed into public debts, leading to spending cuts and a system benefiting the wealthy at the expense of citizens.
  • Banks, heavily subsidized and protected, create money out of nothing, leading to financial instability and inequality.
  • Monetary reform advocates for democratizing the money supply, taking power away from private banks to prevent financial crises and prioritize public benefit.

01:53:24

"Democratizing Banks for Financial Accountability and Sustainability"

  • Banks are not democratically accountable to the people but to their shareholders only.
  • The monetary system needs to be democratized to be subject to similar discipline as other key public services.
  • The law from 1844 needs updating to classify digital money as real money.
  • Banks should be subject to market discipline like other private companies.
  • The current system creates constant debt for individuals, especially younger generations.
  • $2 trillion annually is needed to transition to a greener economy, a feasible amount compared to the $14 trillion raised to bail out banks during the 2007-9 crisis.
  • Banks act as monopolists in credit creation, not adhering to free-market rules.
  • The power to create money should be given to an independent, transparent, and accountable body.
  • Person-to-person banking, like Zopa, minimizes risk and offers alternatives to traditional banking.
  • Monetary reform is crucial, but faces resistance from powerful banking lobbies and government-bank relationships.

02:09:28

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  • Supporting Britain's greatest industry is a patriotic duty
  • George's bonus, when returned, will fund public services
  • Urging to give today until good times return for George and others
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