Banking Explained – Money and Credit

  • Published: 12 March 2015
  • Banks are a riddle wrapped up in an enigma. We all kind of know that they do stuff with money we don’t understand, while the last crisis left a feeling of deep mistrust and confusion. We try to shed a bit of light onto the banking system. Why were banks invented, why did they cause the last crisis and are there alternatives?

    The music from the video is available here!

    Visit us on our Website, Twitter, Facebook, Patreon or Behance to say hi!

    Banking Explained – Money and Credit

    Help us caption & translate this video!

Comments • 4 907

  • Kurzgesagt – In a Nutshell

    There's brand new stuff in the Kurzgesagt Merch Shop. Check it out here:

    • Maxwell S
      Maxwell S  3 weeks back

      You didn't explain the role of the reserve bank and how this affects money markets. House prices are going up and people are borrowing much more than banks can get from deposits. You did not explain where the banks get most of their money from, the interest they pay and their margin of profit when they lend money. Why can banks get money from the money markets but not ordinary people etc.

    • pablo smith
      pablo smith  4 months back

      *Do A Video On The Rise Of Cryptocurrency.*

    • Nourii
      Nourii  4 months back

      theres a bug while using INDONESIAN CAPTION in this video

    • Ethan Gandy
      Ethan Gandy  4 months back

      Restock the 12 019 calendar pls

  • I have been there!
    I have been there!  3 hours back

    So Banks where invented in Italy ??? Woow! So... Roman Empire first, Renascence and then Banks! They made 1/3 of Word history by themself just right there! 🤣😂🤣😂🤣 But better question is... what happened then ???? 😂🤣😂 why they don’t control the world?!?!

    • sauddy
      sauddy  1 days back

      This is a terrible explanation! Blows over all of the basics and spreads VERY wide with no depth of details and explanation.

      • aouad sami
        aouad sami  1 days back

        Bank owners are people who provide nothing and still gets lots of money if we make a smaller example of someone who has 10000$ and keep lending it to people while making profit this would lead him to amass money while everyone is getting more poor of course banks are much more complex but it result in similar way capitalists who own banks get richer while poor people getting in dept because of loans WHY PAY FOR PRACTICALLY NOTHING

        • Cameron Valdez
          Cameron Valdez  1 days back

          Pls slow down a little please

          • Teg. Rex
            Teg. Rex  2 days back

            А что тут сложного? Возьми 1 и отдай 2. Делим на 2. 1 в банк 1 в карман. Вот и все. Вы придурки.

            • Skullduggery
              Skullduggery  7 days back

              One thought,rip off.

              • Sylvester Palys
                Sylvester Palys  1 weeks back

                The description of how banking works in this video is not accurate. There's no mention of fractional reserve banking at all. Banks lend out your savings at interest sure but, they can lend out many times what their actual deposit reserves contain. They essentially conjure money out of thin fucking air! An important detail overlooked by this poorly researched video.

                • Wojtek The Bear
                  Wojtek The Bear  6 days back

                  An important detail in your poorly researched comment is that's NOT how fractional reserve banking works. Banks can't just conjure fucking money out of thin air. That's illegal. Hint: how fractional reserve banking works is in its name.

                  Banks only lend out a portion of all deposits. A FRACTION of these deposits are still kept on RESERVE in case people come back to withdraw the money.

                  Ex: Bob deposits $100 in a bank. That bank takes 10% of it and keeps it as reserve, lending out the other 90%. So $90 is lent to Bill. Bill then does similarly as before, depositing the $90 in his bank, which takes 10% of it and holds it as reserve, lending out $81. Now we have $19 sitting in reserve and $171 loaned out on an initial deposit of $100, BUT NO BANK CREATED MONEY!

              • Johannes Posselt
                Johannes Posselt  1 weeks back

                Very, very, very superficial, subjectiveand without any important info... JUST A BRAINSTORMING

                • wrexxy
                  wrexxy  1 weeks back

                  So cute, “how banking will be done in the future will be up to us”. If the past 106 years are anything to go by, that’s a very naïve perspective.

                  • Wojtek The Bear
                    Wojtek The Bear  6 days back

                    ….You do realize that our current banking system came out due to a public appeal for it, right? Look up the Panic of 1907 if you don't believe me.

                • Redmi Note
                  Redmi Note  2 weeks back

                  Stupidity, reality is way more different.

                  • Jake Meisenbach
                    Jake Meisenbach  2 weeks back

                    make more videos or i will steal your MONEY

                    • anton plumley
                      anton plumley  2 weeks back

                      All of man kinds construction and creations could have been without the advent of money

                      • Wojtek The Bear
                        Wojtek The Bear  2 weeks back

                        Except they couldn't as most of these creations would've had extremely high transaction costs without money.

                    • Happy Aaron
                      Happy Aaron  2 weeks back

                      So what about the assholes at insurance companies that won't provide their services to an already ill person?

                      • Happy Aaron
                        Happy Aaron  2 weeks back

                        @Wojtek The Bear Stop being sarcastic dude. I was just asking what they do with all that money? And they get to keep it all if their client never falls ill.

                      • Wojtek The Bear
                        Wojtek The Bear  2 weeks back

                        Yeah, how dare insurance companies, private enterprises trying to make a profit, not accept a client which would almost definitely cause them to lose money!

                    • God Awful Content
                      God Awful Content  2 weeks back

                      Awesome reminder that we lost our house to retard banks 🗿

                      • Wojtek The Bear
                        Wojtek The Bear  2 weeks back

                        Today I learned that it was only makes that thought housing prices were rising and not the general public......

                    • Karolis Astrauskas
                      Karolis Astrauskas  2 weeks back

                      Bitcoin and Blockchain technogy video, please!

                      • Grzegorz Rutkowski
                        Grzegorz Rutkowski  2 weeks back

                        Wow, praising the devil at kurzgesagt

                        • Arabic Courses
                          Arabic Courses  2 weeks back

                          This is not true. Banks CREATE money, even if they don’t hold anyone else’s money. They simply input numbers into the system and the money is there on the basis that when the money is paid back it will go back into the ether

                          • Wojtek The Bear
                            Wojtek The Bear  2 weeks back

                            Except that's not true. In fact what you described is 100% illegal. Commercial banks, the banks you and I think of as banks, only accept deposits from savers and give out loans from those deposits to borrowers. That's it. This process though inevitably creates money, even if no bank itself ever "inputs numbers".

                            For example: Bob deposits $100 in his bank. That bank, following the guidelines above (and central bank regulations), keeps $10 of it in reserves and loans out the rest. The rest is then borrowed by Tom, who puts it in his own bank. This bank then does similarly to before, keeping $9 in reserve and loaning out the other $81. No bank has created money, but the process of repeatedly loaning out and depositing this money has. $10+$9+$90+$81= $190 outstanding on an initial deposit of $100.

                        • greg richards
                          greg richards  3 weeks back

                          the black nobility. the origin of modern banking. banking is scam and this video is 100% a lie.

                          • greg richards
                            greg richards  2 weeks back

                            it's not a conspiracy if it true.

                          • Wojtek The Bear
                            Wojtek The Bear  3 weeks back

                            Congrats on outing yourself as a conspiracy theorist.

                        • Dagenham Dave
                          Dagenham Dave  3 weeks back

                          This is the same nonsense taught in schools, no wonder people are so clueless as to the true meaning of banking.

                          • Wojtek The Bear
                            Wojtek The Bear  2 weeks back

                            @Dagenham Dave Yes, I know. Something something evil Jews, something global conspiracy, and then some anti-Semitic comments. Heard it all before, honestly? Let's just ignore how the world has never been better economically and the finance sector had a part to play in that. Everything's a conspiracy to make the evil bankers (Read: Jews) richer.

                          • Dagenham Dave
                            Dagenham Dave  2 weeks back

                            @Wojtek The Bear Even the average nit wit with a pea brain could have understood what I was getting at with my first comment without elaborating, I am afraid it is well over your head sunny.

                          • Wojtek The Bear
                            Wojtek The Bear  2 weeks back

                            @Dagenham Dave As I said, you thinking contrary to standard thought on banking doesn't change the fact that banks are financial intermediaries. It just shows your ignorance.

                          • Dagenham Dave
                            Dagenham Dave  2 weeks back

                            @Wojtek The Bear Like I said, utter nonsense.

                          • Wojtek The Bear
                            Wojtek The Bear  3 weeks back

                            Banking is a financial intermediary no matter what your conspiracies think.

                        • Maurizio Oiziruam
                          Maurizio Oiziruam  3 weeks back

                          Banco is the italian for desk, more or less, not for bench! We call a bench a "panchina" =)

                          • Lorenzo Potrich
                            Lorenzo Potrich  3 weeks back

                            F you Chase!

                            • Gs5v5 7bv6tv
                              Gs5v5 7bv6tv  3 weeks back

                              Smh that bird has more money than me

                              • Paul Oshea
                                Paul Oshea  3 weeks back

                                This is totally incorrect, everything changed in 1933, with the "New Deal". Money became DEBT in TRANSIT. It's all based on promises to pay (Promissory Notes) The banks don't lend you investors deposits, and/or savings, that's illegal!! Banks only provide a service to allow you to create your own CREDIT. Your SIGNATURE on the MORTGAGE (Promise to pay) creates the CREDIT.

                                • Wojtek The Bear
                                  Wojtek The Bear  3 weeks back

                                  Wow, your complete ignorance of finance and American history is astounding. First, the New Deal had absolutely nothing to do with finance or banking reforms. The closest Roosevelt came to this was forcing a one-day bank holiday to prevent yet more runs on banks. The modern US financial system was already set up by 1914 with the creation of the Federal Reserve system.

                                  That's not how money works.

                                  That's not how debt or credit works.

                                  Lending out savings isn't illegal and is exactly what happens. That's why banks are referred to as financial intermediaries, because they act as an intermediary between savers, who want to deposit their excess money, and borrowers, who want extra money they don't currently have.

                              • Kyle:3333
                                Kyle:3333  3 weeks back

                                Dear lord watching this video after black mirror bandersnatch was a mistake... WHY TF IS PROGRAM AND CONTROL MAN EVERYWHERE

                                • The Mr. Man
                                  The Mr. Man  3 weeks back

                                  *_Long story short: Jews control the banks_*

                                  • Wojtek The Bear
                                    Wojtek The Bear  3 weeks back

                                    Except the Federal Reserve is currently headed by a Jesuit Christian and his boss is whatever religion Trump claims to be.

                                • Diory N
                                  Diory N  4 weeks back

                                  The rich getting richer, the poor getting poorer.

                                  • Wojtek The Bear
                                    Wojtek The Bear  4 weeks back

                                    Except banking is one of the best resources for the poor.....

                                • Lord Angrim
                                  Lord Angrim  4 weeks back

                                  "banco" means "desk" in italian not "bench".. (maybe in the 11th century though--language changes)

                                  • Nijario
                                    Nijario  2 weeks back

                                    In Portuguese banco means bench

                                  • Un simple gato
                                    Un simple gato  4 weeks back

                                    By the way ... in spanish ''banco'' really means ''bench''

                                • Craig Skipsey
                                  Craig Skipsey  4 weeks back

                                  It seems clear now why you won't do a crypto / Bitcoin video. Whilst I agree with why banks and credit came about in the first place, I don't believe they're the most effective system moving forward. Your criticisms of Bitcoin (via reddit) now appear idealogically motivated.

                                  • Wojtek The Bear
                                    Wojtek The Bear  3 weeks back

                                    @Craig Skipsey Dude, you're not even trying to make a fair argument. Bitcoin mining, or the creation of new bitcoin, is the reason for Bitcoin's huge energy consumption. In terms of our real world financial system, the only real comparison is the Treasury's (not the Fed) printing of new money, which I can tell you isn't even a single percent of the energy used by Bitcoin miners.

                                    Also nowhere does it saying an asset needs speculation in order for it to have a store of value. In fact it's usually the opposite. People use assets that have a consistent, stable valuation as their store of value. That's why people like the USD and Euro, each with an inflation rate targeted around 2%, and historically precious metals like gold and silver, which, besides huge economic shocks like the founding of the New World, kept their valuations stable. There's no point in storing your money if one day it can be worth $5 and the next $500.

                                    The only true possible benefit for Bitcoin is that it offers a 100% market based currency unregulated by any government. The only problem with that is that it's not actually a good thing. There's a reason currencies are typically controlled and regulated by governments, and its because currency tends to be unstable without government regulation and central banking, as evidenced by the 18th century US, when we had Panics ever half decade. Also in terms of Bitcoin specifically, it's almost inherently deflationary, which is a terrible thing. There's a reason central banks tend to hold a stable, small inflation rate. Deflation is bad, much worse than inflation, especially during economic downturns, as evidenced by the Great Depression.

                                    Honestly, there's nothing wrong with using the USD or euro, so looking to cryptocurrencies for a problem that doesn't even exist is pretty pointless and just a waste of energy.....literally.

                                  • Craig Skipsey
                                    Craig Skipsey  4 weeks back

                                    @Wojtek The Bear I don't disagree with any of those points. But none of this diminishes the importance of the technological advancement that Bitcoin offers. The fraud, speculation and energy (though I suggest looking at the energy consumed by the global finance sector for comparison) issues will change over time. Speculation is a natural part of the process to becoming a store of value, unfortunately speculation also breeds fraud for the uninformed.

                                  • Wojtek The Bear
                                    Wojtek The Bear  4 weeks back

                                    Ideologically motivated? Are you saying bitcoin markets don't have a fraud problem, it doesn't use up a huge amount of energy, and that 99% of the people who own it only use it for speculation? There's a reason few businesses actually accept bitcoin.

                                • Grimm Pickens
                                  Grimm Pickens  4 weeks back

                                  While the banks did take advantage of the situation, the US government did sorta tell them that they had to lend to otherwise unqualified people in an attempt to better disadvantaged people since property ownership is the best way to build generational wealth. They fucked up by bunching the subprime mortgages into investment packages, then selling them off.. And AIG really fucked up by insuring the investments without the capital to actual cover the policies.

                                  • Gaming 4 Life
                                    Gaming 4 Life  4 weeks back

                                    So a bank can also go bankrupt? I never knew it.

                                  • Syddique Shaw
                                    Syddique Shaw  4 weeks back

                                    3:01 lmao they lost their shirt XD

                                    • SteveAkaGoatpile
                                      SteveAkaGoatpile  4 weeks back

                                      I heard my economy professor say once. "if people understood how our financial system actually worked, it would stop working and be torn down in days." most bankers and economists don't even understand the mechanisms of their own work, and if they do they desperately try to keep it secret, or rationalize its utter illogicality in overly complex nonsense.
                                      the system is not actually that complex, its not an enigma, a great mystery. its simply utterly divorced from reality and counterintuitive to any logic.

                                      • Wojtek The Bear
                                        Wojtek The Bear  4 weeks back

                                        Your claims are utterly bullshit. No economics (not economy) professor worth their salt would claim they didn't understand how the financial system worked as the financial system really isn't that complex. There's a reason central banks exist after all. Moreover, you're acting like financial economics doesn't exist.

                                    • Borislav Georgiev
                                      Borislav Georgiev  1 months back

                                      Long bitcoin short bankers

                                      • VineNinja
                                        VineNinja  1 months back

                                        Typical textbook video. Banks can now loan you money created on a computer

                                        • Wojtek The Bear
                                          Wojtek The Bear  4 weeks back

                                          They could before computers were even a thing. This isn't a conspiracy, just the basic definition of fractional reserve banking.

                                      • Sandy Baggy
                                        Sandy Baggy  1 months back

                                        That's why I keep my money in gold under my pillow ¯\_(ツ)_/¯ cash is King!

                                      • eLynxz
                                        eLynxz  1 months back

                                        haha in lithuania you pay banks for them to keep your money in a savings account lmao

                                        • eugene olewuenyi
                                          eugene olewuenyi  1 months back

                                          Lmao I thought banks originated from goldsmiths who issued out receipts to people who kept gold with them

                                          • PeenX69
                                            PeenX69  1 months back

                                            Abortion is murder, change my mind.

                                            • Wojtek The Bear
                                              Wojtek The Bear  1 months back

                                              This is a video on fucking banking. Grandstand somewhere else.

                                          • Robo Pork
                                            Robo Pork  1 months back

                                            0:21 put it in .75x speed. Thank me later.

                                            • Imre Bertalan
                                              Imre Bertalan  1 months back

                                              Now imagine a world where the currency is the same in every part of the globe.

                                              • Simone Reckhaus
                                                Simone Reckhaus  1 months back

                                                Bancle doesn't mean anything in italian the correct word is panchina

                                                • Johnny Aingel
                                                  Johnny Aingel  1 months back

                                                  So close to the TRUTH

                                                  • Respect Worms
                                                    Respect Worms  1 months back

                                                    great, taipei 101 is in the bank thing

                                                    • Jeed92
                                                      Jeed92  1 months back

                                                      And yet the very base our of money is corrupt. Its created out of thin air and those who print it can devalue the money people worked for as they like. They manipulate entire countries. These new systems explained in the video might seem nice but in the end they are just a part of this already corrupt failing system that has to crash all 50 years or collapse.

                                                      • Jeed92
                                                        Jeed92  1 months back

                                                        @Wojtek The Bear With crash i mean many people lose their money, such as the housing market in the US. or the recent European recession where millions of people lose their money, but the "big players" are better off than ever... wierd huh? No not really if you understand the mechanisms of this.

                                                      • Jeed92
                                                        Jeed92  1 months back

                                                        @Wojtek The Bear If you think the fed is controlled by the gov. you are not very smart / not educated well in the subject. In fact it is so uncontrolled that the american gov. cannot even look into its activities. Its a banker cartell and that you really believe these bankers are working for the gov. and not for their own interest makes me ask myself if you even looked into the subject at all.

                                                      • Wojtek The Bear
                                                        Wojtek The Bear  1 months back

                                                        @DJ SAHIL KING This is just illiteracy incarnate. What the heck do you mean by "real wealth?". Most rich people have their assets in stocks and bonds. How is a bond any different than a USD in your context? It isn't. Also no one is buying gold and silver? What? You always see upticks of precious metal purchases during economic downturns. No one's stopping their purchases. They are even used to produce goods like computer motherboards. But sure, no one can buy them.

                                                        Also the US attacks oil producing countries like Saudi Arabia.....oh wait, they're an ally. Egypt? Nope (in fact the US defended Egypt against the UK and France during the Suez Crisis). Russia? Nada. Venezuela? No. Huh, Canada? Ally. Kuwait? Ally. China? Huge trade partner. It's almost like the largest oil producing nation in the world (which the US is), doesn't invade other countries for oil and you're full of shit.

                                                      • Wojtek The Bear
                                                        Wojtek The Bear  1 months back

                                                        Wrong statements in this one comment.

                                                        1. Money isn't created out of thin air
                                                        2. Money isn't devalued as any entity likes, and no single entity controls the value of the USD (or other currencies).
                                                        3. Central banks are influenced and face mandates by the legislative and executive bodies of their government (of which they usually are a part), not so much vice-versa
                                                        4, The system is no more corrupt than any other industry
                                                        5. The system isn't failing
                                                        6. I have no idea what you mean by crash all fifty years. Of the last 30 years, we've been in a recession for 3-4 of them. So maybe 10%?

                                                    • Osama Bin Weevils
                                                      Osama Bin Weevils  1 months back

                                                      i think the government getting involved in the banking crisis was a bad idea, if bank are a business and the business fails, you should let it happen, as you would for any other business that fails

                                                      • Wojtek The Bear
                                                        Wojtek The Bear  1 months back

                                                        @Osama Bin Weevils First: Few commercial banks (banks people normally deposit money into) failed. They were mostly investment banks. that required a bailout. More banks were given bailouts than those that needed them though since the government didn't want to cause a panic by identifying which banks were failing.

                                                        Second: once again the government made money off of the bailout.

                                                        Third: You're forgetting that the process of fractional reserve banking creates money (though not banks themselves). So if the banks failed, no matter what the monetary supply would have shrunk, and, as the Great Depression showed, deflation is devastating during economic downturns. This is one of the main reasons governments tend to pursue a small, positive inflation rate.

                                                        Fourth: As I said before, it was extremely hard to know which banks were stable and which weren't.

                                                      • Osama Bin Weevils
                                                        Osama Bin Weevils  1 months back

                                                        @Wojtek The Bear so put the money somewhere else, give it back to the people that originally had the money, or put it in a different bank that hasn't failed

                                                      • Wojtek The Bear
                                                        Wojtek The Bear  1 months back

                                                        That's a terrible idea since bank not only hugely impact the monetary supply, but they also hold the funds of a majority of Americans. You want them to fail? Okay, I hope you can wait a few months with absolutely no money until the FDIC can properly insure your deposit. Also the bailout was made through loans and asset purchases, both of which the government actually made a profit off of.

                                                    • Soviet Cat
                                                      Soviet Cat  1 months back

                                                      *PIKA PIKA PIKA PIKA PIKA PIKA*
                                                      please end me

                                                      • Sorin Cezar Crăcană
                                                        Sorin Cezar Crăcană  1 months back

                                                        Banks make money our of nothing. The gold standard disappeared a long time ago. The presented narrative is obsolete. how did you do your homework on this one?

                                                        • Wojtek The Bear
                                                          Wojtek The Bear  1 months back

                                                          Banks don't make money out of nothing. That's straight up illegal; only the Federal Reserve and other central banking authorities are allowed to make money. Also the gold standard was only dissolved in the 1970's. Look up Bretton Woods if you don't believe me.