Bitcoin: The End of Money as We Know It Page #4

but the bank only holds

three and loans 97

to Bob to buy something.

In the bank's computers,

you still have 100 dollars

in your account.

But Bob now has 97 dollars

of new virtual money

in his account.

Just digits on a

computer screen.

There's no cash, no

gold, or anything else

backing up the new

numbers in Bob's account.

Just his promise to pay it back.

This is new money

created as debt.

When those 97 dollars

are spent, say in a shop,

the shop owner deposits

it into another bank

and it is lent out again

and again and again.

And each of these

people have numbers

in their accounts showing

that they own this money.

So your original 100

dollars has multiplied,

now there are over 3,300

dollars in the system.

This process of loaning

out far more money

than a bank actually

has, as cash on hand,

is called fractional

reserve banking.

- In the U.K., 97% of

the money that exists,

is just numbers in

the computer system.

And those numbers have

been created by the banks.

- [Voiceover] Banks earn

untold billions in interest

every year by creating

and lending virtual money.

What's more, banks don't

even need your deposit

to create new money.

If they consider someone

credit-worthy for a loan,

they can put new magic money

into his or her account,

and start charging interest.

- So, reporters

talk about Bitcoin

as though it's the

first digital currency.

But actually we use

digital currency

every time you

make a transaction

through internet banking,

or your bank card.

Actually it's not

only digital currency

it's digital currency

that is created by

the banks, essentially,

out of nothing.

- [Voiceover] In other

words, all new money is debt.

This is the part

of money creation

that isn't taught

in economics class.

Money in paychecks,

bank accounts,

401ks, that loan to

Bob, credit card debt,

your homeloan, all began

life as virtual money

created by the banks.

The entire system

is based on trust.

Trust in the bank's solvency.

Trust in the debtor's

ability to repay their debt.

If all bank customers

demanded just 3%

of their deposits

right now, in cash,

this "run on the banks"

would reveal the truth.

Almost none that paper

currency you think

is in your bank account exists.

It never did.

(birds chirping)

Remember the drunken party?

(rock instrumental music)

Our financial crisis

had everything

to do with virtual dollars.

Too many people, with

very little income,

borrowed a lot of money

they could never repay.

But the banks didn't care.

They didn't have to.

They quickly made

and sold shaky loans

to someone else, for a profit.

- And I got them all approved.

- Hey!

(laughter)

- Apply now.

- [Voiceover] Selling bad

loans was a good business,

until the whole thing blew up

in a global financial crisis.

The magic money machine

destroyed 30 million real jobs.

The United States alone

lost 16 trillion dollars

in household wealth.

And the banks foreclosed on

more than 1 million homes.

(angelic instrumental music)

Selling subprime loans and

betting they will fail,

may not be sacred,

but it is lucrative.

As much as a quarter of

our best and brightest

are being lured by the siren

call of the money machine.

Instead of science, engineering,

or medicine, they chose

a career playing with,

betting with, other

people's money

to get rich quick.

Very rich.

And sometimes, they

take shortcuts.

Get by on a nickle and a dime,

Money has a funny

way of bringing us down

They say it makes the

world go round and around

- My ancestors in Greece talked

about the corrupting

influence of power.

And nothing has changed

in these 3,000 years.

When you give control of

a massive amounts of money

to a few individuals,

they will take advantage

of that control.

Oh, oh, oh

- Banks today are

factoring in fines

and money laundering and all

the rules that they break

into their cost

of doing business.

JP Morgan is today

coming out and saying

that Bitcoin is not a legitimate

way of doing business.

Banks today are

tied into a system

that is completely rigged

to basically harvest money

from the entire global economy

and pump it into the

hands of the very few.

Don't get consumed

by your greed

La la la la la la

- The existing banking

system is cozy.

Its captured the regulators,

it extracts enormous value

from society without

delivering anything in return

and it is parasitic in nature.

- The banks play a very

pivotal role in an economy.

You look at any successful

economy it has successful banks.

There is a very close

correlation with banking profits

and the economy as a whole.

- [Voiceover] In

Medieval Europe, a banker

who couldn't repay

depositors was hanged.

Today, that same banker

would get bailed out,

paid bonuses and enjoy

some tax benefits, too.

To date, no senior

U.S. banking executive

has been charged for

selling the bad loans

that fueled the great recession.

In December 2014,

Just 6 years after the

last banking crisis

brought the world to its knees,

a Congressman snuck a

last minute provision,

written by Citigroup into

a crucial funding bill.

The provision allows

the largest U.S. banks

to once again make

risky derivatives bets

with bank deposits.

But no need to worry,

if the banks implode again,

lost deposits must be paid back

by U.S. taxpayers.

(bell rings)

Today's financial

innovators package assets

in ever more complex

ways, slicing, dicing,

securitizing, always using

someone else's money.

They sell debt, transfer

risks, leverage bets.

That's what they

call innovation.

- When you're talking

about financial innovation,

Bitcoin certainly is

a very good example

of innovation, but

there's also been

other innovations that people,

a bit closer to the

world of finance

would cite as good examples.

An example of that would be

the original swaps market,

from there moving on to

the credit default swap.

It is an excellent example

of financial innovation.

But also if it's

used incorrectly,

it can create a lot of

problems as we've just seen.

- [Voiceover] History teaches

that the most revolutionary

and disruptive innovation

nearly always comes

from the fringe, not

from corporate cubicles.

True innovators see

the world differently.

They see the big picture.

Creating new products

and entire systems

that lead to new industries.

Steve Jobs called them the

"square cogs in round holes".

- It's unsurprising

that new innovations

always come from a niche

group of early adopters

because it is inherently

very hard for many people

to realize the benefits

of new technologies.

In 2011, most Bitcoin

community people

were either

people from the technology

space, the geeks and hackers,

or people from the traditional

financial industry.

There are even some bankers

and hedge fund traders

using Bitcoinica at

that time as well,

which was really

surprising to me.

- [Voiceover] A radical

Rate this script:0.0 / 0 votes