This 47 minute film on Google was a big wake-up call to me. Through simple animation, the film explained how modern money has actually be founded largely upon debt ever since the US and UK stopped backing their currencies by gold during WWII.
In June 2007, British consumers had borrowed through loans, credit cards and mortgages £1.35 trillion - more than the forecasted GDP of £1.33 trillion. This means that the British consumers owe more money to the banks than the value of everything made in businesses and industry the same year. The vast majority of this debt is £1.13 trillion in the housing market. What makes this worse is that these figures do not include business debt or national debt!
The film explains how banks are allowed to lend money that doesn't exist, called "Fractional-Reserve Banking", and that each of these loans then increases the nominal assets of the bank, which increases the amount it is allowed to lend. Only around 5% of the "money" is actually bank notes and coins - the rest is illusionary - just created in the computers of the banks and stockmarkets.
The recent problem at SocGen where rogue trader Jerome Kerviel had a "position" (a bet to you and me) worth around £37 billion, more than the value of the entire bank, and around the same as the French annual deficit, highlights the flimsy nature of today's derivatives markets. Nick Leeson, another rogue trader whose actions brought down Barings Bank, was quoted as saying that he believe that rogue trades happen every day in the financial markets.
So see the film, research "fractional-reserve banking", and you may never view "money" the same again!
In June 2007, British consumers had borrowed through loans, credit cards and mortgages £1.35 trillion - more than the forecasted GDP of £1.33 trillion. This means that the British consumers owe more money to the banks than the value of everything made in businesses and industry the same year. The vast majority of this debt is £1.13 trillion in the housing market. What makes this worse is that these figures do not include business debt or national debt!
The film explains how banks are allowed to lend money that doesn't exist, called "Fractional-Reserve Banking", and that each of these loans then increases the nominal assets of the bank, which increases the amount it is allowed to lend. Only around 5% of the "money" is actually bank notes and coins - the rest is illusionary - just created in the computers of the banks and stockmarkets.
The recent problem at SocGen where rogue trader Jerome Kerviel had a "position" (a bet to you and me) worth around £37 billion, more than the value of the entire bank, and around the same as the French annual deficit, highlights the flimsy nature of today's derivatives markets. Nick Leeson, another rogue trader whose actions brought down Barings Bank, was quoted as saying that he believe that rogue trades happen every day in the financial markets.
So see the film, research "fractional-reserve banking", and you may never view "money" the same again!
