Worst Ponzi EVER!! DON'T FALL FOR IT!!
🤔 What is Paper Money 🤔
Pound paper money first started being issued in 1697 by the bank of England. US dollars starting hitting the scene in 1792 per the 'Coinage act'. Prior to this, coins made from Gold & Silver were used as the monetary medium in society. However, with the introduction of paper money, these banks could issue bills that were a lot easier to denominate, store and spend. This money was always able to be converted into a reserve asset. In 1944, there was the Bretton woods agreement which would make the US dollar the global reserve currency and have it backed by a certain amount of gold.
💸 In Comes Fiat 💸
Nixon ended the convertibility of the US dollar into gold which eventually meant that there was nothing backing the dollars. From then on, money only had value because the Federal reserve and the US government said it did. It was a piece of paper that people agreed between themselves had a certain value. It is also no coin incidence that after we saw this abandonment of a form of monetary tether, we had an inflation of the monetary base.
🤔 Fractional Reserve Banking 🤔
Money lent to the bank can easily be lent out to other customers. This is what is called fractional reserve banking. What the banks are hoping for in this situation is that only a small proportion of their users will actually withdraw. If all of the banks depositors run to withdraw their funds at the same time, it's called a "bank run" and you then see the long lines and other scenes that were incredibly popular back in the great depression. What's really pretty scary about bank runs is that every single bank is susceptible. It's not only those that are short of liquidity but also those that are in a relatively strong position.
✖️ Money Multiplier ✖️
This reserve ratio is not determined by the banks themselves but by the Fed (or equivalent central bank). It is the minimum amount of deposits that they must hold in liquid securities in order meet their obligations Because the banks are allowed to lend out money to their customers, they can increase the broader money supply to many multiples of the actual money that is in the system. For example, if the reserve requirement is 5%, only 5% of the banks balance sheet should be held in this liquid money. The other 95% can be loaned out. That basically means that the bank can lend out 20 times the amount of money that is kept on their balance sheet. This is called the multiplier effect of money and means that the broader money in the economy can be many multiples of the money that actually exists in the bank. You can think of it as a leveraged trade in crypto position.
💯 Bitcoin Salvation 💯
Bitcoin is the best way to preserve your wealth. This is because it has a limited supply of only 21 million coins. There cannot be anymore printed. The amount that hits the market regularly is defined by the protocol. It is also permissionless and completely transparent. There is no one single entity who controls it and you hold complete control over those coins thanks to being able to self custody.
📜 Disclaimer 📜
The information contained herein is for informational purposes only. Nothing herein shall be construed to be financial legal or tax advice. The content of this video is solely the opinions of the speaker who is not a licensed financial advisor or registered investment advisor. Trading Forex, cryptocurrencies and CFDs poses considerable risk of loss. The speaker does not guarantee any particular outcome.