Money is Broken!! The Truth About Our Financial System!

[Music] Money we all work for it but only a few Of us understand it now obviously if Your goal is to make money then you need To understand what it is otherwise you May find yourself struggling to keep up With the cost of living sound familiar Well in today's video we're going to Explain where money came from what it is How it works and how you can use this Knowledge to start getting ahead this is A video you cannot afford to Miss now I'll start by saying that most Of the information in this video comes From a book called broken money that was Written by macro analyst Lyn Alden Specifically the first two parts of the Book it Is Well worth a read if you have The time and we'll leave a link to the Book down in the description if you're Interested that said the back of Lyn's Book perfectly sets the stage for what We're going to be talking about today Here's part of what it says quote there Are over 160 different currencies in the World each with a local Monopoly over Its own jurisdiction aside from a Handful of them most currencies rapidly Devalue over time and have little Acceptance outside of their own borders While the steady increase in energy Production and the proliferation of of Electronics have improved human Well-being over time the Global

Financial system hasn't kept up and Continues to be a drag on economic Productivity this is especially true in Developing countries but is also Becoming apparent in the developed world As debts and deficits grow without Constraints and countries around the World deal with waves of inflation and Bank failures end quote now this quote Begs the question of what's causing all Of this the short answer is that money And currency have completely Disconnected if you watched our video About how the financial system is rigged You'll know that currencies such as Dollars and Euros used to be backed by Money namely Gold when the gold standard was Officially abolished in 1971 money and Currency became two different things as A result it became possible for Government and central banks to create As much currency as they wanted that's Exactly what they've gone and done and The Practical effect has been inflation And inequality the craziest part is that We're taught by society that the Currencies we're paid in continue to be As good as gold when this hasn't been The case for over 50 years as such you Could say that none of us have been Making money since the 1970s we've been Making currency and it's been losing its Value by the day when you realize this

Fact it begs two bigger questions what Exactly is money and how can you make More of it when you're being paid in Currency well by the end of this video You will have all the answers and by the Way if you're enjoying the video so far Be sure to smash that like button to Give it a boost And subscribe to the Channel and ping that notification Bell So you don't miss the next one Are you ready for Deals are you ready for trading fee Discounts are you ready to save some Money if the answer is yes then you're Ready for the coin Bureau deals Page yes coin Bureau brings you the very Best deals and promotions in all of Crypto you won't find offers like these Anywhere Else discounts on the best hardware Wallets Exchange sign up bonuses of up To $60,000 trading fee discounts of up to 60% coin bureau's brand new altcoin Focus Subscription Service the coin Bureau deals page is even better for you Than this piece of succulent protein Rich nutritious grilled [Music] Chicken head on over to coin bureau.com Deals or click the link in the the Description below don't delay check out The coin Bureau deals page today these Deals are so hot I need to cool

[Music] Down Yeah now this brings us to the first Part of Lynn's book which is aptly Titled what is money Lynn Begins the First chapter by dispelling the notion That money begins with things like coins And shells rather money begins with Ledgers which Lynn defines as summaries Of transactions that keep track of who Owns what Lynn argues that ledgers have Probably existed since the dawn of human Civilization and she provides a simple Thought experiment to explain why back When people still lived in tribes they Likely kept track of the favors that They had done for each other so for Example a hunter may have given some of His meat to another Hunter who failed to Catch any game that second Hunter would Likely return the favor in the future Now here's where things get interesting Lynn underscores the fact that these Kinds of interpersonal ledgers only work Between people who know and trust each Other they do not work between people Who don't know and trust each other or Between people who may only meet once And then never see each other again That's simply because people who know And trust each other are likely to repay The favors they owe but it's less likely That this will be the case if the Counterparties don't know and trust each

Other it's even less likely between People who only meet once and then never Meet again and as a fun fact when people Know they're probably not going to see Someone again the result tends to be More manipulative and deceptive Behavior It's believed that the huge shift of Human populations from rural areas into Cities has increased the frequency of This kind of antisocial Behavior due to The infrequency with which you interact With the same people this ties into a Broader field of study called Game Theory and we'll leave a link in the Description to a simulation which takes You through what I just talked about Anyways understanding that interpersonal Ledgers are a problem in certain Situations naturally calls for a Solution tion now in theory the solution Is barter so for instance One Tribe with Lots of Spears trades some of those Excess Spears with another passing tribe That has lots of Furs assuming of course Both have what the other one wants in Practice though you realize that the Likelihood that the two passing tribes Will have exactly what the other wants Is extremely low so this requires a Different solution specifically it requ Requires some good or service that every Tribe can use as a medium of exchange For other goods or services they will Need in the future Lynn points out that

The solution for many tribes was sea Shells this is because there were limits On how many you could find they took Effort to polish and prepare they were Very easy to carry and they could even Be worn for aesthetic appeal the best Part though is that shells don't rot or Spoil like most Goods believe it or not But the use of some kind of shell for Trade was essentially Universal for Tribes around the world in North America Africa and Asia Lynn also provides a fun Fact of her own and that's that the Oldest shells used for trade were found In South Africa snail shells made over 75,000 years ago Lynn also highlights The fact that when someone in a tribe Had lots of shells this effect L meant That they had done a lot of things for a Lot of people and that made them someone You'd want to be around or mate with This could very well be where the Connection between money and Status Comes from though Lynn doesn't speculate On this possibility in any case this Relates back to the concept of The Ledger the summary of transactions that Keeps track of who owns what Lynn Stresses that the ledgers consisting of Shells were ultimately controlled by Nature as it was nature that put Constraints on how many of these shells Could be created and therefore allocated But what happens when a more advanced

Civilization comes around and uses Technology to practically make these Shells out of thin air to trade them for Resources from the tribes well obviously The value of these shells starts to go Down until they become worthless and the Tribes are forced to find another medium Of exchange this pains to the second Chapter in Lynn's book which explores The evolution of Commodities as money of Course objects like shells don't make For good money but shells were better Than the Alternatives at the time in Other words there's a spectrum for how Much something is money-like with some Things being more money-like than others Lynn explains that there are seven Metrics which can be used to measure how Money like something is divisibility how Easy it is to divide into smaller bits Portability how easy it is to carry Durability how resistant it is to wear And tear fungibility how similar each Unit of the asset is verifiability how Easy it is to check that it's real Scarcity how hard it is to increase its Supply and utility how useful it is now Logically the ideal money is very Divisible very portable very durable Very fungible easily verifiable scarce Enough that it holds its value but not So scarce that it's hard to come by and Useful enough that it can be used for Other things be they simple Aesthetics

Or complex mechanical processes over Time almost every tribe on the planet Eventually came to find that gold was The most ideal money based on these Criteria not that they were necessarily Aware of them of course Lynn goes into Detail explaining how gold doesn't get Used up in the things that it's used for Doesn't rust and is practically Indestructible the catch is that gold Was and still is very valuable this Meant that it wasn't always the ideal Money to use particularly for very small Purchases the consequence of this was That other metals such as silver and Copper became equally adopted as forms Of money particularly for the poor and Working class Lynn then makes a very Good point and that's that money is not A shared delusion put differently money Is not any arbitrary thing we can pick That's just because if we pick the wrong Thing as money then its value will Quickly go to zero as a small group of People starts to manipulate the supply For their personal gain eventually we'll End up coming right back to actual Monies like gold and silver then after Reviewing all the different forms of Money that have come and gone over the Millennia Lynn explains in the third Chapter exactly why it is that gold Eventually won as the best form of money The short answer is its Supply gold

Supply has grown at an average of 2% per Year since the dawn of recorded history By contrast the supplies of most other Metals have either grown too fast to the Point that they lost their value quickly Relative to goods and services or not Fast enough to the point that their Value increased to quickly relative to Goods and services some metals are also Consumed because of their use cases Particularly manufacturing this doesn't Mean that the money derived from gold Was perfect however quite the contrary Governments and central banks cut Corners to try and devalue the currency Including literally cutting off the Edges of gold coins so that they could Be melted down and turned into more gold Coins the Silver Lining pun intended is That this debasement took a long time to Accomplish Lynn gives the example of the Roman Denarius a silver coin that took Around 500 years to fall from 95% Purity To 5% Purity the fact that this happened Over such a long period meant this Devaluation wasn't that noticeable to The average person had it happened on a Much faster time frame there would have Been Mass revolts on that note what's Fascinating is how gold if eventually Beat silver as the best form of money This was for two reasons the first was Because of a decision made by Sir Isaac Newon in 1714 when he was Master of the

Royal Mint at the bank of England The Story Goes that he set the official gold To Silver ratio way too low this Eventually resulted in most countries Around the world adopting the gold Standard starting with good old Great Britain the second reason why gold beat Silver is a lot more significant and That's technology put simply the Introduction of paper currencies being Backed by gold sitting in Banks Eliminated Silver's main selling point That it was more divisible than gold and Better for small purchases due to its Lower value by the same token this Technology transformed gold from money That people would use as a currency to a Plain old store of value even so Lynn Correctly points out that if you were to Go anywhere in the world with gold coins Or gold jewelry you'd probably be able To sell it at a fair price in local Currency then in the fourth chapter of The book Lynn discusses the differences Between the commodity theory of money And the credit theory of money the Details of this chapter are outside the Scope of this video but the tldr is that Money is both commodity money and credit Money Lynn calls this the unified theory Of money and it posits what we learned Earlier that money is fundamentally a Ledger now this brings us to the second Part of the book which is about the

Banking system specifically how it came To be the fifth chapter is about the Haala system which has existed for Thousands of years and consists of a Network of trusted Merchants who acted As de facto Banks along the Silk Road Here's a quick explanation of how the Haala system works imagine per person a Wants to send 10 gold coins to person B Who's in a different city instead of Taking the 10 gold coins to the city Themselves or trusting someone else to Do it person a would give 10 gold coins To Merchant a who knows and trusts a Merchant in the other City let's call Him Merchant b instead of sending the 10 Gold coins to Merchant B Merchant a Would send a letter to Merchant B saying Give 10 gold coins to person B and I Will pay you back in the future upon Receiving this letter Merchant B would Give 10 gold coins to person B now if Merchant B were to fail to do this then Merchant a would let others know that Merchant B is untrustworthy and they Would be cut out of the haala system but Let's assume that Merchant B pays person B the 10 gold coins how exactly do they Settle the debt with Merchant a okay Well what's cool is that they don't need To transfer any goods between themselves Imagine that person B needs to send 10 Gold coins back to person a at a later Date well in that case Merchant B would

Send a letter to Merchant a saying give 10 gold coins to person a you've paid me Back now the key innovation of the haala System was that it made transactions and Settlements more efficient by separating The two instead of having to send around Gold coins or other valuable Goods the Merchants called halladas could send Transactions frequently but only needed To settle them Periodically then in 1494 another key Financial Innovation was introduced in Italy it was called double entry Bookkeeping and it's the focus of the Sixth chapter of Lynn's book now as some Of you will know Double Entry bookkeeper Involves dividing ledgers into two parts Assets and liabilities to explain Lynn Uses the example of 10 gold coins being Lent out by a bank when lent out these 10 gold coins become an asset of the Bank and a liability of the person who Borrowed them this mindbending practice Became the Bedrock of modern banking With the word Bank having its roots in The benches that Italian accountants Would sit on to do business with Merchants similarly to the haala system Double Entry bookkeeping made Transactions more efficient by further Reducing the need to settle that is to Exchange gold when doing a trade of Goods or services the subsequent Introduction of paper Bank notes then

Made it possible to create so-called Bearer assets for context prior to the Introduction of Bearer assets like paper Bank notes money I.E gold could only be Claimed by the person it belonged to Recall the previous example with the Haala merchants only person B can go and Pick up the 10 gold coins from Merchant B Powers of Attorney notwithstanding With a paper bank note however whoever Held it had the right to claim the gold That backed it well they did when that Was still possible this was a big deal Because it opened the door to everyone Being able to trade with each other it Created a truly open Financial system Not one consisting of closed payment Channels between different individuals As more people started to use paper Bank Notes as money out of convenience the Bankers started to realize that only a Few people were coming to redeem those Bank notes for the gold that backed them This gave rise to fractional Reserve Banking and contrary to popular belief It didn't arise because of greedy Bankers it arose because of greedy Customers you see both Proto Bankers Like the haala merchants and early Bankers like the double entry Bookkeeping accountants needed to charge Fees for the services they provided the Same is true for the physical banks that Came later they had to charge fees to

Ensure that all the gold they were Storing to back the paper Bank notes was Secure and could be transported securely It goes without saying that the average Person gravitated to the bank with the Lowest fees eventually Bankers started To realize that they could lend out a Portion of the gold they were holding in Order to earn interest which would be Used to offer banking with zero fees to Customers this would result in more Customers which would mean more deposits That could be lent out at interest now Lynn reckons that at first only a small Portion of the gold being held by Banks Was initially lent out say 10% just Enough to cover the fees that customers Would need to pay to keep operations Running plus a little extra for profit Fortunately or maybe unfortunately it Didn't take long for banks to realized That they could sweeten the deal by Offering customers a share of the Interest they were earning all it would Take would be lending out more gold say 20% this would allow them to cover their Costs make a small profit and share some Profits with customers this would Increase the number of customers and Deposits meaning they could lend out Even more gold to make even more Interest and so on so this created an Incentive to have less and less gold Deposits backing the paper banknotes in

Circulation so long as not too many People came asking for their gold this Would all work fine as most of you will Know there there were periods when lots Of people came asking for their gold Back only to find that it had all been Lent out the first one to get a sense That the bank was short on gold would Get all of their money out the rest Would end up with nothing or close to it Now remember that gold was completely Removed from this equation in the 1970s So instead of fractional Reserve banking Based on gold we now have a fractional Reserve banking system based on Fiat Currencies currencies that only have Value because governments say they do so Consider a scenario where Banks are only Required to hold 10% of customer Deposits as reserves and suppose we have A bank with $100 of customer deposits it Can lend out $90 to another bank which Can then use that $90 to lend out $80 to Another bank and so on you inevitably End up with an enormous increase in the Supply of currency with no actual money Backing it news flash but this creates An enormous amount of inflation which Makes it impossible for the average Person to get ahead and enriches those Who can borrow the most from these Fractional Reserve Banks now consider That US Banks haven't had reserve Requirements since the pandemic in

20120 and if all that wasn't bad enough This Fiat fractional Reserve System Doesn't even deal with physical Fiat Currencies anymore it's all based on Bank Reserves which are quite literally Numbers in a ledger to put things into Perspective Lynn notes that US Banks had $22 trillion of assets at the end of 2022 with just $100 billion of physical Cash to honor customer withdrawals a Shortfall of 22x now this brings me to the big Question and that's how you can use all Of this information to get ahead well The first thing you can do is focus on Accumulating money not currency note That this doesn't mean investing in gold Per se as you've learned money exists on A spectrum many things such as real Estate for example have money-like Properties and if you know anything About Lynn you'll know that she sees BTC As another form of money one that's Possibly Superior to Gold that's because It scores highly on all the seven Metrics of money with the bonus that Transactions in BTC can be quickly and Easily settled relative to other forms Of money the second thing you can do to Get ahead is to understand that the real Inflation rate is much higher than What's being reported because of the Constant money creation to be fair money Supply turned negative for the first

Time in decades recently because of the Recent interest rate hikes by central Banks and this should result in costs Coming down the caveat though is that This decline in money supply is likely To be temporary because if it Contin All the powerful people will default on Their trillions of dollars of debts it's Safe to say that they will never allow This to happen which means that the Money printers will have to be turned Back on eventually given that Governments will do everything in their Power to downplay the real inflation Rate you'll have to get a sense of what The real inflation rate is yourself this Can be done by carefully tracking your Regular expenses week to week and month To month then do your best to keep up With it the third thing that you can do To get ahead follows from the second and That's to move if you can see that the Real inflation rate in your country is Too high ideally you want to go to a Country that uses the US dollar as its National currency has its National Currency pegged to the US dollar or has Widespread support for US dollar stable Coins make no mistake though the US Dollar is losing value by the day too The difference is that this is happening At a much slower lower Pace compared to All the other Fiat currencies at least For now earning money in US Dollars

Currencies pegged to the US dollar or Stable coins should be your goal if your Own National currency is losing value Fast depending on the circumstances the Easiest way to do this will probably be To move and the final thing you can do To get ahead is to help spread the word About what money really is and support The creation of new Financial systems That are anchored to money be they Cryptocurrency based or Otherwise as correct as Lynn is that Money isn't what we all agree it to be It won't get used unless we all agree to Use it this adoption requires Understanding what money is and creating An alternative Financial system that the Average person can understand and use The good news is that the crypto Industry has been Shifting the Overton Window on the former and making huge Improvements on the latter the bad news Though is that central banks and Governments are starting to realize that The world is collectively waking up to The fat Ponzi scheme they've created and You can bet that they will do everything In their power to ensure that they Remain in power and that we continue to Fall behind so that they can stay ahead At the end of the day though it's a Numbers game and there will always be More of us than there are of them if we All work together we can change things

For the Better and that's all for today's video Folks so if you learn something new Smash that like button to let us know if You want to keep learning subscribe to The channel and ping that notification Bell and if you want to help others Learn what money is take a second to Share this video with them if you're Into crypto check out the coin Bureau Deals page it's got trading fee Discounts of up to 60% and sign up Bonuses of up to $60,000 on the best Crypto exchanges it's also got the Biggest discounts on the best hardware Wallets and other exclusive offers you Won't find anywhere else the link to That will be down in the description Thank you all so much for watching and I'll see you in the next one this is guy Over and out [Music]