Money and Banking - Lecture 04

Video Statistics and Information

Video
Captions Word Cloud
Reddit Comments
Captions
let's do this so we begin and chapter one right and section one was importance of money please no more talk I started okay you know after 45 minutes or 50 number one is why money is important so he ended with in direct exchange - is origins are associated with or come from the harder that's before there is money and we barter you have three fundamental promise and money means direct exchange resolves three these three fundamental problems associated with barter next we got three qualities money and here we have a whole bunch of things number one if it's gonna be money it has to be recognizable people should know that it's money it has to be then what else has to be beautiful yes if it's not durable it has the work Tomatoes they will work as money milk doesn't work as my weeds where's this money rice works this money so questions good for the quizzes which is better money we for rice based on the qualities that passed it has to be relatively abundant people got a lot Sun money is for exchange you don't need the line okay people say oh I want a lot of money mostly wrong people a lot of wealth people want to be rich okay and being rich and wealthy doesn't mean a lot of money it can mean a lot of land thousands of acres of land means you have a lot of houses five ten twenty houses okay means you have by then cars lots of gold lots of other things jewels okay you don't have to have a lot of money to be rich in well then again if you're rich and wealthy you need money you can always want if you really need or to sell a house or something else so don't think that actually rich people have a lot of money mostly not true not rich people may have a lot of stocks than a lot of bonds and a lot of investments it will come later on we'll discuss probably next time today that demand for money by rich people is very love it's poor people that kind of like demand money okay and then we're going to discuss something more the difference between the main money and what to have money there are differences between wanting things and economic man all right so it's gotta be a little bit of abundant has to be somewhat scarce now but notice that these two are contradictory meaning he has to be relatively abundant it has to be relatively scarce but at the same time can't be two among them it can't be too scared one of the most important properties of money's be visible Sakurako divisible means when you slice it into pieces the sum of each piece people's the total explained the lines all right and I have one or two more let's see what else I durable so if I can and is beautiful brighter than texture some of these are almost the same it scares between being relatively man durable and also is connected to small let's see if I got anything else yes part of big tiny man willpower added here is portable easy to carry and portable part of being portable is also partially durable it's like it's not easy to carry around and it breaks easy so it's a little bit of a problem for the egg okay that's why for portability metals are usually the best to carry around again part of being durable this also doesn't depreciate much if you get to use it or carry it too much in your pocket they don't get to you know depreciate let's see what else I got so the explanation which I came up with is that gold and silver serve or satisfied all of these is best if they satisfy them better than anything else so when people say they thought that gold is best money it's not because they love no because about God because of religion or perennial reason just the physical properties of all nice beautiful very durable does not gain this nonprofit has not changed its talent its relative their monthly but it's relatively scarce gold is very easy to cut slicing where to do all of those things it's more Spanish so when it comes to gold and silver they are the best of the best the best historic that has been copper copper is always served but copper using very very Apollo's okay and it is a very very move man so copper is like cheap it doesn't serve as well but it serves for transactions [Music] alright let's see what else that before we've already seen is the money or at least bald and silver and in general for - will be done wait okay so what is the weight we mentioned the exchange rate the exchange exchange rate of two monies if they start of the same mental blackbolt will simply be the weight ratios the weight divided by the weight of the banana and monetary unit is just AIDS turns out to be a name and it's the name pull up weight is the weight is the pound and sterling is the quality of silver all right I tried last time to explain and I'll try very simple again you have the king who has the total of five points now you can think in terms of 500,000 and the king will take each point and take half of the ball in it will put next to the gold we'll look for the 1/2 ball coppers but it's not exactly the same and they'll put more of the base I thought the cheap metal on the inside and they'll put more of the shine and precious metals outside so they'll take one half and make a new coin and it'll take the other half and make a new so it takes one point it makes out of it to the new point we'll have this is telegrams this will be five grams and this will be five grams 5 frames they will look on the outside the same on the outside it will be nice but look on the inside on the inside there's less so what they did was basically creates before you had now you have when the King takes all the coins upfront from everybody let's see 5 million points she will recall and great and then he will return five million to the people and five million points it got for himself that's worth him up gain that's for him up okay that's it basically cheated the people out of their money out of business put this process and I wrote in that last is called deep face the basement means lowering the precious metal precious metal weights in a coin the basement is it's very proud you debased by 10% the government profits 10% if you debate 50% the garden profits the 50% of the pocket as much bacon soap government as a vested interest to control money that's number one obviously to control all the weight and occasionally to debase whenever they need a little extra money the basement for the government is a source it's not easy to see well eventually when the government tries to cheat people eventually two months later - do you think that people get on they realize they can't cheated by the new king or defiance or the money just less they realize this eventually but for the government it's an immediate source of revenue is in okay let's see what else we got so the basement is basically the government redefining the coin to have a lower weight and extracting the business for itself now the basement means that those who make the money profit boys those who coin the money product and of course naturally those who create the money profit while we're in explaining my class if I can print a billion dollars I could profit from it I can extract the father so the profit goes to those who create the money this is the most important lesson to learn and money and bank of course the second one coming they're only stuff commercial banks themselves created money and profit from it that's coming later all right let's see what else what else is coming is very simple historically every government every Kingdom every Empire this all is grown to prosperity based on good high-quality beauty gold or silver honest money historically economic social cultural political decline for any society anywhere in the world just the West and so era including Muslim culture Christian world in Christian car including China with their own car encourage Japan in any society that the basis its money is usually the result or a consequence of its ongoing decline in culture morals politics laws in general social decline and of course political decline and of course fiscal is an governmental depart this is to go and in hand these are all social processes and money is the best way to see where the society is to go in the basement of money and my inflation is a good way to judge a society the maturity of a government and your own society but let's see what else I have ok next one is basic and a fan actually mother supply is simply the number of coins but we can have twice the voice twice the number of points which have to wait so Evangeline money supply is simply the weight of how much mental is out there now if you make twice as many coins with each new point worth eventually only the original so the value of the old five points the total value will be exactly the same you cannot change the manner you can change the one that did the beach you can change the number but when you multiply the number of the coins by the quantity of the weight of the vault you all get the same number so these were five coins [Music] in these times five is [Music] this prices with prices it's very straightforward if you double the number of points prices will double in terms of the so the basement is lowering the bed if you lower the menu in town prices will double to reflect the same man so the new member of money will be reflected in price so the prices but just to reflect your command think of it very simple what will happen if here let's say we simply double the amount of US dollars in the country today well most likely palaces prices will double easily quickly car prices will double easy quickly and that's where I'm heading probably today but most likely next time so that's the money supply all right and that's chapter chapter 2 is today that's right here chapter what determines crisis of a so in a flash [Music] because the answer is shockingly simple this is one of the easiest answers you can have him prices are determined by supply and demand all we need to do or try now is to put a supply and demand to money into prices let's take a look and see all right first basic economics demand in general is downward sloping that's as you raise the price of something the quantity demanded Falls as you lower the price of something quantity increases to do lower further the price quantity demanded increases that's basic straightforward economics we're always in here demand and it's exactly the same is the man skip that's the man the schedule will be basically a little table that in Europe what price so for each price that's the demand so high price we can use now this thing here if price goes up this is increasing means that now demand goes down that's it basic relationship nothing new here let's see what else we have all right so that's very straightforward is absolutely nothing people now saying will be and that's actually a lot more interesting and important is supply supply is typically upward sloping so you have quantity you have price one price you will have a particular supply this is we should be indeed you increase a little bit the price the quantity supply will increase as you increase the price the supply increases that's again very straight with straight form so as price goes up yeah quantity supply also decrease again fairly straightforward next is suppose there is a surplus let's see which way we're going to have is a service okay suppose you have a demand curve suppose you have a supply and suppose that the prices here okay let's see do we have a surplus or shortage here goes like this this here is supply this year is in the hand this year is quantity supply this year is quantity demanded now quantity demand is greater than quantity supply so how does the market but just what is the adjustment process how does the market work it's very simple if there is a shortage means people want to spend people want to buy if you increase the price I'd say $5 if you increase that this here is representing the shortage this is something people want to fight back stoppage well and suppose the price 5 goes to 6 what is the logic said our CEO people come in people want to buy but it's not there and instead of asking for 5 they will ask for 6 why would they ask for sex well no need if you're a seller why would you sell at 6 instead of 5 ok let's try again people wanna buy people come people asking for it and you have only 3 pieces why if you're a seller you will raise the price four five six there's a lot of demand okay let's try to get something simpler there's one fundamental reason it's called profits profits we call this profit motive people raised suppliers raise prices when there is a higher demand because they are driven by profit if you raise the price you will make more profit if you lower the price you will have less problem so the profit motive drives suppliers to raise the price so the profit motive is what adjusts the lower price when there is way higher price now the six the condition Hispanics manner again there is again and those sellers that raised the price to seven will profit even so the most important part to understand is that there are two elements that needs to be satisfied - profit motive it is always bigger guarantee people always want to make more money people are by nature greedy the more profit the better this is the one thing which is guaranteed by human nature it's just the same for Chinese as with Japanese with British and French English Russian vulgaris we're tied with anybody in the world they want more money the second part is trickier it's called free prices or free adjustment of prices as long as prices can adjust free in other words sellers can raise the price everything is great these things works now obviously when you raise up to eight receiving the main equal supply we say that the market clears clears two clear means that demand equals supply means there is no shortage it means there is no service this clearing in economics is called well what if the price starts out of 50 stars out of 50 in here what happens now oh they will meet this week all sharp dish and this is certain plus so you're a Salesman okay or a virgin you have a lot of stuff you have 20 units and 15 units and surplus and you're greedy you want to make more profit now you sell only five minutes in a profit is not big what is the response if you want to have [Music] yes well number one you got extract will surplus in a trying to sell eggs your eggs will spoil you will lose those it's better to lower the price and sell yet and gets something rather than not that's the big difference to understand in the sir a situation in a circle situation if you are a merchant if you are a dealer and I've seen this a lot happens a lot in Asia where small during the mid-sized businesses they put a particular price they cannot sell anything they're not willing to lower the price that's what happens to businessmen who are not wise were not adjustable who cannot change so it is always more profitable to lower the price and the guarantee is price adjustment the seller wants him lowers the price and the profit now here's the next thing to understand which is of course simple common sense you're all salesmen okay you're all set in whether it's anti-polish doesn't matter if two three or five of you decide to lower the price from 15 to 14 you lowering the price of 14 we'll sell a lot more you will make a lot more profit in those seven fifteen will sell nothing you're actually going to be losing money so not only when you lower the price to fourteen you actually gain and profit more but these guys actually lose more deadly so when these guys lower the price it forces you to lower the price to have the situation where it is their ass out these guys won't make it for profit they won't grow their businesses in those that keep the price high they usually lose money so there is out this surplus forces through the profit motive prices low wealth prices 14 still a lot of surplus there is more price pressure now so again the price goes down all the way you know here all the way to be so it's simple basic straightforward microeconomic stuff as long as businesses are greedy as long as they want as long as more profit is better in the trichromats as prices below the equilibrium will be driven up for more profit but prices above equilibrium will be driven down so no matter where you start as long as people maximize their profits they will drive prices towards the equilibrium and this applies equally well for money let's move on and see what I have so I explained the sole surplus that's for those of you who have textbooks okay the market is clear market is clear first 20 that's market clearing okay next one page 20 the profit motive does all right here age 20 that's the profit motive you can stage in the middle and the next one free adjustment of crisis the next book calls it how the free a price system which is the same as free pricing all you need to do is let prices be free this applies for money this applies for interest rates this applies for houses this applies for any commodity including rice as the most important so the three prices they're not babe 20 join all the DS two together you need these two together to guarantee movement towards equilibrium shortage that's page 21 okay you have you see on the right page 21 the equilibrium price again I wrote that equity group that's page 21 I have it on 21 the last air the equilibrium price it's the intersection price I'm reading from the board the price which tends to be the daily market price intersection meaning intersection between and supply the price which clears the market the price of the market is called the equilibrium price is unique unique means there's only one price that clears the market not too earthy let's do this we're gonna occasioned assume it's over you can see the picture see so the price that clears the market is unique only one price you can have two or three price yeah who made me more the big man last an example will win the West they even here as the weather gets more hot during the day people demand they just wanna buy more ice cream and if it gets cooler and especially let's say in Europe but again stop people don't even buy ice cream soda man they change over the day it may change with temperature it may change with other things but at one point in time there is one you need to demand okay so all right so you will have shortages and services driving towards the equilibrium we call these things prop adjustment all these things in general the general rule is called market forces market forces mean not related to the government everybody acting in his own interest you might water if you want anybody phone if you want you sell water did you like and you sell iPhone if you like you put your own price anywhere all you need to do is to be self-interested consumers need to pay the lowest price and sellers want to charge the highest price that's all you need to do market forces all right the next again very simple concept a to page 23 is rationing market market rationing for example if water becomes a little bit scarce for some reason doesn't work very well or whatever that might be maybe people want to buy water will be willing to double or triple if there is a water shortage in the price of a bottle goes from 15 cents to to the haulers would you buy water short answers only if you're very thirsty and if you're not thirsty so rationing means that the market distributes goods all that to those who are most willing to pay for it you really fiercely gonna buy that water which is more expensive same thing happens with behind phones you really want to get a iPhone even a paid those seven or eight hundred or whatever one thousand US dollars if not to give by a whole lot cheaper galaxy for two or three hundred dogs so twice as the function of rationing if you really gonna buy rice with whatever else we want to buy indeed that's what the rationing function of tomorrow rationing is associated to scarce goods who's associated with the scarce goes the main function of the market is to ration scarce goods to those most willing to all right so next month again basic economics suppose that there is an increase in demand basic economics so demand curve shifts demand curve shifts this is the and this is the new one price one star star if demand increases what happens is two things the price one star so the rising demand causes the price the equity price to rise and causes the new equilibrium quantity that's very straightforward we can have right next the price to fall and fall okay now what about supply again this is just single basic economics supply whether it was nice whether it was good the Sun the training everything's perfect and you have a price so supply shifts to the right when supply shifts to the right two things happen so supply increases causes number one it causes the price to supply to increase so whether the supply increases of course the equilibrium supplying raises and the price of that's basic economics so this here is age 20 this is just basic adjustment when demand increases for whatever reason could be more hot weather people wanted more ice cream the price tends to rise the world and sellers and you sell warm ice cream that's basic economics okay let's see what else we have but here in the textbook they draw the supply curve to be particle or it could be like that it is the result is pretty much identical that's one page okay well here's the next thing it's again called a sense but it's usually forgotten in economic analysis you have to put x and y if you have two goods x and y m consumers demand and here's the next key base supply of money is fixed you got the same amount of money get the same twenty dollars in your pocket okay and again to good one baby water the other one may be Jews or in the Western case one may be coffee yeah well maybe tea this is very simple and very important to understand in terms of money and bank that just have only two goods it's very simple when we made four x rises it follows immediately that demand for y what happens to the demand for y it drops that's very easy in people's forget all the time demand for one good given the same supply of money must always mean for sure guaranteed that the demand for the other good must necessarily well if demand for white drops does it mean the demand for X will arise when we have only two goods yes absolutely guarantee so rising demand for the one means falling demands for the other in the opposite is also true falling demand for one means rising demand for the other team this is observation this is one of the most important observation related to in place are we finish
Info
Channel: Krassimir Petrov
Views: 8,288
Rating: 5 out of 5
Keywords:
Id: 72d8FU8ciOw
Channel Id: undefined
Length: 49min 46sec (2986 seconds)
Published: Thu Nov 10 2016
Related Videos
Note
Please note that this website is currently a work in progress! Lots of interesting data and statistics to come.