Prof. Werner brilliantly explains how the banking system and financial sector really work.

About this Video

• Video Title: Prof. Werner brilliantly explains how the banking system and financial sector really work.
• Channel: Alessandro Del Prete
• Speakers: Prof. Werner, Richard (likely)
• Duration: 15:45

Introduction

This video features an interview where Prof. Werner explains the inner workings of the banking system and financial sector, focusing on how banks create money, contribute to inequality, and the need for regulatory reform. The discussion centers on the UK's financial system as a case study but also draws comparisons to other countries like Germany and the US.

Key Takeaways

1. Banks create money: Contrary to popular belief, banks don't simply lend deposited money. They create money by issuing loans, which are recorded as debt (deposits) on their books. This process accounts for approximately 97% of the money supply.
2. Financial sector concentration leads to inequality: Highly concentrated banking systems, like the UK's, favor large corporations and exacerbate inequality by limiting lending to small and medium-sized enterprises (SMEs). Decentralization is presented as a solution.
3. Productive vs. Unproductive Lending: Lending for productive purposes (investments, technology) fosters economic growth and stability, while lending for speculative financial transactions (asset purchases) drives asset bubbles, inflation, and inequality.
4. Regulatory Reform is Crucial: The current banking regulations, based on the idea of banks as mere intermediaries, are insufficient. Prof. Werner advocates for new regulations that recognize banks' money-creating function and limit their involvement in financial speculation. One suggestion is to ban bank credit for financial transactions.
5. The City of London's Unique Status: The City of London operates outside the regulatory framework of the UK, highlighting a further layer of complexity in the system and its reform.