馃攳
Could digital currencies put banks out of business? - YouTube
Channel: The Economist
[0]
banks are one of the engines of the
[2]
modern economy
[4]
but the way they work is under threat
[7]
tech payment giants and digital
[9]
currencies are revolutionizing how
[11]
people use money
[13]
and this could have dramatic
[15]
consequences far beyond banking
[18]
it could affect consumer privacy
[20]
government power
[22]
and the stability of the entire
[24]
financial system
[26]
it is difficult to overstate sort of how
[28]
radically different that world could be
[29]
from the one that we
[30]
live in now so what would a world
[33]
without banks look like
[35]
and would you even miss them
[44]
the fundamental principles of banking
[46]
have been the same for centuries
[48]
and revolve around the greatest magic
[51]
trick of all
[52]
how to create money it's called
[54]
fractional reserve
[56]
banking here's how it started
[60]
hundreds of years ago banks stored gold
[62]
for investors
[64]
but they realized it was unlikely
[66]
everyone would claim their gold back
[68]
at the same time so they began to loan
[71]
some of these gold deposits out to other
[73]
people
[75]
this made money for the bank through
[77]
interest and helped power the economy by
[80]
allowing idle deposits to fuel
[82]
new business and trade as time went on
[85]
the banks started issuing
[87]
banknotes or ious rather than physically
[90]
giving out gold
[92]
and these ious started being traded in
[95]
the economy
[96]
this meant the amount of money in
[98]
circulation was much
[99]
larger than the value of the gold held
[101]
by the banks
[103]
so the bank's lending had in effect
[105]
created
[106]
new money nowadays most money is digital
[111]
when the bank makes a loan it creates a
[113]
new asset
[114]
on its balance sheet and credits the
[116]
borrower's account with new funds
[118]
which creates a new deposit
[122]
the fundamental principle is the same
[124]
every time the bank makes a new loan it
[126]
creates
[127]
new money in fact ninety percent of
[130]
money in the world is digital deposits
[132]
that have been created by
[134]
banks in this way this is hugely
[137]
important for the economy
[140]
what it means is that banks are able to
[144]
respond
[145]
to demands for money in an economy and
[148]
that means that their supply of money in
[150]
economy
[151]
is very elastic there is no
[154]
set amount of money in circulation so
[157]
if the economy is booming and more goods
[160]
are being created
[161]
then thanks to fractional reserve
[163]
banking the supply of money should also
[166]
increase
[166]
as people take out loans and make new
[169]
investments
[171]
the ease with which commercial banks can
[173]
create money
[174]
is largely controlled by central banks
[177]
like the federal reserve
[178]
which set interest rates if interest
[181]
rates are high
[182]
banks pass those costs onto borrowers
[185]
this makes it more expensive for them to
[187]
borrow money to buy
[188]
things and so banks create less
[192]
new money central banks also supply
[195]
money for use in the economy
[197]
they print the physical paper cash
[199]
people carry around
[201]
and so banks and central banks balance
[204]
the need to create
[205]
money between them that sort of balance
[208]
means that you know money can grow
[211]
easily with demand but also that the
[213]
central bank has sort of
[214]
direct presence in payments and
[218]
transactions
[220]
but this delicate balance is under
[222]
threat
[223]
thanks to a revolution in the way people
[226]
use money
[227]
for a start an increasing number of
[229]
businesses no longer rely on banks for
[231]
loans
[233]
this is because businesses historically
[235]
used to create concrete assets
[238]
like machinery against which banks were
[240]
happy to lend
[241]
they could always claim the assets if
[243]
the borrower stopped repaying
[245]
you know you're reliable
[248]
but intangible assets like software
[251]
can't be easily posted as security for a
[254]
bank loan
[256]
the world has shifted in a way that does
[258]
make it hard for banks to fund
[260]
the sort of most innovative parts of the
[263]
economy
[264]
if you want to get funding as a silicon
[266]
valley startup
[268]
in general you'll need to go to people
[270]
who are
[271]
equity investors so they take a slice of
[273]
your business
[274]
in return for some money
[277]
and it's not just innovative startups
[280]
that are turning elsewhere for funding
[282]
since the 1950s the share of bank loans
[285]
as a percentage of gdp
[287]
has been relatively stable at the same
[290]
time
[290]
non-bank loans and securities have risen
[294]
sharply
[296]
this means the role banks play in
[298]
financing important businesses
[300]
is receding and that's not all
[306]
the way people move and spend their
[308]
money is changing too
[310]
thanks in part to a new class of mega
[313]
apps from china
[315]
one of the most popular is alipay from
[317]
chinese tech giant
[318]
ant group it has over a billion users
[322]
and handles 16 trillion dollars in
[324]
payments in 2019.
[326]
i am alipay i have a dream
[329]
to create a world where mobile payment
[332]
replaces cash payment
[335]
rather than using bank cards to make
[337]
payments alipay customers carry out
[339]
transactions by loading money into
[342]
digital wallets
[343]
they can then do anything from buying
[346]
lunch to investing in stocks and shares
[348]
all without leaving the app and rather
[352]
than paying expensive international
[354]
transaction fees to their bank
[356]
alipay users can also use the app
[359]
overseas
[360]
you're already seeing this even even in
[363]
america you know
[364]
walgreens in the states except alipay
[366]
this sort of new digital payments
[369]
uh ecosystem sort of completely
[371]
disregards nation states and national
[372]
borders
[374]
it's not just alipay facebook is
[377]
developing its own digital currency
[379]
and amazon is also working on financial
[381]
services
[383]
some worry this could concentrate too
[385]
much power
[386]
in the hands of a few tech companies
[390]
but for central bankers the problem is
[392]
even more acute
[394]
they fear these developments could cut
[396]
the cord between the central bank
[398]
and the economy altogether the super
[401]
apps in china they now they started off
[403]
as doing payments and now they do
[404]
provision of loans they do provision of
[406]
investment services they provide
[408]
insurance you know they do all the
[409]
things that banks do
[410]
central bankers feel as though their
[414]
sort of ability to oversee
[417]
and conduct monetary policy and
[420]
oversight
[421]
is you know fundamentally slipping away
[426]
so some central banks have taken radical
[429]
action
[430]
by creating their own digital currencies
[432]
to rival the tech giants payment systems
[436]
in the hope this will secure their grasp
[438]
on the economy
[439]
central bankers level of discomfort is
[441]
potentially prompting them
[443]
to sort of act to change this you know
[446]
economic system the monetary system that
[448]
has underpinned
[450]
uh modern economies for you know 250
[452]
years
[453]
china is one of the largest economies
[456]
leading the way
[456]
by trialling a digital um
[460]
you might have heard of bitcoin or other
[462]
digital money
[463]
that is supposed to disrupt finance but
[466]
digital currency issued by governments
[468]
in this way
[469]
might be even more radical here's how it
[473]
works
[475]
most central bank money is held by
[477]
commercial banks
[479]
as reserves against customer deposits
[482]
you can only access
[483]
a small amount of this government-made
[485]
money via physical notes and coins
[488]
as this physical cash is issued by the
[490]
central bank
[492]
in the uk bank notes are even signed by
[494]
the chief cashier of the bank of england
[498]
a central bank digital currency or cbdc
[502]
is a bit like digital cash as it gives
[504]
the consumer a direct relationship with
[507]
the central bank
[510]
so in theory instead of keeping your
[512]
money in a commercial bank
[514]
you could hold all your money in the
[516]
federal reserve or the bank of england
[520]
cbdcs are only being used or trialled in
[523]
a handful of countries worldwide
[526]
but they're growing fast 80 percent of
[529]
central banks are considering issuing
[531]
them in the future
[534]
the bank of international settlements
[535]
which is a club of central bankers says
[537]
that uh within three years
[539]
a fifth of the world will live in
[541]
countries that have
[542]
this central bank digital money this
[545]
could change
[546]
everything if everyone put their money
[549]
into a cbdc
[550]
then fractional reserve banks could
[552]
potentially be out of a job
[555]
this could affect economic growth as
[557]
they could not rely on consumer deposits
[559]
to finance their loans
[561]
and this would be particularly
[563]
pronounced in the developing world
[565]
where most lending still comes from
[567]
banks
[568]
but that's just the beginning there are
[571]
also
[571]
concerns about potentially
[575]
you know cyber warfare because if you
[578]
can take down
[580]
the servers that support the central
[582]
bank digital
[584]
wallet system then you could shut down
[587]
an entire economy digital currencies
[590]
could also
[591]
increase the potential for state
[593]
intervention in everyday transactions
[596]
it becomes much easier for governments
[599]
to completely
[602]
block your ability to pay for something
[605]
it's very easy to imagine
[607]
that you know perhaps you could program
[611]
uh you know money in china so that it
[613]
can't be used to pay
[615]
for books or newspapers from foreign
[617]
sellers
[619]
supporters of cbdc's claim they could
[621]
lead to a world where more people have
[623]
access to financial services and it's
[627]
cheaper and easier to move money across
[629]
borders but innovations like this
[632]
could also disrupt the financial
[634]
equilibrium
[635]
and give governments far greater control
[638]
over their citizens money
[640]
and lives so although it's possible for
[644]
the first time in modern history
[646]
to imagine a world without banks you
[648]
might just find you'd miss them
[650]
if they were gone i'm alice forward the
[654]
wall street correspondent for the
[655]
economist
[656]
if you would like to read more about the
[657]
future of banking i've written a special
[659]
report
[660]
on the subject that you can find by
[661]
clicking the link and thank you for
[664]
[Music]
[667]
watching
Most Recent Videos:
You can go back to the homepage right here: Homepage