Money And Banking (1983)

get as you have just seen the history of money from the barter system to the credit card system is a fascinating story and knowing where money comes from makes it easier to understand how it works today I hope you have enjoyed your tour through the bank's new exhibit on the history of money please come again excuse me I'm the new security guard here I heard some strange noises so I came to investigate what's going on here I I thought this area was off limits to everybody I'm just taking a sneak preview of the bank's new exhibit my friend here has been giving me a guided tour while I get the place all pretty and Polished for tomorrow's grand opening there's nothing to worry about uh Mr Franklin Finch well uh that's one of the first things they teach in security school you know is to check out all irregularities well I've been called plenty of things in my day but never an irregularity name's Katie Gerard I'm pleased to meet you Franklin hi and you know I've been around this place a long time in fact Mr Johnson says this Bank probably wouldn't open up each day without old Katie who is Mr Johnson well he only runs this Bank oh in fact this whole exhibit was his idea now he thinks people need to learn more about where money comes from so that's what I've been doing Hey listen as long as you're here why not let me show you what I've learned no no I I really have to be getting back to my RS oh come on it'll just take a minute no no really I have to be getting back what's that doing here that piggy was used before we had money see if I was a farmer raising chickens and you were a farmer raising pigs and I wanted a pig and you wanted a chicken we would just swap or barter as it was called but what if I didn't want your chickens but you still wanted my pig well the Barger system worked fine as long as you can find somebody who had what you needed and needed what you had now let's just say that there's still no money right now okay that's easy all right now uh say I wanted something of yours a your security badge and all I had to trade was this vacuum cleaner but I I don't need a vacuum cleaner but I certainly need my badge all right then think of something that you do need uh uh brakes new brakes for my car um and a muffler and uh fact is I need a new car well let's just say brakes brakes all right now I have to find somebody with brakes who wants a vacuum cleaner go to him make the trade and then come back to you and trade the brakes for the badge there must be an easier way exactly that's where money comes in come on over here see I could give you money for the badge say $100 or 100 dogs teeth or whatever is the going form of money you can now exchange money for the breakes now that's the number one function of money it is a convenient medium of exchange you're really smart for a cleaning lady I I mean a woman I am not a cleaning woman I am a maintenance manager if you please and I know more about what's going on in this Bank than most loan offic ERS I bet you do you know for a long time I just looked on this as another place to work then I got kind of curious about what was going on around here and I did have all my savings in this bank so I made it my business to find out it's weird to think that people used to use uh trading beads shells Nails as uh money well those things had value for the people who used them like your badge has value for you yeah yeah yeah I I come to think of it I don't think I'd sell it for $100 well then you could set a higher price don't you see come here look money is not only a medium of exchange it is a standard of value now with money we can compare the value of things and set prices ah if your badge is very valuable you might set a higher price maybe I could sell it for $1,000 well all right let's say that I accept this very high standard of value you put on your badge but here was I with a cleaning woman maintenance manager salary what could I do uh you could save up yes and that brings us to the third function of money money gives us a together and store of [Music] value jeez yeah if you thought it was a mess with with a the dogs teeth and the chickens I me look at this it looks like every state had its own form of money yeah but then they finally gave in and adopted a national form of money but even now whether it's dogs teeth or dollar bills what we're using is money is really based on trust if we stop trusting the money we're using the econom is in big trouble oh just like me if I don't get back to my rounds hey I have to make a check in the bter well I hold on I'm going your way let me get my car okay oh you know I think I saw you drive up to work tonight is that your car that old maroonish Heap terrible isn't it well it's no Maserati I'm saving up to buy a new one I figure about $50 a month it'll take me oh about 4 years that old car of yours will be in the junk he long before you saved enough say why don't you take a loan from the bank no well For Heaven's Sake I didn't say Rob the bank what's so terrible about a loan look my father went bankrupt when I was a kid I swore I'd never borrow a penny as long as I live oh well sure I can understand that sure I can some people just don't know when to stop borrowing but if Katie Gerard is any judge of character and she is you're no Spen Thrift I try not to be well that's why you're the perfect person to get a loan good job reliable now if you were to get a loan I'm just saying if you could have a brand new car and pay your $50 a month while you're driving it that's how I'm paying for mine a new car would be great but uh hey wait a minute I got an idea it's okay come on come on now then uh Mr Finch come on Frankie Frank I understand that you are in need of a new car perhaps something in a uh Turbo Charge 5speed I'm really not very good at pretending well I wasn't very good at banking until I came to work here come on Frankie now Mr Finch about that loan um yes I'd um I would like a new car uh and I I do a steady job U but my father he he has not none of that on the loan application as long as you are an adult and have a steady job we don't need to know anything else unless uh you yourself have some outstanding debts oh no I no I don't not one well then Mr Finch I would be pleased to approve your application now you will need to make small monthly payments with interest over a period of 3 years and then Bravo Katie I couldn't have done a better job myself Mr Johnson what are you doing here at this hour working on a speech for the opening of the exhibit tomorrow and uh you I see have been Moonlighting as a loan officer well I'm just trying to convince our new guard here to become a bank customer oh U Mr Finch this is Mr Johnson hello sir um I I'll be getting right back to my rounds uh I have to go check the Vault area oh come here Frankie Mr Franklin Finch is a very very careful young man don't you know that's why he's going to be such a good security guard but before he opens an account here or takes out a loan he'll probably want to know exactly what happens to the money in this bank and where we get the money we lend Katie that sounds like a hint if ever I've heard one well let's see if I can help the money that Banks lend Mr Finch comes from deposits that people make in their savings or their checking account those are people just like me and you Frankie only when I put my money into a savings account I'm not only helping the bank I'm helping good old Katie see now my savings earn interest yeah and uh and I'm protecting my money from being stolen or maybe even destroyed by fire but I need my paycheck to to buy things and to pay my rent well of course you Lord know that paycheck go so you open a checking account it is much easier and much safer than carrying around a lot of cash just what I was going to suggest see more than 90% of the money in this country is in checking accounts when you pay by check the transfer of funds happens within a bank or between Banks or with electronic transfer almost quicker than you can blink an eye and bank robberies can happen just as fast maybe we could talk some more in the volary it's it's really time to close it up okay Franklin but it's been quiet as a tomb here I know but they always taught me in security school don't be fooled by silence good crooks are quiet and there's a lot of money to be head in that Vault so so please let's check it out why would there be money in the vault Mr Johnson said they just lend out all the money that comes in well not all of it Katie would you deposit money with us the Federal Reserve board requires us to keep a certain amount of it on reserve the rest we lend down so when Katie puts money in the bank she's helping to make it possible for me to get a loan well that's the idea anyway it takes a lot of Katie to make these loans possible this works both ways when the bank lends out money uh say to you it not only helps you get your car it stimulates business increases the money supply and helps the community grow I never thought me borrowing money could do anybody else any good the more money that's borrowed the more money there is in the commun of course I wouldn't advise anyone to go too deeply into debt in your case Mr Finch I'd say why not go for more moderate price car the 5-speed turbocharged sports car that was Katie's idea a simple twoo is what I want but even with my savings I'd need $4,000 it could still be a black and shiny twoo okay let's assume that you get the $4,000 from us you give it to the car dealer he deposits it in the bank which puts 10% or $400 on reserve and then they can lend out $3,600 to the next customer say a factory owner who needs a loan to add a new machine to his production line he gets the loan pays the machine manufacturer who then deposits the money into another bank which puts 10% on the reserve and let's see that would leave um uh 3240 uh for the next customer so the original s of $4,000 keeps getting used over and over again and it can expand to let's see $40,000 wow so the money supply keeps growing and we get richer and richer but there has to be a limit to all that loaning spoken like a true Banker you're right Mr Finch there is a limit if the money supply just kept growing we'd have terrible inflation did you hear something no I thought for sure I heard something oh Frankie it's all no really really I I heard something now what was that about inflation well the control that curbs the money supply is called the Federal Reserve System it's the Federal Reserve that's kept me here late tonight I thought you said it was a speech for the grand opening of the exhibit well that's true but you see that's what the speech is all about my daughter's High School class is coming to see the exhibit tomorrow and I told her teacher that I would say a few words about the Federal Reserve System me in my big mouth I can just see all those High School sophomore more squirming and fidgeting while I try to tell them about the fed well why don't you try the speech out on us oh I don't want to keep you here any later k nonsense Mr Johnson I'd love to hear it oh really I don't think I Franklin and I are both very interested in hearing about the Federal Reserve System now aren't we Frankie yes all right come on bring a couple chairs we're going to listen to a speech now that looks like a good speaker's table come on Mr Johnson right over there go on um the Federal Reserve is really A bank's bank now the FED as we call it not always so affectionately watches the economy and controls money supply through what is called its monetary policy now first of all the FED can buy and sell government bonds on the open market now this has a direct effect on the money supply now second it controls the percentage of the money that banks are required to keep on reserve what we talked about before with the loan now I mentioned 10% as an example of a reserve requirement but let's say the FED found that there was too much money circulating which could lead to inflation now they might want to tighten the money supply then they could raise the reserve requirement say to 20% and the banks would have less to lend out how am I doing any questions so far yeah I have a question what if the banks have to borrow money well that's a good question Katie the banks can borrow money from the Federal Reserve it's a bank for the bank now the discount rate is the interest the FED charges when it lends money to the banks the banks will pass on this interest rate to their customers if the discount rate is high they pass along a high interest rate oh and people are less likely to take out loans exactly and if the interest rates are low uh too much borrowing right then the FED can raise the discount rate and upgo the interest rate see so the discount rate is another way the FED can control the money supply oh my goodness look at the time I was supposed to call my wife an hour ago for a ride she's probably in bed by now why don't I give you a lift oh it's too far out of your way Katie Mr Johnson I insist now come on get your stuff together and don't forget your code I'll have you home in five minutes Katie I don't know what I'd do without you good to meet you Mr Finch I feel we're in good hands with you here oh thank you sir um and I do feel better about Banks good enough to take out that loan uh well uh I'll have to think about it think about it nonsense now you stick around this bank till 900 a.m. opening time you'll get that loan no problem oh we better hurry we don't want Mrs Johnson to worry Mr Finch I told you you know was the FED who controls the banks it's Katie Gerard who runs this one oh which one is your car Katie oh that little five speed turbocharge jet black sports car over there come [Music] [Music] on e [Music] [Music] [Music]