The Difference Between Fiscal and Monetary Policy
Vložit
- čas přidán 11. 12. 2022
- Governments are typically concerned with curbing both unemployment and inflation, and there are two ways they approach this, fiscal policy and monetary policy. These are tools that can be used to speed or slow economic growth. What are they? How do they work? Let's check it out!
Script by Matt Beat: / iammrbeat
Animation by Ignacio Triana: / unraveled
Watch the whole Economics playlist: bit.ly/ProfDaveEcon
Mathematics Tutorials: bit.ly/ProfDaveMath
American History Tutorials: bit.ly/ProfDaveAmericanHistory
History of Drugs Videos: bit.ly/ProfDaveHistoryDrugs
General Chemistry Tutorials: bit.ly/ProfDaveGenChem
Classical Physics Tutorials: bit.ly/ProfDavePhysics1
EMAIL► ProfessorDaveExplains@gmail.com
PATREON► / professordaveexplains
Check out "Is This Wi-Fi Organic?", my book on disarming pseudoscience!
Amazon: amzn.to/2HtNpVH
Bookshop: bit.ly/39cKADM
Barnes and Noble: bit.ly/3pUjmrn
Book Depository: bit.ly/3aOVDlT
Thank you so much the 7 minute video is more helpful than the 2 hours lecture 😔💗
Perfect for me interested and learning about subjects such as politics and economics where this matters.
Well explained. Thanks
Thx for this!
Thank you!
Thanks
Just to add to the video, the Required Reserve Ratio plays a much bigger role than mentioned here. The $9000 that is lent out will eventually be deposited in the bank again, if somebody does not stuff it in an old mattress. That money can then be used as reserve for a new loan again. Effectively this means that the $10,000 deposit will allow the bank to lend out $100,000 in loans. That is, the bank is creating money: the amount of money is circulation is multiplied by 10.
It's even worse than that once you factor in the fact the government needs to take out money from the Fed, and basically what they offer is the "IOU" bond as mentioned in the video. This is basically a reputation game with extreme consequences once borrowing or lending skews in one way. The biggest of all of these issues is this whole "interest" factor that goes completely ignored in the video for some reason. Dave by proxy explains how "total money" in the economy is actually created (by the deposit process within your choice of bank which renders said money legal tender if you were the first to reap that money in the same way the government is the first hand dib).
If all loans are paid off, there is thus no more money so to speak, thus no way to even charge interest. Interest has an even more insidious aspect that prevents all debt from being paid off simply because if we follow the $10K example in the video. If there is a 5% interest on that loan, and let's say the entire economy was reduced to two people, the person loaning, and the person borrowing. How can the person who now has to return $10K + $500 (5% interest) even return that money? The entire money supply was $10,000 ... It's literally impossible to return the interest owed if you truly wanted to pay off the entire debt as owed, there's no way to manifest these "owed" $500 extra dollars in an economy with only $10,000 in it in the first place. The way this is handled in reality (and the only possible way it could be handled from a business perspective) is to tell the person you loaned the money to, to then make up the $500 difference using something else other than money. That thing is virtually in all cases what we call "labor". This is obviously the reason many people detest modern economic systems like fractional reserve banking, interest in banking, etc.. As you basically can easily argue for a truly rigged system meant to keep debt as a constant to perpetuity.
is the money multiplier always ten?
The required reserve ratio has been 0% since March 2020 - so it has been a non-existent role since then.
Perfect timing Dave my macroeconomics exam is tomorrow
Good luck
Cue Zeitgeist flashbacks
Hi Dave. I check out your stuff all the time. I am very entertained by your attacks on pseudoscience. Keep it up.
Thanks for your generous support!
Dave is jack of all trades and yeah, master of a few😂
Cool!
bro please, on an unrelated note, please debunk the silva method right now, im not seeing many debunking videos on the silva method so please do a thorough debunking 🥺
Prof Dave teaching me calculus and economics
Professor can you do a video on trickle down economics and if it is bad or good? HAPPY HOLIDAYS
For all intents and purposes, Keynesian economics is synonymous with "trickle down" economics. Both concepts adopt the notion that if money is injected at the highest levels, it will eventually move through the economy, yielding the "multiplier effect" that this video discusses. In other words, policy that feeds money into the economy at the highest levels (e.g., relaxing reserve requirements for banks, that then produces more loans to small and large businesses, that then encourages businesses to grow, that then results in more hiring and better wages), is a typical Keynesian approach.
This stands in stark contrast to "trickle up" policy, which is generally increases to minimum wage, Federal subsidies to specific producers of goods and services, or outright tax breaks to the poorest taxpayers.
GlennP provides false information.
Trickle down economics: tax the rich less, they will spend more, which will result in economic growth, which will result in a netto increase of tax revenues. It has been falsified.
Keynesian economics: the government invests (eg in infrastructure) during hard times and cuts expenses (saves money) during good times. Officially: monetary politics are anticyclical. It sometimes works, sometimes doesn't (notably in the late 1970s).
It would be a total of three seconds long, and would simply consist of him saying “It doesn’t exist. It can’t exist. The end.”
Anything more than that would be redundant.
@@glennpearson9348 Keynesian and trickle down are opposites though. Both are expansionary fiscal policies. Trickle down is about tax cutting, while Keynesian approach would expand social programs.
@@abrahamel-gothamy6472 We must have gone through very different economic programs in school.
I don't follow your logic, so help me understand, please. First, you suggest that trickle down economics and Keynesian economics are opposites. Then you say that they are both expansionary fiscal policies. So, are they opposites, or are they the same?
I agree that a fundamental precept of trickle down economics is cutting taxes - for corporations and the very wealthy, in the hopes that those tax savings will "trickle down" to the middle and lower classes.
Keynesian economics are the various macroeconomic theories and models of how aggregate demand strongly influences economic output and inflation. That is, demand for goods and services drives the inflationary cycle.
So, Keynesian economics describes what the money does, and trickle down economics describes how the money gets there. But both models begin with putting money in the hands of those who can create the highest demand for goods and services - large corporations and the super wealthy.
Dave you give great tutorials
Could you try to explain to the average person the fractional money reserve system
That was the straw that broke the camel's back when it came to the American revolution Once they took our sovereign money away and forced us to use their money we knew we'd always be in debt the rest of our lives That's how we ended up with Can you deal and getting the United States of America
Original sin slavery still suffer from that sin to this day
Nice
"For this reason, the Fed yields tremendous power over..."
LOL. You mean "the Fed *wields* tremendous power". The Fed isn't in the habit of yielding power to anybody. ;-)
😂😂😂😂 👏 👏 👏
87
Also, politicians in general are trying to reward different voting groups as the middle class
5:00
I have no idea what any of this means. I am never going to use this information.
I still enjoy it though. Weird.
Honestly, I just like his voice…I’ll put on a super long video and walk my dog/go about my day and hope I retain a crumb of it so I can listen to my uncle talk about physics and be able to throw in the occasional “oh, you mean blah blah blah” lol
Here's where you would use this information:
Understanding the macroeconomic policies that govern our economy, so you can be an informed voter, know what politicians are talking about, and make educated decisions in elections.
👍👏
You need to heavily edit or update this video as much of your monetary policy info is far out of date. The Federal reserve doesn't really do OMO anymore since 2008. Massive QE at the time really reduced the effects of OMO. Also, the required reserve ratio for banks has been 0% since March 2020. The new tools the Fed uses today are interest on excess reserves (IOER), reverse repurchase agreements, and forward guidance. Much of this is actually done with the goal of affect the demand for money rather than the supply.
Check out the most recent (9th edition) of the Hubbard O'Brien Macroeconomics textbook, as they have a decent explanation of it all.
i like that song lol
I find the monetary part confusing
?
❤
おはようございます
Would you PLEASE run for congress? Our deficit spending is unsustainable. Congress doesn’t seem to have a clue (or give a ____) about what causes inflation.
Deficit spending isn't the primary cause of inflation. Also the debt just straight up isn't very important at all, the government isn't like a business, it doesn't need to make a profit.
@@calebr7199 If debt doesn’t matter, why don’t they just give each of us $100,000?
Why worry about spending at all?
We need common sense in Congress, not failed socialistic policies. Replace them all!
The debt piled up over the last 3 years sure SEEMED to cause inflation. Moronic energy policies didn’t help either.
@@DM-zq8qy
Read about MMT, or just any economics in general as to why governments don't make a profit. All the talk about the deficit is just scare tactics by politicians that you've clearly fallen for. News flash no government on earth operates at a profit.
@@calebr7199 I read the book on MMT “the Deficit Myth” and it acknowledged that deficits can cause inflation.
WE the people are “on the hook” and suffer the consequences for the failure of our government.
Would you rather be on the hook for a profit, or a loss?
MMT is a discredited THEORY.
@@calebr7199 The more dollars that are created for whatever reason, the less each individual dollar is worth. This is offset to some extent by increased competition and technology but in the end, the dollars in your pocket are losing money every time the Fed creates them. And what is the biggest source of new dollar creation? Federal borrowing. So yes, federal debt matters a great deal. Every stupid government program, every idiotic overseas war we are forced to fight or get involved in, damages the dollar. Is it the only cause of inflation? No, we have an entire banking industry to blame for a bunch of other aspects of this. And only after that do we have contemporary issues like supply lines in an era of Covid and the Ukraine War -- those are temporary. The other forces have been there for over a century now.
First
Now do bitcoin ☺️
You should not be promoting the false idea that a government operates just like a household.
Dave needs to stay as far away as possible from anything related to government and/or politics.
He was just saying that three aspects they both the government and a household have in common is having a budget, having bills to pay, and figuring out how to get the money to pay them.
He's not saying they're exactly the same.
He is not saying they identical but using an analogy to explain the principles. It works just fine at this level.
Funny you morons believe that's what Dave was getting at...lol its like you were listening, misunderstood something then, turned your tiny brains off to talk trash and look silly.
had the same in mind. I dont understand why so many people think that the government needs our money to pay bills. In fact the moneys origin is the state (FED for example). Just like in monopoly the state (bank) has to create and give the money away before taking it back with taxes for example.
Hello flat earth destroyer!!