okay so what we're going to do today is we're  going to explain very precisely what is meant  

by the 700 billion pounds that has been given out  by the government since the beginning of Covid

so people who've been watching this channel  from the start or even in the last few months  

will be aware that I keep going on and  on about this number 700 billion pounds  

that's been given out by the government  it's an enormous amount of money  

It's £14,000 for every single man or woman  in the country so if you don't have your  

£14,000 someone else has got it, in my opinion  it's at the heart of this financial crisis  

um I predicted that because of it at the very  beginning of Covid I said we would get a

cost of living crisis; of inflation, of increasing  asset prices, increasing inequality... 

so if you understand this £700 billion then you  can understand a lot of what's happening...  

it's also an opportunity to attack the government, ask them where it is, ask them who has it  

because it is now held by the richest people in society but if you're going to do that you need  

to understand precisely what it's meant, we've had  a few questions about people saying you know what  

exactly is that number, where do you get it from?  & we're going to explain that all very clearly today  

so first of all what is the 700 billion pounds? the  700 billion pounds is the total government deficit  

since the beginning of Covid if anyone doesn't  understand these terms don't worry because it's  

going to be explained very clearly it's the total  government deficit since the beginning of covid  

which is also the same as the total increase  in government debt since the beginning of covid  

which you can understand that's the total amount  of money given out since the beginning of covid 

um it's it's a public record number we'll put a  little link to just a public website that shows  

exactly the government debt so you can see exactly  how much has increased um and what it is is the  

total amount of government spending over and  above government taxation so when the government  

spends money but funds it through taxation that  doesn't increase the amount of money in society  

it just moves it around so if I come to you and  I tax you 100 pounds and I use that money to  

pay school teachers to pay doctors to pay nurses  it doesn't increase or decrease money in society  

it simply moves it from one person to another   no increase in total amount of money in society  

but when the government spends money without  taxing that does increase money in society  

um and I think it's important  to understand how that works so  

the first thing to understand is okay if  if they're spending money and they're not  

getting it from taxation, where are they getting it  from? now that 700 billion pounds has been funded  

in in basically two ways so 450 billion of the 700  billion has been funded by QE quantitative easing  

um that is a term that confuses a lot of people  and we will explain it and the other 250 billion  

pounds has been borrowed essentially from the  private sector from individuals and we will  

get into that as well this is more 450 from QE (quantitative easing) and 250 from traditional  

borrowing now let's start with the £450bn Q.E. because that confuses a lot of people and it also  

shows you really neatly how this leads to  cash accumulation by individuals in society  

so QE which stands for Quantitative Easing is a  concept which has confused a lot of people and  

I'm going to provide a slightly simplified way of  understanding it which I think helps understand  

crucially how it affects the economy in society  so I'm gonna step forward that when you hear QE  

what you should understand is that that is the  Central Bank in this case the Bank of England  

printing money and lending it to the government  

so you should understand that the central bank Bank of England here or Federal Reserve in the US  

European Central Bank (ECB) in Europe  prints money and lends it to the government  

and this is one way that the government can  finance its spending, now I'm going to briefly  

elaborate a little bit on this simplification  because I know there'll be people who will be  

watching will say that's not what QE is, that's  not how QE works but if you don't understand  

this slightly more detailed explanation of QE  what you should keep in your head is that QE is  

when the Central Bank prints money and lends it to  the government okay in actuality what happens is  

the government borrows money from the  private sector from individuals from banks  

and at the same time the Central Bank buys  those loans from the banks now imagine  

you are the private sector you are the banks  and the government borrows money from you the  

government borrows £100 it gives you an IOU  for £100... IOU £100... £110 plus interest 

in a year's time then the Bank of England comes in and buys the IOU from you  

for £100 or maybe for £101 so you lent money to the government  

and then you immediately sold that debt  for the same price at the central bank  

effectively it's as if you weren't there right  you made the loan to the government then you got  

rid of the loan you're a middleman and the  end result is that the government owes money  

to the central bank and the central bank has given  money to the government you see what I'm saying?  

technically the central bank doesn't lend the  money directly to the government there's a middle  

man between who basically stands in the middle  and takes the money from Central Bank and gives  

it to the government but that is not particularly  relevant for the end result, the end result is the  

Central Bank prints money, that money gets sent  to the government, the government has the money  

so the way you should understand QE is  that it is Central Bank prints money and  

lends into the government does that make sense?  what is useful about this from the perspective  

of our understanding is because that money  has basically been magic'ed up out of nowhere  

it makes it really clear how when  the government spends this money  

which is run runs a deficit, how that increases  the amount of money in society right so sound  

the government I borrow money from the Central  Bank 700 billion pounds what 450 billion pounds  

at this point you're not affected right it's just  the transaction between the government and the  

central bank but when the government then gives  that money out it's it's brand new fresh money in  

society and that 450 billion is created so it's  it's in the case of the QE quantitative easing  

funded deficit it's really clear how this just  leads to increased cash holding in society right  

it's couldn't be clearer really the government  prints it it goes through the private sector but  

it ends up being led to the government and then  the government just gives it out and I think this  

captures something which we spoke about in last  week's video the "What is Money?" video which is that  

the Central Bank cannot give money out they can  only lend money but government can give money out  

so the Central Bank lent £450 billion to  government 450 of the 700 and the government  

gave that out and this at the beginning of Covid  that number was 250. we could see then that it  

was going to be increased but it was basically  that simple understanding which enabled me to  

make a lot of money trading at the beginning  of Covid because you could see okay  

the government... the central bank has only lend  250 billion to the government the government's  

going to give 250 billion out we know someone  is going to end up with a ton of cash even

250 billion is still £5000 for every adult in the country right so we knew there's going to be  

a ton of money given out right someone has to have  the money, people have more money, it's going to  

push up prices, asset prices will go up and this  is how it was very predictable from the beginning  

of covid that for example house prices would  increase now most mainstream economic pundits  

were predicting a collapse in house prices but if you  understood well you know the government and the  

Central Bank together are giving a ton of money  out we know that actually it's much more likely  

asset prices will increase so what is nice about  this QE funded money even though QE itself can  

be a bit confusing and I think you understand now  what it's meant by QE yeah? the Central Bank prints  

money and lends it to the government what is nice  about it is it creates a very clean increasing  

cash holding in society it's very clean it's very  clear because that money hasn't come from anywhere  

it was printed by the Central Bank given to the  government and put out into society um so that's  

450 billion of it and we know we know now it has  to be held by somewhere it's like if you pour 450  

liters of water into a swimming pool you know  that that water has to be in there that money  

has been poured into society and somebody has  to have it somebody has to have it nice and easy  

um one little thing I will add on this is that the  Central Bank pays interest on that money so even  

though the Government and the Central Bank between  them have created this money, it is still basically  

interest bearing debt because the central bank  pays the base rate on that money and the base  

rate has gone up and up so now the Central  Bank actually has the pages open that money  

another thing is this creates an interesting  situation where the government owes a lot of  

money to the central bank and the central  bank is is essentially a part of government  

so it raises the question of is this really  government debt and I would say yes it should  

be counted as Government debt because the Central  Bank pays interest on it so you're paying interest  

on it like any other debt and technically it is  included as part of the government debt okay so  

700 billion is the total deficit 450 billion of  that funded by QE we know that because that's  

brand new fresh money that exists in society  somebody has to have it it's not complicated  

you follow that? the other 250 billion is funded in  the more traditional sense of government borrowing  

and what that means is it borrows money from  pension funds from wealthy individuals  

a lot of the time you think you have money  in the bank your bank would actually use  

that money to buy a government bond  and will be holding government bonds 

so essentially the money in your bank  account is used to buy government bonds  

and it's a little bit more complicated to understand now... okay is society richer now because  

in the case of the QE it was absolutely brand  new money poured into society okay now let's  

consider what happens if the government borrows  250 billion and then spends it into society  

okay so imagine your your Society okay and  you've got you've got 100 pounds I walk into  

the room and I borrow that 100 pounds off you and I give you an IOU, are you richer? 

not really you used to have 100 pounds now you've  got an IOU for 101 pounds so if you include interest  

but then I give the 100 pounds back to you

are you rich now? see what what makes  society richer is not the government  

borrowing it's the fact that the government  borrowed the money and then gave it back  

so if I borrow money from you and then give you  the money then you have the credit and the money  

and I think what makes it even neater is often the  bank does that basically without you knowing so  

you have 100 pounds in the bank the government  comes and borrows 100 pounds from the bank and  

then gives you the hundred pounds which you  put in the bank so now you have 200 pounds in  

the bank so the answer is yes you're richer if  somebody borrows money from you and then gives  

that money to you, you are richer because you have  the money and the credit and often all you see is  

an increase in your bank account because the  borrowing goes on by your bank your bank lends  

the money to government, the government gives the money to you and you are richer so it's um  

it's not that complicated really if somebody borrows  money from you i.e the government and then gives  

you the money, you double your money, does that make  sense to you? it's you know.. and I could do it again  

right you know; you've got £100 I borrow it  from you & then i give it to you now you've  

got £100 and £100 borrowed.. like now.. £100  also owed to you okay you lend me another  

£100 pounds & I give it to you again you know so  of course of course that makes society richer so

basically the end point here is no matter  how the government funds it's borrowing  

be it by printing money or by borrowing money  from individuals if the government then gives  

that money out society has more money it's as  simple as that you know if I if I borrow money  

from you or if I print money and give money to you in both cases you end up with more money and  

it's important to understand that this is not  this is not about lending money into the system  

and most traditional economists when you talk  about people having more money they will think  

about increased lending this is about giving  this is about the government going into debt  

and giving money into the system which means  that the rest of society must go into credit  

and must accumulate money and if anyone  doesn't understand that I would encourage  

them to go watch last week's video what  is money that explains very very clearly  

the monetary system is always in balance in  terms of who is in debt and who is in credit  

so there, that's what it is basically the £700  billion is the total amount of money given 

out by the government above taxing, if the  government tax isn't spent that doesn't increase  

private money holding it just moves around  but if the government prints and spends  

or borrows and spends that does increase  money held in society and it then becomes  

important especially if the amount of money is  enormous to understand who is getting that money  

so I've said it many times before and I'll say it again £700 billion is £14,000 for every adult

in the country so if the government has given that amount of money out  

whether it's been printed or whether it's  been borrowed the distribution of wealth  

and the distribution of money in society will  have changed enormously and it's important to  

understand anyone who has not gotten £14,000  richer you have effectively gotten poorer because  

other people have gotten richer um but yeah  that's it that is that is the number the number  

we'll put a link in the description so people  can see that it's increasing government debt  

um when the government gives it out somebody  gets it it's it's it's not complicated  

um and if other people are getting it and not you  that will have social and economic consequences  

which we'll go into in the next video um partly  it's funded by QE and that's nice and simple  

because in that case it's brand new money partly  it's borrowed it's funded by borrowing but in that  

case as well it increases money held in society  because if somebody borrows money and gives  

it to you then you have more money um the next  couple of videos we're going to go through  

I think the other couple of important things to  understand which is number one who actually did  

get the money um we've covered it many times in  the channel but you know mainly in the first ever  

video on the channel which is two and a half years  ago now so we probably we've got a lot of new  

viewers you might have seen that so we'll cover  that quickly and then we'll go over basically what  

are the economic consequences because I think the  way that that ripples through society is actually  

really interesting but the main point of this  video what is the 700 billion pounds?

it is the total government deficit since the beginning of covid, part of its printed, part of it's  

borrowed but all of it increases cash holdings in  society it's enough to give 14 000 pounds to every  

single adult if you don't have that, somebody has  that, we need to know who has it... okay that's it

money currently is flowing from the  government to the rich leaving the  

government with big powers of debt and  the rich would be part of money there's  

one other thing they can do with that massive  amount of income they can buy your mom's house