This video is about Coronavirus and money. Now this is a really important

video, I've been wanting to make it for a long time, because huge, huge, historic things

are happening in the world of money here. Even when I was working as a money trader in

the 2008 crisis nothing ever happened of this speed. Now what's happening in the world

of money here is going to dominate the economy for the next few years

quite possibly even the next few decades. It's going to affect you it's going to affect

your family's financial position, so if you want to understand what's going to

happen in the economy going forward, you've got to watch this video.

Now so far in this crisis, most workers have had their incomes relatively protected. in this country the

In this country, the UK, most workers are still working and getting their regular incomes,

of those who can't work the majority are being supported by government furlough

and self-employment schemes. Now, as many as five and a half million

workers are falling through the gaps of those schemes and are getting almost no

income support. Now those guys already are feeling the pain of this financial crisis,

but what we're going to explain in this video is how even if your income is

being supported, the changes in the world of money, behind the scenes, are

going to affect your financial position going forward. Now we're going to explain how.

Now the biggest changes have been happening in the world of government and central banks,

now this is happening all over the world, but in the UK the central bank, the

Bank of England, has committed to printing 300 billion pounds,

300 billion pounds, it's an enormous amount of money, it's £4,500 for

every single man, woman and child in the country. It's more than three times the

net worth of Jeff Bezos, the world's richest man. Now when such a huge amount

of money gets printed and put into the economy, it's really important you

understand three things about it:

1. How does it work? So we are going to talk about exactly what money printing is.

2. Where does the money go?

3. Where does the money end up.

Now those last two things they may sound similar

but they're actually crucially different, and we're going to explain why.

Okay so number one, how does this new money work. So I think a lot of people are confused by the

concept of money printing. It's important to understand that this 300 billion

pound is brand-new money created by the central bank. Now if that's confusing to you,

you just need to understand that the central bank has the legal right to

print or create brand-new money. Now we say "print money" to give the visual idea

of a printing press printing out new banknotes, but in reality nowadays

most money is electronic, so what that means in practice is that the Bank

of England is allowed to simply credit its own account with new money.

Okay, so this is brand new money, it doesn't come from anyone, it's not raised through taxes

it's simply created by the Bank of England. When that money gets poured into

the system we need to understand who's gonna get it, and the next question: where

does it go? Now most of this money is getting lent from the Bank of England

to the government. Now even though this is brand-newly created money, and the

Bank of England is a government institution, the government still has to

borrow it from the Bank of England. This creates a debt which legally the

government has to pay back. For this reason government debt has increased

hugely already in this crisis and just recently UK government debt has gone

above 100% of GDP for the first time in over 50 years. So what does the

government then do with this money. Well the government gives most of it to

furloughed workers and other workers who can't get their income during the Coronavirus crisis

This brings us to part three: where does the money end up?

now we know the money is being paid to furloughed workers. But if we look at

the actual situation of furloughed workers, they're actually receiving less

income than they were before the crisis happened. This is because, even though

they're receiving government income support

it's only 80 percent of their original wages and their original wages are no

longer coming in. So this creates a mystery. We know that a lot of new money

is coming into the economy, and we know that ultimately it's going to the furloughed

workers, but the furloughed workers are no richer than they were before. So

where's the money going? that brings us to question number three

Where does the money end up? Now we know the money is being paid to the furloughed

workers. But the furloughed workers have less money than they had before the

Coronavirus crisis, because they've lost the wages that they were originally

being paid. If we want to know who ends up with the money we need to find out

who has those wages? Where have the wages gone that used to be paid to the workers?

So if you want to understand we have to follow this cash flow back through the system

Now, normally wages get paid to the workers through the companies. But if we look

at the companies, we will find that most of these companies are struggling as well

because customers have simply stopped coming to their stores and stopped

buying this stuff. So we need to follow the cash flow back

one step further, to the customers. Now the customers in this crisis have

dropped their spending massively. For that reason, many of these customers are

holding more money in their pockets. That money is not going to the companies

which means the wages have stopped. So the people who are holding more money,

the net benefitors of the new money being put into the system are actually the

customers. Now when I say that, you're probably thinking "wait a minute I'm a

customer where's my £4,500 per man woman and child?" and that would be a good question.

The reason why you might not be holding £4,500 more than you were

before is because not all customers are created equal. Remember the reason that

customers have more money now than they had before the crisis is because they've

cut their spending. But it's not all spending that has cut here. Spending on

essentials such as rent, mortgage, food and bills still has to be paid. So if

most of your spending is on those essentials, you're spending won't have

fallen by much. The spending that has fallen is on non essentials and luxuries.

So see here, the customers who are saving the most money are the ones who have

very high spending on non essentials and luxuries. Well, you're probably starting

to see where I'm going with this. Who spends a lot of money on luxuries?

The customers who are accumulating money during this crisis are the rich.

Now I wrote an article predicting this back in March, explaining how rich people, because

they would cut their spending would accumulate savings and money during this

crisis. Since then, data has come out from a lot of institutions, including the IPPR

in the UK, demonstrating clearly that rich people have been accumulating money

during this crisis, because their spending has reduced so much. It's

interesting to compare here the situation of a furloughed worker with a

richer person in the economy. Furloughed workers have lost their income, which

comes from services jobs, but they've kept most of their spending, which is

largely on essentials like rent and bills. Richer workers, who tend to work in

office jobs and can work from home, have kept their incomes, whereas their

spending, which is largely on luxuries, has collapsed. It's important to understand

the significance it has on the economy when the rich people stop spending.

Now in normal times, rich people have very

high spending, much higher than ordinary workers. Because that spending goes to

companies, which employ workers, it contributes to wages being paid. This is

really important because ordinary workers have to pay bills, rent, food. When

they pay that money, a lot of that money ends up going to the owners of the

houses and owners of the corporations who are themselves the rich. So as you

can see in this diagram, in a normal situation, the spending of the rich goes

to the workers, and when the workers pay the rent, bills and food, it goes back to

the rich. The money flows around in a circle. So what happens when the rich

suddenly stop spending? Well that money was driving the wages for ordinary

workers. Suddenly, the workers' wages have disappeared. But they still have to pay

the rent, they still have to pay the mortgage, they still have to pay the

bills. How are they gonna do that with no income? It's a massive problem and if

nothing happens some of these guys they could become homeless

they could even not even get food on the table. So it's no surprise that in this

emergency situation the government and the Bank of England stepped in with the

furlough scheme. This provides a substitute income to ordinary workers who have lost

their wages. It's important to realise that at this point, from the perspective

of the worker things actually look quite similar to how they did pre-crisis. They've got an

income, they've got their expenditure. The income's a little bit less, they have to

save a little bit, but from their perspective the situation is largely

unchanged. But look at what is happening outside in the system. Previously the

money was going out in a circle. What's happening now? The money gets printed by

the Bank of England, it goes to the worker, the worker pays their bills,

it goes to the rich, and then... it just stays there! Because the rich are not

spending their money anymore. That means money piles up with the rich and

accumulates, and what happens with the government? They accumulate debt. Okay so

we've learned that during the Covid crisis, most people's financial situation

appears relatively unchanged. However, behind the scenes the government is

accumulating big piles of debt, and the rich are accumulating big piles of money.

The next question is... why does that matter? Well the easier part of that

question is to talk about why big government debt could affect you.

Those of you who are old enough to remember 2008 will remember at that time

too, government debt increased, and the government came in and used that to

enforce austerity. Now that impacted a lot of people, it had a lot of effects

in many, many different ways. That could happen again if government debt increases

again. Now I'm not a politician, I'm not political forecaster I'm an

economic forecaster. I can't tell you if austerity will happen again. But what I

want to talk about is those big piles of money stacking up in rich people's bank

accounts. How's that gonna affect you? So what does it mean if the rich get richer?

I mean if they just stack the money in their bank account it's probably not a

problem right? Personally, I worked in the finance industry for a long time, I

managed money for the rich, I've got involved in understanding how they

invest their money. Through that I made some money myself

I got involved in investing myself. I know a little bit about what the rich do

when money starts piling up in their bank account. Number one, they buy houses

but it's not just houses they buy, they buy stocks, they buy shares, they buy

bonds, they buy gold. To be honest, they buy everything. Now let's look at what

happened last time the government used money printing to solve a financial

crisis. We can look back to the 2008 crisis. In many ways, that was similar.

That time, too, the Bank of England printed a huge amount of money to try and deal with an

economic crisis. What happened then? Well within six years stock prices in London

had doubled. Within three years the gold price was up 150%, and within 10 years of

the crisis, London house prices had doubled. What does that mean? Well in the

20 years since 2000, through that period of crisis and rising house prices, the

percentage of young people who've been able to afford a home in this country

has fallen from 65% to 27%. What will it mean if house prices double again? It'll

mean that, realistically, people who are from a family that doesn't have a home

now, will probably never own housing. It means that those people will be locked out of

the housing market forever. It means that young people will find it more difficult to

get the security of a home to raise a family. And at the same

time as that's happening, stock prices are gonna go up, gold price is gonna go

up, the rich are gonna get richer than ever before. But it's not just stocks and

shares and housing that these guys are going to buy. They'll be in the shops too

and they'll have a lot more money to push those prices up. It's very likely that

over the next few years we're going to see the prices of a lot of things

increase. At the same time, what's going to happen to wages? Well we've already

seen the unemployment rate double in this country, and that's in spite of a

furlough scheme encouraging firms to keep jobs on. There's currently nine

million workers on that furlough scheme, and when that starts to be wrapped up a lot

of those workers will probably be pushed into unemployment. With unemployment

going up and up and up, it's very likely that just as house prices and prices in

the shops are rising, wages will stay low. Okay so what can we do? We know that

under the current situation the rich are going to get richer, while wages full

house prices rise and shop prices increase. It's going to make housing

unaffordable and it's going to drop the living conditions for regular people.

Can it be fixed? Well, personally I think that it can. If you go back and look at this

slide explaining the problem, we can see what's happening. Money, currently, is

flowing from the government to the rich, leaving the government with big piles of

debt and the rich with big piles of money. We can actually fix this with one

simple arrow in this diagram. If we start money moving, back round the system, away

from the rich, no more cash piles for the rich, no more debt for the government.

In my opinion we need to find a ways the tax of truly rich in our society, by

taxing wealth rather than just income. This will draw money from the wealthiest

people in our society, the people who get their income from owning assets, rather

than working. Ultimately we need to find a way to make the richest in our society

contribute to fixing this crisis rather than simply profiting from it. Otherwise

financial security is going to move out of the reach of our kids. Thank you for

watching. This is a message which is really important to me. If you think it's

important too, share it with your friends share t with your family. If you want to

know more about me you can see my Twitter and my website in the description

come back here for more videos. Okay, thanks again.