Okay, welcome back to Gary's Economics  today we are going to talk about Money

okay I've wanted to do this video about money for  a while now and we'll probably do some more videos  

about money because it's a big subject area but  the main reason that I came through this video  

today is the other day I read an article which was  talking about why are rents up so much in London  

and other big cities and this was an article in the  Financial Times uh there's a link to it on my Twitter  

if you want to look at it and basically in this  article it spoke entirely about issues regarding  

the supply and demand for apartments and that  seems like it makes total sense right you want  

to understand why apartment rents have gone up so  you look at the supply and demand for apartments  

but I want to give you a thought experiment to  help you maybe understand why to me I think this  

is strange now imagine the price of apples went  up relative to oranges so an apple used to cost  

the same as an orange and now an Apple costs twice as  much as an Orange and at the same time there's been a  

massive massive increase in the supply of oranges  there's been like a massive bumper orange harvest  

and then now an apple costs two times an orange as  opposed to one you would say well this is probably  

because we've got so many oranges now and if at  the same time everything the price was going up  

in terms of oranges you would say well this makes  sense because we've got so many more oranges now  

right this would be totally sensible now imagine  we replace that example we take our oranges and  

replace it with money imagine suddenly the price  of an apple in terms of money doubled and just  

before that there'd been suddenly loads and loads  more money everybody had more money would you  

say this is because everybody's got more money or  would you look specifically at something that was  

to do with apples now imagine at the same time the  price of everything has gone up relative to money  

would you say this is probably because of the  increase in the amount of money everyone has  

or would you say well let's look at every specific  thing and try and find out what's going on in that  

specific thing now I think it would be sensible  if there was suddenly a massive increase in the  

average amount of cash holdings in a country  and then the prices of everything went up  

suddenly say this is probably because  such a huge amount of money was given up  

but this has happened in the last 3 years  the government's given out £600 billion  

which is £13,000 per person so we know that at least some people must have hugely more money  

and yet the Financial Times runs a story saying why have London rents gone up 

and it doesn't mention even once that an enormous amount of money has been given up  

to me I think this is so interesting and it  shows that there's kind of a blind spot in the  

minds of a lot of people and a lot of economists  regarding the fact that you know money is a thing  

and the value of money can go up and down and  if we suddenly give out a huge amount of money  

then the value of money will go down which  would mean the price of everything goes up  

um and you know people who watch this channel  regularly will know I was a money trader for a long 

time and I was a very successful money trader  I was a money trader full-time for six years  

um and when you're a money trader all you  do all day is you look at the different  

kinds of money you know there's lots  of different kinds of money in the world 

British Pounds (£), US Dollars ($), Australian Dollars ($), Euros (€) and you try and work out which monies 

are going to become more valuable and which  monies are going to become less valuable so a   

huge part of the job is understanding that the value  of money goes up and down and if you do that for  

a long time you start to realise that actually  money is one of the most volatile asset classes  

that exists, the value can fall very quickly and  one of the reasons for that is there are some big  

institutions like central banks: Bank of England,  European Central Bank, Federal Reserve in the US  

and governments that have the power to give out  huge amounts of money very quickly which mean  

that people suddenly have hugely more money than  they used to have and when that happens you  

would expect the value of money to fall but I  think people have a difficulty conceptualizing  

an idea of the value of money falling because  people use money to value other things you know  

how can the value of a pound fall? a pound is always a pound but in reality if a huge amount of money is  

given out then the value of power can fall and  the way that we see that is that the price of  

everything at the same time will go up  which is exactly what's happening now um

what has happened in the last few years is during Covid the huge amount of money was given out  

the price of everything went up and rather than  say this is probably because of a fall in the value  

of money people say well rents in London went  up because of issues in the London rental market  

and wages are going up because of specific issues in the labour market and house prices going up 

because of specific issues in the housing market  and food prices going up because specific issues

in the food market and every single individual  thing is blamed on specific issues in that area  

and this is super interesting to me and you  know I'm not denying that there are areas  

in which there are supply problems so the most  obvious case is energy in Europe there's been a  

reduction in the energy coming from Russia into  Europe that's causing energy to go up but it's  

not just energy prices going up here you know  London rents are going through the roof and you  

know this is not because of Vladimir Putin  or because of the war in Ukraine obviously  

um but for me the biggest problem that happens  when you are blind to ideas such as when money  

is given out it depresses the value of money is  it also leads you to be blind to other questions  

like where did that money go and anyone who  watches this channel will know that I've been  

going on about this from the beginning of Covid  which is during Covid a huge amount of money  

hundreds of billions of pounds, you know trillions  of US Dollars went from governments to the rich  

and the obvious consequence of that is that the  rich get richer ordinary people get poorer  

inequality increases and ordinary people find it  harder to live because you as an ordinary person  

are competing with the rich for limited resources  if they've got if they've got way more money they  

will get more and you will get less um and what that  has meant is because we don't look at money when  

these changes happen generally we haven't realised  and it's been very under reported in the media that  

in the last three years we've seen massive  massive increases in the wealth of the rich

and super rich in in pretty much every country  in the world it's been the fastest ever increase  

in rich and super rich wealth and that's happened  in the UK it's happened in the US it's happened  

in Europe and what that has meant has been that  when we've had this inflationary crisis after Covid 

because the media has not generally reported what an enormous increase in wealth there has been from  

the super rich it has meant we have not discussed  taxation of the super rich now the amount of money  

that has gone from the government to the super  rich and the rich in this country has so far since  

Covid been £600 billion - if we were to tax  that back and just make the rich as rich as they  

were before Covid we could give every single  adult in this country £13,000 and this crisis 

would be over but because we don't talk about this massive accumulation of cash by the rich 

we don't talk about the fact that we could  get that money back and it also means that  

the way we resolve the crisis now in Liz Truss'  energy bill recently announced we are going  

to give more cash to the rich which will likely  likely make this problem worse so yeah basically  

I think it's really important that we understand  that when money is given out we question who it  

goes to we understand that if that money goes to  the rich it will make ordinary families poorer  

and the ordinary families will see that through  inflation which can also be seen as a reduction in  

the value of money which includes a reduction in  the value of your wages if we're not aware to that  

then we we allow ourselves to get into situations  where crises are managed in such a way that the  

rich get much much much richer ordinary people get  much much poorer and nobody really notices it and  

nobody talks about in the media so uh yeah money  is important the rich made a ton of it if we tax them 

back we can make your life better and if we don't unfortunately everybody's life is going to get worse 

except for the super rich are richer than they've ever been before. thank you very much like & subscribe...