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Interest on loans is high at present.

And then of course I have that 250,000.

Or I could buy this house for 1 million.

or have to be at least 10 of that.

This is actually not a bad situation for me.

To compound the amount of money we invest we multiply the amount we invest times 1 plus the yield.

Now, the first entrepreneur, he's very conservative and he's been saving all his whole life to do this.

If you run out of cash, you can fall back on your savings in the bank.

The former hedge fund analyst had recently quit his job to do something that at the time, sounded a bit strange.

Now, the reality is you didn't get the cash forward, and you had to spend 200 of cash out of your pocket, so you're still, just like the cash accounting, you're still going to have negative 100 in cash.

And let's say that I can, in the bank,

So what I do is, I take their 900 gold pieces, and I take it as a deposit.

And it would be easy to implement and inexpensive.

When you put money in the bank, you deposit it.

I could have borrowed money in some other way, but I won't worry about that right now.

I just give them a checking account.

Because it buys treasuries, just from people or from banks or from institutions, and then those people take that cash that they just got for these treasuries, and they'll deposit it in banks.

So 10 of 110 is 11.

And we went the fractional reserve route.

What will it take to shift away from the current money system?

I want to deposit some money.

I'll open a bank account.

I have a fairly wealthy village.

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He deposited the prize money in the bank.

So this is the account of B. The account of Villager B.

The bank keeps money for people.

Well, no. Because then a bank take on arbitrary amounts of risk and there are regulations, although I think a bank would do it on their own to some degree, but there're regulations called reserve requirements that tell us how much lending can a bank do relative to its actual reserves. In this case, it's reserves of gold.

Tom currently doesn't make as much money as he used to.

That would be total bank notes in this case and bank notes are also something we'll later leave a world where every bank is issuing bank notes, but I just wanted to give you that kind of historical context, how bank notes even started off.

So they'll go and they'll deposit it in maybe bank 1 over here, then over here in bank 2, and since there's more money in bank 1 and bank 2 you have the supply of money going up supply going up and also the demand for reserves is going up this cash right here, these are reserves.

I guess you could say non cash assets, right?

You know, about my money.

And I think something happened, right? He put aside a little cash for you.

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