How the rich get richer – money in the world economy | DW Documentary

There has never been so much

money

as there is today and rarely has

money

been so cheap and yet the central banks continue to pump money into the

world

, we are being inundated with trillions of dollars and euros, it can't go on like this forever, it's a Time has never been easier for investors to get cheap money. Getting into debt is practically free. Organizations simply borrow large amounts of money from each other and then use it to make money by lending it to others who are using it. lending it to others a snowball system that allows the

rich

to get even

rich

er savers on the other hand are losing billions every year thanks to low interest rates if you just open a savings account it's almost like burning money This deluge of money has created worthwhile businesses Billions of companies are bought and sold for large sums because loans are cheap Employees become pawns of speculators The question is where does all this money go abroad?

Germany this couple faces the same dilemma as many others what to do with their savings in this

world

of low interest rates Carl Heinz ice a recently retired bailiff knows everything about money and debt will his life insurance policy be paid soon How should you invest money in a house you already have? the stakes are high for cycling Enthusiast, he and his wife want security in old age and a good time. He hoped that after the payment he could invest the money again and earn interest that could be added to a pension, but that plan is not working. to work abroad he has always led a modest life he always stayed away from investments that paid high returns but were risky he never thought it would come to this he doesn't know what to do with such low interest rates and his friends don't tell him either For me, They will no longer keep your money in a bank account, but rather deposit it as physical cash in a safe deposit box.

Doctors, it's hardly worth going to the bank. The interest on savings is almost zero, only 0.01, which means you receive one cent for every hundred euros a year, people are worried about what happens to their money, says Elmar Schmitz, director of the local branch of the Volksbank. Although there have been no runs on the safe deposit boxes, there are still more requests to keep the money in cash or gold. Overseas, we have seen a continuous decline in interest rates over the past eight years. I need a crystal ball to tell you if it will continue like this for a long time.

I think we will have this situation for another two or three years after that. It will change again but we will not have the interest rates we had 10 or 20 years ago. The manager knows who he blames for these low interest rates. The European Central Bank. The competence of the ECB is clearly price stability. It uses the base rate as its tool. to achieve this and has been reducing base rates steadily since the financial crisis until reaching zero. Savers are left by the wayside, but countries with high levels of debt, like Greece, can get cheap money, as can troubled banks. in southern Europe cheap money is supposed to drive growth by buying government bonds the ECB has injected trillions of extra euros into the markets otherwise the system would face a possible collapse the price of all this is a money deception money has to go somewhere stocks and real estate that continue to rise in price, the result is a massive concentration of wealth right at the top Bill Gates, the richest man in the world, has a fortune of 65 billion of euros; that is the market value of your shares to compare the total value of all the cash in the world is less than 100 times that amount 5 trillion euros the value of all goods and services created each year around the world is 75 trillion of euros that is the real

economy

the world's debts are much greater than those of states, companies and individuals have debts a world that lives on credit 705 billion that is the value of all derivatives speculative financial bets on the future They have almost nothing to do with real assets anymore to recapitulate this is the fortune of Bill Gates what happens when there is too much money in the World economist Max Otter says that this deluge of cheap money is not only flooding the big banks;

He believes that low interest rates are a symptom of a massive illness in the global financial system, and what's more, cheap money endangers the entire

economy

and promotes increasing levels of debt. says that those who believe that with the 2008 financial crisis receding things are now better again are very wrong this influx of money is extremely dangerous, it is slow, but at some point the dam will burst and then we will be in a big crisis, the biggest danger is that this avalanche of cheap money will divide our society moves money from the bottom up says it is a gigantic redistribution machine many economists demand low interest rates they mean that states can borrow cheaply states can take on more debt It also means the rich can do the same and often without any liability if they default, if I am one of the super rich buyers of the business then I am only liable to the extent of my share, not the rest of my wealth, which is a blatant injustice compared to the media. middle class families and ordinary people with housing construction laws, this avalanche of money not only saves states and banks, but also favors the rich who use this cheap money to buy shares of companies and real estate with values rapidly increasing, while the financial investments of ordinary people. they lose value the middle class has savings and insurance policies and these investments are the ones that lose with a low interest rate The poorest citizens of the world suffer because real estate prices are rising and therefore rents are too foreign London , the largest financial center in the world, illustrates very clearly the effect of this monetary deluge, trillions are traded here. 300,000 financial sector employees are trying to turn money into even more money.

Property prices in London are soaring. All major banks have offices here. This is where the money of the world's rich is invested. Well, there are neighborhoods where billionaires are driving out millionaires. Borisovich fights with his colleagues against the sale of the City of London to speculators. As a former banker, he has investigated the anonymous owners of several properties. He is familiar with price developments. Well, these fun houses and again, depending on the size, it's hard to say how deep they are, but between three and five, maybe between five and seven million in this, but in this particular area, five to seven million pounds now, if you think about Muse. houses this is a family place just think what kind of family can afford to buy a house for three or five for even five to seven million pounds expensive houses are all speculative objects and empty London belongs to investors who don't They live in the city, Roman Borisovich, discovered that this house was sold to a Ukrainian billionaire for 66 million pounds.

In theory, the mansion is owned by a shell company. There are currently in excess of 40,000 properties in London that are owned by Anonymous offshore corporations, meaning I don't know who the owners are, they could be decent people, they could be mafia, there are four. We suspect that much of this money that came through London and drove up prices here is actually of dirty origin. There is construction going on everywhere, there is speculation in real estate. the big game in the city billions of euros from Russians, Germans, Chinese and Indians have arrived in London. From a socioeconomic perspective, it's not sustainable, you can't have a city where residents and workers can't live, you know, this is a uh, this is the problem. with bubbles is that no one knows when they will burst, but London does not have a monopoly on property bubbles.

They now exist in cities around the world. If a real estate bubble were to burst, it would surely affect the wealthy who invest there. but they have a diverse investment portfolio they take advantage of opportunities around the world if the real estate bubble in Munich bursts they will be in Rio or Tokyo they can act globally but the middle class will not, as was seen in the 2008 financial crisis the middle class is affected while the rich get

richer

in boom and bust times not much has changed the minor regulations introduced in the financial sector are not very tangible here in London speculators are looking for new ways to make more money in the world the number one financial center many Transactions are now taking place in the shadow banking system Bonuses for lucrative deals are as plentiful as ever and Brexit will see regulations relax even further The show must go on Alf Townsend has been through everything he's been driving A taxi that He has been driving bankers and brokers around the city for 54 years, negotiating with billions of dollars in the world.

It has become the trump card of the British economy, he says optimistically, beneficial for London. I think there are several people who invest wherever they come from in the world, if they want to invest their money in the city, that is good for the British economy. Yes, he has benefited too, but in exchange Alf has to live far from the city center. A million pounds for a one-bedroom flat that no ordinary local can afford and there aren't many owners. That part of us, the old people who still live in London, most of them sold their houses, as I was saying before, bought their houses at the Town Hall, made a big profit, sold them and moved to a suburb, a hideaway, yeah , some leave the city altogether. and always guaranteed Anderson was one of London's financial stars.

He now he lives in Wales. He paid the same for his farm as he did for a small one-bedroom apartment in central London, but that's not the only reason he came here. He's had enough. From the financial excesses, the city is full of greedy, ruthless, smart people and if they put a little more regulation, a little more compliance, a few restrictions, these guys figure out how to game the system to make sure it benefits them. The script is about the financial world. He used to earn a few hundred thousand pounds a year. He didn't care who listened to the merchants.

That was a few years ago, but nothing has changed, Anderson says. The system rewards those who make big deals at the expense of others. I make a lot of strange bets. Incredible reckless decisions, but they turn out right, so I make huge amounts of money, if they go wrong, maybe I lose my job, but that's the only downside, so this is what's called asymmetric risk that encourages short-term gambling . Anderson is confident that the financial system will continue to grow and expand the prospects for huge profits low interest rates the deluge of money the former Financial Insider believes that these elements create an explosive therapeutic mix the Ponzi system that exists is such that organizations simply They borrow large amounts of money from each other and then use that to make money by lending it to others, who use it to lend it to others, which means you have a system where ultimately no one actually has the money behind it. all the money that is lent and then, um, when that system collapses, then yes, good evening, attacks on speculative financial transactions could slow down this merry-go-round.

However, this financial transaction tax would have to be introduced globally, but even the small-scale version with only 10 EU states failed after years of negotiations despite German Finance Minister Wolfgang Scheibler personally He pushed for this tax, but Britain was against it and will be even more so in the future. London, as a financial centre, would suffer which is very unfortunate because this tax would be the necessary surgery for the financially ill. The system in which the ECB and other central banks flood the world with cheap money is not a cure, it is just a pain reliever and, in the long term, has serious side effects.

The entire system is a system that continues to be saved temporarily, but at some point it inevitably will. Fall Apart until then exacerbates the enormous injustice that already exists. Those who have benefited from a handful of super-rich individuals own as much as the poorest half of the world's population combined. This avalanche of money is further widening the gap between rich and poor. These are struggling at the hands of low interest rates Carl Heinz ice and his friends are worried in the past, the world was a true paradise for savers, the economy was booming and interest rates were high, even if inflation It was too much, yet successive generations lived by the motto.

Those who saved got more out of life in the past, could rely on a certaininterest rate for their savings account, they could live with that, but not anymore, in the '70s we had a fixed rate of seven percent for a short time, we got 11 percent. Carl Heinz Ice has an appointment with his financial advisor at the bank, what should he do with his money? We have this account and next year he will have a life insurance policy due. What can we do with this money? The advisor wants to know about his clients. to take risks, you are actually more risk averse and want to invest your insurance money as widely as possible every day, it stays in the savings account, you lose purchasing power and you know that since you get almost no interest, we have You have to see where you can generate a return and that means stocks and chairs invest more in real estate bonds and chairs, that's what your bank advises, what else can you do in times like these?

I don't feel uncomfortable or very comfortable with the idea, although I have generally had positive opinions. experiences to date foreign real estate bonds higher risk whether you like it or not Carl Heinz the age has to participate in the game the big financial world is a party industry big companies buy their competitors thanks to low interest rates, thus increasing the value of their shares Only shareholders benefit from this strategy and they tend to be rich. The buyer of the German chemical giant bought American Seed. The supplier Monsanto, for example, for 65 billion euros, the world's largest brewer, Anheuser Bush inbev, swallowed the number two Sab Miller for the equivalent of more than one hundred thousand million euros and the software giant Microsoft bought the professional networking site LinkedIn for 26 billion companies as a plaything of international financial interests. a less notable case wmf is based in geislingen, in the southwest of germany, since the mid-19th century it is a brand with a global reputation wmf manufactures cutlery and coffee machines used to be in the hands of german owners and shareholders its operations meant security for thousands of families then the financial players set their sights on wmf the company has changed owners three times in the last 11 years each time it is sold the price rises enormously at the same time that wages and working conditions have worsened there were mass protests when the company was acquired by the French group Seb Martin Porsche hoped things would finally improve again is on his way to a WMF working meeting on behalf of the metal union IG believes it is symptomatic of the current era the ease with which investors close a deal worth billions in the big banks they can get cheap money without problems the new owner paid 1.6 billion euros it is very easy for investors to buy and sell companies and make huge profits that they would never achieve with the daily operations of a company The question for me is how detrimental it is for jobs to become part of this game.

It's a business meeting during troubling times at WMF. What are the prospects with the new owner? The staff has had bad experiences in the past. They have milked us. a cow with dried blood when there is nothing left to draw we are sold it has been like this for years everyone fills their pockets we can only hope that the company survives and that calm is restored at least today the employees are told that the new buyers yes I have no intention of cannibalizing WMF further before selling it, but union representative Martin Porschke knows that the only way to pay for such deals is through extremely low interest rates on loans.

The agreement at WMF was as follows. The New York-based equity firm KKR bought WMF for around 660 million euros through a subsidiary located in a tax haven, KKR used 100 million of its own capital and borrowed 560 million from banks. Four years later, KKR sold Wmf to French appliance maker Seb for 1.6 billion, a deal backed by very low interest rates. After repaying the loan and investing only one hundred million of its own capital, it made a profit of €940 million, which is a return of more than 800 percent. A lucrative deal, but only for KKR shareholders. This is possible because there is enough money on the world market at the moment.

Other investors are able to pay those prices, if the money wasn't there, they wouldn't be able to transfer those volumes for almost nothing. That is the other side of the deluge of money. Financial investors make deals with huge sums that would have been unthinkable in the past. past in a regulated financial system today many want to return to those times the deregulation of the financial world has a long history until 1971 the world was financially stable the currencies were covered by gold the real economy was in balance with the amount of money available then The president American Nixon needed money for the Vietnam War.

He turned on the money printing machine, especially since OPEC had raised oil prices. This money flooded the world. Banks devised new investment models. Now they wanted to make money not with goods but only with money. This was the beginning of today's financial industry. Credit cards and checking accounts accelerated. Financial transactions. Former public responsibilities were privatized. Pensions were a good example. The private sector is better at everything than the State. That's why they said that new billions came into play in the 1980s. Margaret Thatcher deregulated the banks in London Bill Clinton later did the same on Wall Street Chancellor Gerhart Schroeder in Germany later also accepted the philosophy of deregulation money was to make money and thus create growth the Global Casino was open for business the path of liberalization was a mistake, it is also the wrong word if you deregulate markets that need to be regulated then you create chaos you unleash an avalanche of money in the world you can call that liberalization but it was a policy that benefited only a few people, specifically the rich, which has caused many problems for the world, yes, liberalization or deregulation allowed the banks' businesses to exploit, now they acted at an international level, the main banks have become investment establishments that finance large businesses, increasingly more money goes into speculation, that's where a lot of money is made.

It has less and less to do with the real economy. Are the central banks the only ones responsible for this influx of money or where does it all come from? Economics students in Ziegen Germany are researching what people know about the origin of money, that's what they want to know find out we are from the University of Siegen we are doing a research project on money what money means to you you can't do anything without money where money comes from it's not for me that's for sure how money was made work, for Of course, I'm not sure about banks by state.

I couldn't tell you that the responses were sobering, it was very varied, many people didn't respond at all, some said the bank or it's just printed and some mention manipulation. For years I had no idea Finance expert Helga Poikert is upset that money plays almost no role in the economy Many consider it simply a neutral medium of exchange It's strange that it's not just the public that is in the dark Students The A street survey demonstrated it quite well but the process of money creation also seems to be a mystery among academics and even in the banking boardrooms the banks are silent for a reason that they would have to explain to their clients who today are the ones As a result, as Poikert explains, money is not neutral after all, it is not central banks but private banks that generate most of this new money.

A process also known as deposit money creation. Money is created when someone goes to a bank to apply for a loan. You open an account and issue the funds, then you are in a contract with the person who took out the loan, the bank expects that person to pay it back one day, that means the original impulse to create money comes from private banks, that is new to Most people, many think alone. It works like this Savers take money to the bank and the bank lends this money to a customer, such as someone who buys a house or runs a business, but that is not the case if someone has savings, their money is parked in a savings account, the advantage for the bank is that that person can't just take it out when the bank makes a loan, it is created out of thin air, these two processes really have nothing to do with each other, even though it may seem that way and even though that's what the books say text, this is how it works a client wants to request a loan of 10,000 euros the bank has to deposit between one and three percent, so at least one hundred euros in the central bank and that's it, in return the bank You can transfer 10,000 euros to the customer's account with the push of a button.

The bank generates 10,000 euros of electronic money from one hundred euros and in exchange charges interest. This creation of deposit money is a license to make money. The banks are happy. Of course, if they can do it because that gives them free rein, they can keep the profits, the seniority is a few billion each year, those who would want to miss out on that are definitely not the private banks. Basically, private banks create new money whenever they want and that used to be the privilege of the mint of princes and governments it is a privilege to create money and therefore make profits out of nothing this privilege has been in the hands of The financial industry for a long time and in recent years it has not been controlled is that it is really a good idea for the big banks.

In particular, in this way the deluge of money has been greatly increased as a way of imposing more controls on the financial system. Private banks could be deprived of the privilege of creating money. Events are already taking place in Switzerland. Zurich is a popular location with banks. There is an initiative. Advocates of curbing Swiss banks in the future say only the National Bank should be allowed to create money and not private banks. The initiative fights for fully backed money and for the end of the privilege of large banks to generate electronic money as they wish. one button he used to be treasurer of the city of Saint Gallen, then he understood that we cannot continue with unlimited loans and debts 19. 90 of all our money is just numbers on a computer in a bank somewhere where the banks make this money .

That is what worries us and that is what we want to change together. Great things have small beginnings, but the members of the initiative are striking a chord with many passes because they distrust the financial system. The big banks are creating a spiral of loans and debts with your money. creation I am a former banker now retired I can no longer say it with pride, it is casinos now manipulation happens everywhere where we in the future generation are being robbed at the moment it is mainly the big banks that pocket the profits from this. Company to make money the Swiss initiative wants these billions to benefit the citizens of the country by only allowing the National Bank to create money we want to take away the banks' right to create money but we will not take away a line of business that they still deny.

It will allow you to lend money, manage assets and monitor financial transactions. The banks will keep all that. They want their National Bank to play a key role in the future. Private banks will only be able to issue loans if they have the money in their hands. vaults 100 safe private banks would no longer be able to create money deposits and the profits from this privilege would also benefit the National Bank the general public is the winner the National Bank is obliged to ensure their well-being thanks the group wants the The creation of money must be controlled by the State and not in the hands of private banks.

Billions in interest payments would flow into the public treasury. I support these various initiatives. Banks couldn't create new money, they would have to work with money. they have and deposits, that is a good first step, it is not enough, but it is an important step on the path towards a fair financial system. It seems absurd, on the one hand the world is flooded with cheap money, but at the same time, in some places there is none. that do not offer great benefits immediately but that in the long term would benefit the future of our society we are at the impact Hub in Munich an office space for startups a space for companies that have innovative ideas for the future new technologies Sustainable Solutions for our problems, but there is no foreign money here.

Hahn and his team are working on a car for the future, for example, his baby is called Zion, a small electric car that generates some of its own electricity and is designed for the city to access. electricity from well-protected solar cells in the car body. You will also get electricityof a battery. It is an economical and highly ecological electric car. Developing the Xeon costs money and no bank wants to spend that money, says Laoin Han. Startups like his. I have no chance of getting a loan from a bank even though there is more than enough money available.

Banks prefer to invest in infrastructure or something similar that is long-term and safe where the loan is guaranteed if our company goes bankrupt, they practically couldn't recover anything Laureen Han had to raise money from private donors online Venture capital no loans for their projects that is the central issue for young entrepreneurs they cannot get any of this cheap money at the end of the day it is not about money but about creating opportunities so that people who want to do something can do something, if you do not invest in that or new companies cannot access money easily and cannot develop easily, so they will move countries, there are many entrepreneurs. here that want to promote sustainable products and services products where the consequences for people and the environment are taken into account from the beginning products designed to create value for society I think it is a scandal that companies like this struggle so much to access financing from They store them in banks or large investors Carl Heinz I shinbad bodendorf invests in a traditional way he has received the money from his insurance policy and has made a decision he is looking at his house with a painter and decorator he wants to invest part of the money in renovations abroad investment in assets a strategy to overcome low interest rates Carl Heinz ice has realized in recent months how important it is to pay attention to Money Matters the times when we could give up our responsibility at the checkout counter are perhaps gone be lucky, but One thing is for sure: the sick financial system is going to cost us a lot of money.

I don't think anyone will come out of this situation unscathed. We have been living on loans. There will be destruction of wealth. It is very likely that the current financial system will change. To lead to the next disaster we need a different system, but it would be enough if we returned to having highly regulated financial markets and a banking sector under control and whose purpose was to serve. We have to reign in the global financial system, but exactly. In the United States the opposite is happening with Donald Trump: making the system safer for the people. A system like the one envisaged by the Swiss initiative could be a basic element in which certain states have to reduce their enormous debts.

It is the only way to stop this deluge. of money and break the spiral of loans. That is why we also need international debt conferences at which states mutually forgive each other's debts. We are the ones who pay the bill. Large banks must cover their loans with more equity capital than today. There needs to be a global tax on financial transactions and money needs to go to places where it benefits society for the sake of our future. The interests of the financial industry have determined developments in politics and society for too long. Trump and Brexit must not be allowed to fuel that further.

Money is too important to be left alone in the hands of foreign banks.