00:00 Once upon a time, there was a goldsmith of sound reputation who had a secure vault to
00:09 store his gold.
00:10 One day, a fellow citizen asked the goldsmith if he could store his gold in the goldsmith's
00:15 vault for safekeeping.
00:17 The goldsmith agreed and in return gave the man a credit note as a receipt and wrote on
00:22 it how much gold he had stored in the goldsmith's vault.
00:25 Some time later, another person came with that same credit note to claim the gold.
00:30 It became clear that people had a lot of trust in the goldsmith's credit as they traded it
00:34 as if it was the actual gold.
00:36 This gave the goldsmith a clever idea.
00:38 He thought, "What if I write more credits than I have gold?
00:42 I could use those extra credits to fund a trade ship.
00:45 The trade ship will yield products that I can sell on the market, so I will have money
00:49 to back my credit plus a little extra profit for myself.
00:53 And that way, I will get rich without working for it."
00:57 And just like that, banking as we know it was invented.
01:00 The clever goldsmith became a banker and made a lot of money.
01:04 He created even more credits and invested in even more companies, which created products
01:09 that he sold on the market.
01:11 When this extra credit came into circulation, prices of goods and services slowly went up.
01:17 While the townspeople didn't like the rising prices, it meant more profit for the banker.
01:22 But then something happened.
01:24 Some people came to take their gold out of the bank.
01:27 But the banker did not have enough gold in the vault.
01:29 He said, "Please come back later.
01:32 I will have it next week."
01:34 The people who previous believed that their gold was safe in the banker's vault started
01:37 to lose their confidence.
01:39 And when all confidence was gone, a bank run happened.
01:43 They took up torches and pitchforks, went to the bank and demanded that the banker give
01:47 them all their gold immediately.
01:49 But to their horror, they saw that the bank vault was empty.
01:53 The mob became enraged and threw the banker in the dungeon until he had repaid all of
01:57 his debts.
01:58 And when he could not do that, they burned him at the stake.
02:01 And all of his worthless promises to gold burned with him.
02:05 The townsfolk had learned their lesson.
02:08 Everything was back in order in the city that had known so much turmoil.
02:12 And they lived happily ever after.
02:14 Until one day, years later, a clever goldsmith noticed that the people who stored their gold
02:19 in his vault often left it in there for a long time.
02:23 And he started a bank.
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