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Ep.41 Know Nothing About The Economy? This Episode's For You.

Working Hard with Grace Beverley

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The Role of Banks in the Economy

Money is no longer backed by anything. It used to be backed by gold. But now it's backed by trust. And the trust is that when you go to the bank and you want 100 pounds out, the bank will be able to give it to you. If everyone at the same time went back and asked for their money back,. things can go really badly wrong. We saw that actually during the financial crisis, it had a Northern Rock. You might recall some of the long queues that are forming outside of the bank - which economists would call bank runs.

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