Vocabulary - The making of money


A. Pre-viewing
This documentary explains how the fundamental weaknesses in the monetary system are responsible for the current financial problem in the world. Familiarize yourself with the following entries before watching a video about money and banking.
  1. goldsmith - someone who makes objects from gold
  2. monetary - a system relating to the money in a country
  3. prosperous - successful, usually by earning a lot of money
  4. entrepreneur - someone who starts their own business, especially when this involves seeing a new opportunity
  5. anchor (verb) - to make something or someone stay in one position by fastening them firmly
  6. oblige - to force someone to do something, or to make it necessary for someone to do something

B. Comprehension
Watch the video and answer the following questions:

Click here to watch the video

Video ©ido zaifman(Youtube.com)
  1. Which of the following words is used in the video?
    “The goldsmiths who safeguarded this _________metal were the only ones who knew how much gold actually exists in the safe.”
    precious previous pendulous
  1. What did the first form of banks do? (you may select more than one option)
    ◯ represent gold
    ◯ trade gold
    ◯ deposit gold
    ◯ guard gold

  1. “increasing pressure on the government by the safe owners and entrepreneurs anchored the system in legislation and it became possible to create money out of thin air.”
    What does ‘out of thin air’ mean?
    easily legally from nothing
  2. “The system works in a similar way today, but whereas in the past the bank notes were backed by gold…”
    What does the verb ‘backed’ mean in the above context?
    covered made supported
  3. “The system works in a similar way today, but whereas in the past the bank notes were backed by gold…”
    What does the verb ‘backed’ mean in the above context?
    The banks will collapse.
    The monetary system will fall apart.
    The clients will have a higher risk of being robbed.

C. Synonym
In the exercise below, three synonyms are provided for each bolded word in the following sen-tences taken from the talk. Watch the video again and observe how these words are used in a larger context. Select the synonym that best fits that context. Consult a dictionary when neces-sary.
  1. In the past, barter between people was based on goods. As society developed, so did a gen-uine need for a representative values for all goods and services.
    real exact original
  2. How did the first banks develop? Since gold was highly attractive to thieves, a new commer-cial branch emerged - a service of depositing and guarding gold.
    was established has occurred was exposed
  3. Does taking out a loan actually mean creating money? Precisely, when the commercial bank loan the money to the customer, it actually created new money.
    easily exactly sharply
  4. From here we understand the disturbing fact that all money created in this system comes from a debt.
    alarming interrupting threatening
  5. What about our deposits in the bank? Well, the same rules applied to them. The bank is re-quired to retain a set percentage of the deposit and the rest it can lend.
    absorb contain reserve
  6. Without a doubt, the present system needs fundamental and profound changes; it is a ne-cessity and we can only hope it comes in the near future.
    thorough skilled intellectual

D. Vocabulary Round-Up
Complete the following sentences using the words in the box. Use the correct grammatical form of the words.
  • oblige
  • prosperous
  • entrepreneurs
  • fundamental
  • profound
  • anchor
  • necessity
  1. In a prosperous country like this, no one should go hungry.
  2. She feels obliged to be nice to Jack because he is her boss.
  3. His mother's death, when he was aged six, had a very profound effect on him.
  4. There is no real necessity for you to come early if you do not want to.
  5. The sailor anchored the ship to the rocks with a rope.
  6. When you begin to cook, you must first understand the fundamental use of kitchen tools.
  7. He was one of the entrepreneurs of the 80s who made their money on property.

E. Idiom related to money
In each set of the following dialogues, select the option which meaning is the closest to that of the underlined idiom.
  1. A: You have finally got this contract signed! Congratulations!
    B: Yes, I have! Let me foot the bill for lunch today.
    “foot the bill” means
    to pay for a bill
    to decide what to eat
  2. A: Be confident, you never know who’s going to win at the end!
    B: I have very much given up. I can't compete against rich old Mrs. Jones. She'll get her way because money always talks.
    “Money talks” means
    money allows one to speak louder than others
    money gives one power and influence to get one's own way.
  3. A: How would you comment on your life so far?
    B: I have only invested little in the project but I've had a good run for my money.
    “have a good run for one’s money” means
    to have a good enough time
    make good use of one’s money
  4. A: This business is doomed. You should just cut your losses before it is too late.
    B: I feel like a loser closing the company that way.
    “ cut your losses” means:
    to stop wasting time or money on something by ending your connection to it
    to cut the connection with business partners
  5. A: Who do you reckon will get the job, then?
    B: I'd put my money on Val.
    “put one's money on someone or something” means
    to pay for someone or something
    to bet money that someone or something will accomplish something.
  6. A: I worked as a bartender for a year, and it was the tips that were my bread and butter.
    B: Seriously? How can that be enough to make a living properly?
    “ bread and butter” means
    Someone’s basic income
    Someone’s commission
  7. A: The CEO has given a blank cheque to Mr. Smith while he is away for holiday.
    B: Mr. Smith? He is just a manager! Can he handle that?
    “ to give blank cheque” means:
    to give a huge amount of money to someone
    to give someone freedom or permission to act as one wishes or thinks necessary
  8. A: How would you comment on your life so far?
    B: I have only invested little in the project but I've had a good run for my money.
    “ have a good run for money” means:
    To have a good enough time
    Make good use of one’s money
  9. A: The company took a beating last year, losing $50 million in profits.
    B: No wonder they are cutting off staff.
    “take a beating” means:
    to lose a lot of moneye
    to make a risky investment
  10. A: The overall business world is very unstable.
    B: Yes. Many companies on the Wall Street went bust during the past three months.
    “went bust” means:
    The business is doing very well.
    The business is forced to close because of the financial difficulty.

Transcript - The making of money

https://www.youtube.com/watch?v=x67DxMeGOrc

In recent years we have experienced waves of economic crisis. To understand why this situation have and will continue to come about, we need to understand the fundamental ideas of our present day monetary system.

In the past, border between people was based on goods. As society developed, so did a genuine need for a representative values for all goods and services. Gold and silver were rare metals which could be readily worked - many people began to use them. This is the basis of the monetary system.

How did the first banks developed? Since gold was highly attractive to thieves, a new commercial branch emerged - a service of depositing and guarding gold. People were given a receipt for the gold deposit because the public believe that's the notes represented gold, they began to trade in them.

The goldsmiths who safeguarded this precious metal were the only ones who knew how much gold actually exists in the safe. From here it was, but a short step to issuing receipts not backed up by gold.

Was there no problem in issuing these receipts? As long as people did not all try to withdraw their money at the same time, the system did well. In fact it worked so well and people became more prosperous, as a result increasing pressure on the government by the safe owners and entrepreneurs anchored the system in legislation and it became possible to create money out of thin air.

The system works in a similar way today, but whereas in the past the bank notes were backed by gold. Today money gets its value out of the amount of money that already existed in the system. To illustrate how banks create money, let's take a look at this simple example.

A customer comes into a commercial bank and asks for a loan the commercial bank borrows it from the central bank, plus interest. And from there the money goes to the customer plus additional interest. So all our money comes from a central bank? Not exactly. The commercial bank is obliged to maintain a reserve of just ten per cent of the money loaned. It can lend out the remaining ninety.

Does taking out a loan actually mean creating money? Precisely, when the commercial bank loan the money to the customer it actually created new money. From here we understand the disturbing fact that all money created in this system comes from a debt.

Since we all believe that one day the money will be paid back, the system continues to work and more money is created from future debts. Hence the name: fractional reserve banking.

What about our deposits in the bank? Well the same rules applied to them. The bank is required to retain a set percentage of the deposit and the rest it can lend.

What will happen if all the banks’ clients withdraw their money? The result would be a total bank collapse; even those who have never borrowed a cent will also lose all their money.

What about the interest on loans? All the money created in the system is interest-bearing, so that the total amount of money plus interest on it will always be greater than the existing amount of money. This is the fundamental law of the system. It is the way it was designed and right now we're approaching its maximum capacity.

Without a doubt the present system needs fundamental and profound changes, it is a necessity and we can only hope it comes in the near future. Until that day comes we need to start understanding how critical our financial situation is, and work towards changing it.

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