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LIBOR | Money, banking and central banks | Finance & Capital Markets | Khan Academy

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London InterBank Offer Rate. Created by Sal Khan. Watch the next lesson: https://www.khanacademy.org/economics-finance-domain/core-finance/money-and-banking/federal-reserve/v/fed-open-market-operations?utm_source=YT&utm_medium=Desc&utm_campaign=financeandcapitalmarkets Missed the previous lesson? Watch here: https://www.khanacademy.org/economics-finance-domain/core-finance/money-and-banking/banking-and-money/v/frb-commentary-3-big-picture?utm_source=YT&utm_medium=Desc&utm_campaign=financeandcapitalmarkets Finance and capital markets on Khan Academy: We all use money and most of us use banks. Despite this, the actual working of the banking system is a bit of a mystery to most (especially fractional reserve banking). This older tutorial (bad handwriting and resolution) starts from a basic society looking to do more than barter and incrementally builds to a modern society with fraction reserve banking. Through this process, you will hopefully gain a deep understanding of how money and banking works in our modern world. About Khan Academy: Khan Academy offers practice exercises, instructional videos, and a personalized learning dashboard that empower learners to study at their own pace in and outside of the classroom. We tackle math, science, computer programming, history, art history, economics, and more. Our math missions guide learners from kindergarten to calculus using state-of-the-art, adaptive technology that identifies strengths and learning gaps. We've also partnered with institutions like NASA, The Museum of Modern Art, The California Academy of Sciences, and MIT to offer specialized content. For free. For everyone. Forever. #YouCanLearnAnything Subscribe to Khan Academy’s Finance and Capital Markets channel: https://www.youtube.com/channel/UCQ1Rt02HirUvBK2D2-ZO_2g?sub_confirmation=1 Subscribe to Khan Academy: https://www.youtube.com/subscription_center?add_user=khanacademy
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Text Comments (35)
Big Bearn (6 months ago)
Srini Krish (1 year ago)
I was looking around to understand what is BBSW in Australia , LIBOR explained it perfectly. I would love to understand how paying with this rate affects economy ?
simonmabee100 (1 year ago)
Yeah...you guys need to update this video.
jbrowz (1 year ago)
Thank you libor
Gordon Kenaston (2 years ago)
If you can create a dollar, then you are. 25cents richer. Where did that. 25 cents come from?
Gordon Kenaston (2 years ago)
Money is transferred from Bank A to Bank B.. With a penalty...Interest Can anyone tell me where this interest 'money' comes from? You guessed it: you and me.
Gordon Kenaston (2 years ago)
Where is Interest in your astute observations?
Rex Sitti (4 years ago)
Banks can strategically manipulate the LIBOR for whatever reason. Despite the huge fine imposed on some perpetrators, I believe this is still ongoing. It calls for the need for increased regulatory practices on banks given the impact of LIBOR rates to the global financial economy
rajvanan (5 years ago)
Very nice and simply explained..hats up man!!!
bluemagicuk (5 years ago)
this is fuckin dope
Vicki Bee (5 years ago)
Do you have one about a 'LIBOR scandal?' I'm NOT going to be able to understand any OTHER financial channel's video, b/c they assume you have a full working brain and can actually use it. Not someone who has medical proof of a traumatic brain injury.
Libor Strnad (6 years ago)
Ohh its about me♥
SUNNY VIJ (4 months ago)
Smarika Mishra ha ha ha
Smarika Mishra (1 year ago)
Libor Strnad hope you are alive and doin well.
Me (6 years ago)
Very informative. Thank you!
UmTheMuse (6 years ago)
The actual manipulations probably stole pennies per person affected, but it affected a lot of people. The more chilling part is that they were in cahoots with the government. Part of the problem is that the LIBOR was supposed to show how healthy the financial system is, but government was just as anxious as Wall Street to show that everything was going well. Thus, the crash. Wikipedia did a good job summing up the scandal.
Andrew Pham (6 years ago)
If you google 'LIBOR scandal', you'll get a good helping of info about the implications and consequences of rate manipulation.
Andrew Pham (6 years ago)
Which is what's been going on with Barclays and a few other financial institutions recently. Compared to Australia, which uses actual transaction data to set the equivalent of LIBOR (bank bill interest rate or BBSW) as well as rate validation services.
Jante Op (6 years ago)
This is a good explanation of what LIBOR is, but I'd be very grateful if someone could explain the actual significance of the manipulation of LIBOR. Obviously this rate impacts upon people's mortgage rates etc., but is it not right that the rate was manipulated so that interest rates were lower? So people with mortgages would pay less interest on them? I've probably way oversimplified it/got it completely wrong, but it would be great if someone could explain this to me.
bdub24j (6 years ago)
Thx for posting. It helps bring some understanding that the news channels just don't.
whatupwiththatdog (6 years ago)
....the ponzi scheme would suggest a bank is profitable just by playing catch with other banks in collusion.
whatupwiththatdog (6 years ago)
And if they can increase equity simply by lending money back and forth each bank can make the other look more profit tab
whatupwiththatdog (6 years ago)
That last drop in cash from bank b to a should have resulted I a rise in equity correct?
Weiszcracker (6 years ago)
Gabriel Wilson (6 years ago)
came here looking for discussion on it
blognewb (6 years ago)
Libor scandal any update?
UmTheMuse (6 years ago)
One thing that I'd like to point out here: Sal mentioned that to calculate the LIBOR, they just take a survey and ask the banks. There isn't a lot of fact checking, from what I hear. Thus, it is subject to manipulation. To paraphrase Mr. Weasely in The Chamber of Secrets, "Never trust a system if you can't see where it keeps its brains"
OtZman (6 years ago)
These videos are absolutely amazing. Short, simple, informative. Much better than many of the lectures I have. Great job!
j0hnc00 (7 years ago)
Is Sal going start explaining Austrian economics? I'm just curious and I hope he does since most YouTube uploaders, on the subject have a huge bias and aren't even willing to be realistic about the pros and cons. And furthermore, they don't explain why and how bias towards Keynesian emerged. The worst offenders are the Zeitgeist...
trublu97 (7 years ago)
@vickiormindyb Sometimes you have to maintain your "liquidity" or cash equivalents at a certain level without having to sell something that is not liquid (something that takes a while to make a market to transform to cash) or stocks/bonds/investments you don't want to sell because of taxes, or you think they are going up a lot faster then the interest rate. People /business take out loans all the time when they could just pay cash. Basically, it's just leverage.
Dankest Elf (7 years ago)
\/ (^-^) \/
dinmorerengeit (7 years ago)
dinmorerengeit (7 years ago)
dinmorerengeit (7 years ago)
Azore Khan (7 years ago)

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