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High housing prices are also very nice for banks and benks control nations. Essentially all mortgage money is created as dept. Banks can simply say: Here you go
by teekert 9y ago
High housing prices are also very nice for banks and benks control nations. Essentially all mortgage money is created as dept. Banks can simply say: Here you go ma'am/sir, here is your money, created out of thin air. Now, please sign here to pay for your house twice, 1 time to the original owner and 1 time to us, because we created this money for you out of thin air.
- mnm2 9y agoYes and no: The bank wants 2% as interests, but inflation is 3% --> The Bank effectively loses money
- icebraining 9y agoIsn't that only true for fixed-rate mortgages? At least around here, almost all are variable-rate, so they rise with inflation. I think banks only really lose money on defaults, and that's if the house lost value.
- yellowbeard 9y agoThe bank only has to have a very small percentage of the money they loan you. Most of it is created at the time of the loan.
- teekert 9y agoExactly, the bank is not hurt from money devaluating when they don't have to do anything for it but create a dept in their books. Sure, what you will pay them will be less in 20 years but it more than the nothing they had before...