4 ms·
$400k and also -$400k is created ex-nihilo by the bank, balancing to $0. If the bank just created $400k and you paid it back and it made $400k profit plus inte
by quickthrower2 4y ago
$400k and also -$400k is created ex-nihilo by the bank, balancing to $0.
If the bank just created $400k and you paid it back and it made $400k profit plus interest for printing that money, then they would be much more aggresive in giving you a mortgage, in fact you would see negative interest rate loans, because if they give you the $400k from thin air, and you only pay back $40k real money, they still make $40k profit! Hell they would probably just go around buying houses from other banks in circles in a scheme a bit like modern web3 defi wrapping all sorts of coins and reselling them.
- jollyllama 4y ago>$400k and also -$400k is created ex-nihilo by the bank, balancing to $0. Yes, over the term of a 10, 20, or 30 year loan. However, the immediate effect is such that the money supply is increased, $400k is created. The destruction of the money is gradual as the loan is repaid. The reality of the situation is not that far off from what you're describing here.