4 ms·

I totally have a mortgage rate that was lower than inflation at the time because it was sth like 0.7% above market rate for 20 years fixed… Banks don’t care abo

I totally have a mortgage rate that was lower than inflation at the time because it was sth like 0.7% above market rate for 20 years fixed… Banks don’t care about the real value of money the way normal people do. Borrow 100k, pay 1% interest, buy a piece of stone and sell it for 200k after a couple of decades because of inflation and pay back a banks 100k: they are happy because the math adds up.

lazide 4y ago
well, except the math doesn’t actually add up in that case for anyone ‘real’ including any bank using normal lending sources, as that 100k paid back is now worth far less than 100k back when the loan was written. The reality is that for a long time the Fed was using QE to buy up mortgage bonds written at nearly arbitrarily low rates. Bonds that no one else would buy/fund because the odds of losing money were too great. They’d been doing so since ‘09 or thereabouts to keep that market liquid. So they were willingly taking the risk of money destruction, and as the one entity that could do so, that’s pretty good. They’re probably the only one that could really do so without going bankrupt, as they are the only entity that can ‘create’ money arbitrarily in the system. It’s around 2.6 trln dollars right now [https://fred.stlouisfed.org/series/WSHOMCB https://fred.stlouisfed.org/series/WSHOMCB] The vast majority of the banks haven’t been underwriting mortgages themselves for a very long time, and the ones that were had been getting put in scarier and scarier positions because of the Fed’s actions. Right now, the entire sector is in the process of imploding because the Fed has stopped doing what it was before, and trying to push the markets back to reflect a more realistic cost of money, which of course dries up demand as prices are still based on ‘free cash’ as the benchmark - https://www.bloomberg.com/news/articles/2022-08-19/mortgage-lenders-are-starting-to-go-broke-as-loan-volumes-plunge https://www.bloomberg.com/news/articles/2022-08-19/mortgage-...
- looping__lui 4y ago
  Thats the problem. The FEDs gave the banks the money for free. And we gave it to them for free as well because we didn’t get any savings on our accounts… Those who borrowed money and bought assets literally took a tiny little bite from everybodys savings account every year..

lazide 4y ago

well, except the math doesn’t actually add up in that case for anyone ‘real’ including any bank using normal lending sources, as that 100k paid back is now worth far less than 100k back when the loan was written. The reality is that for a long time the Fed was using QE to buy up mortgage bonds written at nearly arbitrarily low rates. Bonds that no one else would buy/fund because the odds of losing money were too great. They’d been doing so since ‘09 or thereabouts to keep that market liquid. So they were willingly taking the risk of money destruction, and as the one entity that could do so, that’s pretty good. They’re probably the only one that could really do so without going bankrupt, as they are the only entity that can ‘create’ money arbitrarily in the system. It’s around 2.6 trln dollars right now [https://fred.stlouisfed.org/series/WSHOMCB https://fred.stlouisfed.org/series/WSHOMCB] The vast majority of the banks haven’t been underwriting mortgages themselves for a very long time, and the ones that were had been getting put in scarier and scarier positions because of the Fed’s actions. Right now, the entire sector is in the process of imploding because the Fed has stopped doing what it was before, and trying to push the markets back to reflect a more realistic cost of money, which of course dries up demand as prices are still based on ‘free cash’ as the benchmark - https://www.bloomberg.com/news/articles/2022-08-19/mortgage-lenders-are-starting-to-go-broke-as-loan-volumes-plunge https://www.bloomberg.com/news/articles/2022-08-19/mortgage-...

looping__lui 4y ago
Thats the problem. The FEDs gave the banks the money for free. And we gave it to them for free as well because we didn’t get any savings on our accounts… Those who borrowed money and bought assets literally took a tiny little bite from everybodys savings account every year..