After yesterday's article on The Great American Mortgage Scam, the Candid Blogger received the following question:
Who would pay your lender 3.24 million (10X) for a 324,000 Note? Nobody would do that.
$342,000 mortgage @ 6% interest for 30 years: Payment = $1,942.54 monthly or $1,942.54 X 12 = $23,310 annually.
30 X $23,310 = $699,300 total payment to holder of the note over 30 years.
You actually believe that someone would give the lender 3.24 million and only get back $700,000 over 30 years?
They would get face value of the note plus some fraction of the $375,000 in interest to be gained over 30 years.
Anyone heard of Common Sense?
The Fed has two roles - one to be the issuer of Fed reserve notes, and the other to serve as a cartel organization for the 20 member banks. Federal reserve notes stand for nothing in particular, and to vary their number, the Fed buys or sells bonds to and from the member banks.
Suppose the Fed buys bonds from Chase in the amount of $1000, and Chase previously had the minimum reserve on hand - say it's 10% just for easy numbers. Now Chase can make additional loans from the $1000 cash that has now been added to their reserves. How much can they loan out? $900.
But whoever borrows that money will now deposit it in an account somewhere. For simplicity, say they deposit it at B of A. Now B of A has another $900 on hand, and they loan out $810, which is deposited in B of A, which then loans out $720... This is how we get the 10 times multiplier. That is, the 10 times includes all that the commercial banks create. At the end of this process, $10,000 is created from an original deposit of $1000. It doesn't matter which bank since they are all members of a cartel -- family. Pretty clever, huh?
(By the way, exactly the same thing happens if the original $1000 is in the form of a deposit from my back pocket rather than in the form of the Fed creating reserves, except that now the structure is less stable. The same thing does not happen if it is a deposit from earnings, since then it has to be matched by a withdrawal from the employer's account.)
Now do you see also why the Fed contributes only a small amount to the money creation, mathematically speaking? For every $1000 they create, the banks can then create $10,000.
So, let's go over it again. On a $100K note, they lend out $90K, which is deposited in a bank who can then lend out $81K, which is deposited and then $72K is lent, etc., until 10x the face amount of the original note has been created.
And they can do it all from just your signature on a Note. Now you can see why lenders were so anxious to give loans to any creature that could walk upright and sign their name.
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