Rent or own

[slowworm]

No, you've lost me there slowworm, what part of my comment is inaccurate then? Presuming it was my comment.
I understand the concept of compound interest. It just means interest gains interest doesn't it?
Ive just given that as an example above and said why think its wrong.
So what do you mean?

You reference to paying back 2 or 3 times what you borrow. This is simply down to compounding and would apply to whoever you borrowed from.

Your B&B example is also rather misleading, in the real world taxes would reduce the £50 to about £5 when it gets returned to the salesman. People would also expect to pay using cheques, credit cards etc further reducing the amount and proving banks do provide a purpose.

 

[Dave]

You reference to paying back 2 or 3 times what you borrow. This is simply down to compounding and would apply to whoever you borrowed from.

But whats to stop the government lending you that money at a much lower rate?
You know, there is a seat in parliament called 'The remembrancer' Right behind the speaker. Out of sight.
Which has existed since 1581
This is the bankers man inside parliament. No other industry is allowed to have a man in parliament.
This fellow has a team of barristers who get to look at every bit of banking legislation, and change it before it gets put before the house for a vote.

His job is to make sure, everybody remains in high debt. But it doesnt have to be that way. We are owned by bankers. And I'd disagree. There should be a much higher dislike of banks and the monetary system. Its unbelievably bad. Evil even.

Here, some interesting stuff on this site, if anyone wants to delve deeper...https://www.positivemoney.org

I looked into all this stuff, as I worked for 14 years in london and leeds, as a consultant, and, like millions of others, couldn't afford a rabbit hutch, which left a severely bad taste in my mouth...

Cest La vie...

 

[mrcharly]

I've owned, rented and (just to be different) lived on boats.

Renting has some plus points. You don't need a huge wadge of cash to get the property. If something major happens to the house, you don't have to worry about the bill. It has lots of negatives. If you want to, say, hang a picture on a wall - ask permission. You can't change anything in the house. Don't like the kitchen, hate the crappy floor that is a dirt-trap? Tough. Put up with it or move. Something goes wrong with the boiler/lights/radiators? Notify the landlord and wait a few days while he gets someone round to look at it. Can't just fix it yourself.

Owning, well you get to decide what to do with the place. You can alter things, repair stuff, do what you like.

I've just bought a place, having rented for 4 years. My monthly bill (rent/mortgage bill) has gone *down* by £150 a month.

In York, renting is more expensive than buying.

 

[slowworm]

But whats to stop the government lending you that money at a much lower rate?

Where do they get it from, what impact does that have on other things?

I think it's easier to look at a simple credit union example. Before people borrow people need to save. If you save you want a return that's at least as high as inflation so a year ago you'd expect about 4% - 5%. The credit union will have overheads (staff costs, infrastructure etc) and make allowances for bad debts etc so when they lend the money it's understandable why the rate would be over 5%, so a 6% mortgage cost seems fair? Now along comes a bank and due to efficiencies and their ability to raise money cheaper they'll offer a mortgage for 5% and most people will choose them. Who's fault is it?

 

[smojo]

Many moon ago (1975) I took a mortgage for a house that cost £7,500 - yes you read that right. It took about half of my income each month to pay for it. I was earning about £100 a month. I figured by the time I paid it off I would have paid over £22,000 which seemed horrendous but I was happy to have my own place that I could do what I want with. Glad I did because it's now worth over £300,000. Not a bad investment. If I'd rented all these years I would have nothing still. It now gives me some equity if I want to downsize and the satisfaction of being able to leave something worthwhile to my children when I'm gone. Times have changed al lot and it's not so easy now but if you can afford it - buy is my message. Nothing like the feeling of being the king of your own castle and instead of lining your landlords pocket, you can be securing your own future security.

 

[British Red]

But whats to stop the government lending you that money at a much lower rate?

Because the government does not have any money. Tax payers have money. So to make this happen the government would need to raise taxes by an eye watering amount and provide no service in return, other than to lend the money at below market rates to those least likely to repay it (those most likely to repay it can already get a mortgage). Alternatively the government could simply print more money. This would of course cause spiralling inflation and another house price bubble. The way to make house prices affordable would then be to print even more money - and so on until we end up like other countries that have iflation in the hundreds of percent.

We are a small country, with a large population, relatively high incomes and a limited housing stock. The laws of supply and demand mean that house prices are expensive. There is no way to change that.

 

[Andy BB]

Hee hee. Return to the barter system? Love it! But somewhat impractical nowadays, n'est-ce pas?

And of course there would have to be an agreed "equivalent" rate agreed - eg 3 goose egg equals a loaf of bread. However, the list of "equivalents" would fill up a house with the lists - how much is a TV worth in brussel sprouts or candles? The only practical way round this is to set up an imaginary "standard" to make life easier? ie one "loony" equals 1/3 loaf of bread, or one goose-egg, and a litre of diesel equals 15 "loonies".

And to save the storage problems - not to mention the rotting of most consumables - it would make sense to have some physical item to represent a loony, and other physical items to represent fractions or multiples of a loony. And some sort of monitoring/control organisation to oversee the fairness of the "exchange rates" of items for loonies. And of course to deal with other countries' loony equivalents - for example how many loonies should a car imported from Germany be worth, as their Loony equivalent (the "Daft") is based on a different barter list. And if we export to France, how do we then spend the resulting French "Merde" back in the UK?

Anyone else see where this is going?

 

[Dave]

Where do they get it from, what impact does that have on other things?
Now along comes a bank and due to efficiencies and their ability to raise money cheaper.....

As far as how money is created. This video explains it better than I ever could in under two minutes.

[video=youtube;b6_SLwReMqo]https://www.youtube.com/watch?v=b6_SLwReMqo#t=11[/video]

https://www.positivemoney.org/how-money-works/how-banks-create-money/

 

[British Red]

I think you misunderstand money Dave. Notes and coins have no intrinsic value (other than scrap). They did when we had the gold standard, but not now. Paper and coin have no more worth than electronic bits and bytes. The banks do not create money, if they did, they would not have needed a "bail out".

 

[slowworm]

As far as where money comes from. That website explains it better than I ever could:

https://www.positivemoney.org/how-money-works/how-banks-create-money/

It doesn't though. I read it and it concentrates too much on obvious basics such as a loan not being given to you in physical notes but doesn't mention that banks 'borrow' from other banks, the Bank of England for example and it's they, the UK government, that is creating vast amounts of electronic money at the moment. This is causing inflation, reducing annuity rates so retired people are seeing incomes severely reduced etc, etc.

 

[Dave]

I think you misunderstand money Dave. Notes and coins have no intrinsic value (other than scrap). They did when we had the gold standard, but not now. Paper and coin have no more worth than electronic bits and bytes. The banks do not create money, if they did, they would not have needed a "bail out".

Look at the vid I posted above. Of course banks create money! Notes are IOU's. Also, government would not have to raise taxes, to take over this money creation.

 

[Dave]

I read it and it concentrates too much on obvious basics such as a loan not being given to you in physical notes but doesn't mention that banks 'borrow' from other banks, the Bank of England for example and it's they, the UK government, that is creating vast amounts of electronic money at the moment. This is causing inflation, reducing annuity rates so retired people are seeing incomes severely reduced etc, etc.

But 97% of all the money in creation in the UK has been created by Banks, as electronic debt over the last 45 years. Not the gov. They shouldn't have been allowed to do that. Its a complete failure of gov. The more money they create, the more money they make. So they expand the money supply year on year. That pushed up the price of houses. It means ultimately that banks will own everything.

How Much Money have banks created?

 

[British Red]

Look at the vid I posted above. Of course banks create money! Notes are IOU's. Also, government would not have to raise taxes, to take over this money creation.

In that case, since the money is simply created, why don't you make yourself into a bank and issue mortgages to all the people who can't get a mortgage? If the money is created, that shouldn't be a problem should it?

 

[slowworm]

But 97% of all the money in creation in the UK has been created by Banks, as electronic debt over the last 50 or 60 years. Not the gov. They shouldn't have been allowed to do that. Its a complete failure of gov. The more money they create, the more money they make. So they expand the money supply year on year. That pushed up the price of houses. It means ultimately that banks will own everything.

I'd suggest checking the facts with a different site. Currently the BoE (UK government) is creating money to lend to banks to encourage them to lend. The banks themselves are not just creating this money.

 

[Dave]

Thats a fair point Hugh, I don't have an answer to it. Its tempting to think you can become an expert in everything with the internet at my fingers, but Im not an economist and I have to go out..

 

[Dave]

I'd suggest checking the facts with a different site. Currently the BoE (UK government) is creating money to lend to banks to encourage them to lend. The banks themselves are not just creating this money.

The facts on that site are completely accurate slowworm. They are very reputable.

 

[slowworm]

The facts on that site are completely accurate slowworm. They are very reputable.

How do you know? Perhaps a better criticism would be the site is very one sided, if you're interested I'd suggest looking at contrasting views. Personally I wouldn't be overly confident in the government taking control, it's not as if everyone is completely happy with them at the moment.

What I do think is rather than waiting for such ideas to come to fruition they could be doing something now such as supporting their credit union or old fashioned building society rather than using banks.

 

[mrcharly]

Too much fixation on 'money' here.

The financial system works on credit and debit. If a bank lends you money, you own them money - that's a 'credit' on the bank's books. You've not gained money, you've gained a debt. No money created, just a credit and a debt. The bank show your loan as a credit on their books. That raises their apparent worth so the bank can then 'borrow' themselves from other sources, to top up their 'cash' worth (Legislation says they aren't allowed to lend out more than they have). So the banks borrow at one interest rate, lend at another and pocket the difference in interest.

If you had enough source capital you could start doing the same yourself - it's just a private mortgage.

 

[santaman2000]

Where do they get it from, what impact does that have on other things?

I think it's easier to look at a simple credit union example. Before people borrow people need to save. If you save you want a return that's at least as high as inflation so a year ago you'd expect about 4% - 5%. The credit union will have overheads (staff costs, infrastructure etc) and make allowances for bad debts etc so when they lend the money it's understandable why the rate would be over 5%, so a 6% mortgage cost seems fair?.....

Mortgage rate of 5%-6%? Wow! Back when I got my mortgage in 1989, the rate was 8.55% and that was considered low. Shortly after that the rates dropped to near nothing. Even now they're only about 3.5% or less.

My loan was/is a V.A. loan (guaranteed by the Veterans Administration) That doesn't affect the interest rates but it does qualify me to gat the loan with no down payment (up to more than 100% of the homes accessed value) The original bank making the loan sold the mortgage within the first month and the next mortgage company resold it about 7 years later.

Original cost of the home and property back when I had it built in 1989? $45,125 and the seller/builder paid closing costs (survey, title search, building permits, etc.) for a small home (1065 square feet, 3 bedroom, 2 bath)

Payments? $450 per month PITI (Principle, Interest and escrow accounts payments for Tax & Insurance)

Current value? Between $100,000 and $150,000

 

[boatman]

The maker of that video does not understand money or has read the economic reasoning of the "Freemen on the Land". In order for the bank to lend you X Euros it must have access to X Euros in its accounts that can be transferred to your account and then to the watch seller who can spend that money as they wish. Their reserves are reduced by X Euros to be replenished by the repayments and interest. One reason for the banking crisis was the non-repayment of loans that should never have been made.