Is the Fed Reserve UsingHomes as Collateral Twice?
Posted Aug 24 2008 10:30pm
Warning! This post is confusing. Very confusing. Which is the whole point of it.
I find money and credit confusing. Take home loans: The bank gives the homebuyer money to buy a house. That money goes to the seller, who then pays off his bank.
That part is easy. The part I find confusing is “Where did the bank get the money to lend to the new homeowner?”
I used to think that money came from bank depositors. That is, Mike puts his savings into Stately Bank, which then loans that money to homebuyer Nick. Stately Bank and Mike share in the interest that Nick is paying on the mortgage.
Warning! This post is confusing. Very confusing. Which is the whole point of it.
I find money and credit confusing. Take home loans: The bank gives the homebuyer money to buy a house. That money goes to the seller, who then pays off his bank.
That part is easy. The part I find confusing is “Where did the bank get the money to lend to the new homeowner?”
I used to think that money came from bank depositors. That is, Mike puts his savings into Stately Bank, which then loans that money to homebuyer Nick. Stately Bank and Mike share in the interest that Nick is paying on the mortgage.