Who'd have thought it, a mainstream news source explaining how banks create money from nothing . . . .

And which "mainstream news source" is that?

Bugger - link added.

It was always one of the major reasons behind Thatcher's "Right to Buy". There was no interest in allowing council house tenants to own their own homes just for the sake of it. It was however another way of ensuring a compliant workforce. From going into arrears on rent, with little fear of eviction, suddenly those who may have gone on strike realised that if they didn't pay the mortgage, they may not be reposessed immediately but their debts would rack up at an alarming rate and the fear of losing "their" home was ever present.

If people don't want to become debt slaves they shouldn't borrow money or at least unrealistic amounts. It's quite simple. The real reason asset prices increase is actually savings (esp. pension funds) - the constant flow of money into the investment system causes asset prices to go and periodically crash back.

And what do you think of the fact that the money for said loans was created out of thin air? I used to think that when I got a loan for my mortgage it was some pensioners hard earned savings being handed over to me and so I had a moral obligation to pay it back with a little interest on top.

Now I realise I was basically scammed and 97% of our 'money' is infact bank created IOU's, so 97% of our money supply is backed by an equal debt (actually it's more when you include the interest). The only way to keep this debt pyramid going is by somebody somewhere taking on even more debt or the whole system collapses. This is why the European response to the sovereign debt crisis is to give the countries in trouble more debt!

Its not slavery its a voluntary transaction. If you lend someone money then you usually expect a price for deferring being able to consume now to being able to consume later. The interest rate is the price of that deferred consumption. As long as the lender and borrower both agree and its a voluntary transaction and both parties have full information then there isn't anything wrong with it.

I think you'd agree though, that only the initial borrowing is a voluntary transaction.
Thereafter, the actions of the banks and the vagaries of the financial markets etc. are outside the control of most of us.
Unfortunately, no-one ever has "full information", which is why the economists' favourite, the so-called "perfect market", is an unachievable fiction.

At the end of the day we're at the start of an adjustment. Probably 10 + years of so-called de-leveraging. By the end of that we'll have house prices, etc at about half of current levels in real terms and real family incomesdown dramatically. In o9ther words the debt fuelled frenzy will inevitably unravel and people will be back to roughly where they were before the frenzy. So in a longer time frame there is no problem. In the shorter term the pain could be enormous if governments and central banks fail to rig the markets to spread the pain over a decade. If they don't then we'll have banks and country's going under and there will be mayhem on a scale most of us cannot imagine. Worrying about the abstract will be the least of Legionnaire's and our problems.

Who has stolen Dally's login ID?
Come on, own up.


Phew, it's Dally all right.

That's true its outside most people's control but part of the voluntary transaction is that both parties accept some risk. The mortgage lender accepts the risk that the borrower may default. The borrower accepts the risk that the interest rate may vary or if he wants to insure himself from the risk, sign up to a fixed rate mortgage.

In fact in terms of mortgages a lot of people have benefited by paying lower mortgage rates than expected in recent years due to the low interest rates.

I think in terms of mortgage slavery the bigger problem is the shortage of supply of housing that is driving up house prices and meaning owners of property have a huge advantage in being able to make money off those that don't own property, because everybody needs somewhere to live.

... on the basis that if it goes pear shaped, the taxpayer will stump up a billion or two to see them right; the bankers can sack a few thousand staff to look as if they're doing something, and continue to trouser obscene pay packets. Trebles all round. Some risk.

But that shortage in supply, what is the root cause?
Builders aren't building, but that's not the cause, that's a symptom.

The cause is the fact that first-time buyers (on whom the whole structure depends) can't get mortgages.
If they could get mortgages, builders would be building homes a whole lot cheaper than the existing stock is currently selling for.
One thing that Dally did get right is that house prices will erode but IMHO that will be slow.

Cameron says that it's planning regs and process that are the problem.
But Cameron is a lying n0bhead who wants to help the likes of Tesco to build on land they have stockpiled.

The last thing the BoE and Government want at the moment is a big increase in housing supply. Policy is aimed at trying to keep property prices artificially high for the medium term.