1946 Raleighs

On 2012-05-11 15:54:08 +0000, AMuzi said:

p.s. If bankers could conjure assets from thin air, why would anyone
engage in any other trade but banking?

Because they can't do that. They can merely multiply, not add.

Tim Bradshaw wrote:
On 2012-05-11 14:42:41 +0000, Radey Shouman said:

No, even loans at zero interest would create more money. But no
wants to make such loans.

Specifically, I think that commercial banks don't because although this
would still create more money, they need to cover things like their
insurance and running costs, and make a profit as well, ideally.

Incidentally, another convincing argument that money is being created is
to look at the income stream of the bank. (I might have made mistakes in
the following, I have not checked my maths very carefully, but the idea
is correct). If they are required to keep a reserve of r (r being less
than 1) and they need to pay a rate d to borrow money, and charge a
rate l on money they lend, then their effective income rate is l(1-r)/r
- d. So if r is 1/10, and d and l are both 1/50 (ie they need to keep
10% reserves, and they can both borrow and lend money at 2%), then their
effective income is 4/25, or 16%, which is 8 times the interest rate
they borrow and lend at.

Again, you can see this without being able to do the closed form: if the
bank borrows a million zorkmids, then at 2% it pays 20,000 interest a
year. It lends 900,000 zorkmids on a house for which it gets 2%, or
18,000. That 900,000 ends up back in the bank, and it lends 810,000 on
another house, for which it gets 2%, or 16,200. At this point it is
already 14,000/year in the black, and as you iterate you'll find this
number converges to an income of 160,000/year.


"That 900,000 ends up back in the bank"

Well, yes, after 30 years for the 95% of loans which don't
default . . .


--
Andrew Muzi
www.yellowjersey.org/
Open every day since 1 April, 1971

On 2012-05-11 16:26:41 +0000, AMuzi said:

"That 900,000 ends up back in the bank"

Well, yes, after 30 years for the 95% of loans which don't default . . .

No, it ends up back in the bank right away: when I buy a house from
you, what do you do with the money? I'm guessing you put it in the
bank.

Tim Bradshaw wrote:
On 2012-05-11 16:26:41 +0000, AMuzi said:

"That 900,000 ends up back in the bank"

Well, yes, after 30 years for the 95% of loans which don't default . . .

No, it ends up back in the bank right away: when I buy a house from you,
what do you do with the money? I'm guessing you put it in the bank.


You might, but not necessarily. The usual split is mostly
to pay off the other mortgage lender plus a fee for
interrupting their revenue stream. The mortgagee moves his
equity (after all the various transaction fees) into another
property or savings/ heirs/ investments/ whatever.

--
Andrew Muzi
www.yellowjersey.org/
Open every day since 1 April, 1971

On May 11, 10:40*am, AMuzi wrote:
Tim Bradshaw wrote:
On 2012-05-11 16:26:41 +0000, AMuzi said:

"That 900,000 ends up back in the bank"

Well, yes, after 30 years for the 95% of loans which don't default . .

AMuzi writes:

Tim Bradshaw wrote:
On 2012-05-11 16:26:41 +0000, AMuzi said:

"That 900,000 ends up back in the bank"

Well, yes, after 30 years for the 95% of loans which don't default . . .

No, it ends up back in the bank right away: when I buy a house from
you, what do you do with the money? I'm guessing you put it in the
bank.


You might, but not necessarily. The usual split is mostly to pay off
the other mortgage lender plus a fee for interrupting their revenue
stream. The mortgagee moves his equity (after all the various
transaction fees) into another property or savings/ heirs/
investments/ whatever.

You're making the question more complicated than it should be. Whatever
the split is, and whatever the people eventually do with the money, they
almost always deposit it immediately in some bank. Do Wisconsin house
buyers normally run around with suitcases full of $100 bills?

Radey Shouman wrote:

AMuzi writes:

Tim Bradshaw wrote:
.

No, it ends up back in the bank right away: when I buy a house from
you, what do you do with the money? *I'm guessing you put it in the
bank.

You might, but not necessarily. *The usual split is mostly to pay off
the other mortgage lender plus a fee for interrupting their revenue
stream. *The mortgagee moves his equity (after all the various
transaction fees) into another property or savings/ heirs/
investments/ whatever.

You're making the question more complicated than it should be. *Whatever
the split is, and whatever the people eventually do with the money, they
almost always deposit it immediately in some bank. *Do Wisconsin house
buyers normally run around with suitcases full of $100 bills?

Don't ask Andy to disclose his private business mattresses, I mean
practices.

Chalo

Radey Shouman wrote:
AMuzi writes:

Tim Bradshaw wrote:
On 2012-05-11 16:26:41 +0000, AMuzi said:

"That 900,000 ends up back in the bank"

Well, yes, after 30 years for the 95% of loans which don't default . . .
No, it ends up back in the bank right away: when I buy a house from
you, what do you do with the money? I'm guessing you put it in the
bank.

You might, but not necessarily. The usual split is mostly to pay off
the other mortgage lender plus a fee for interrupting their revenue
stream. The mortgagee moves his equity (after all the various
transaction fees) into another property or savings/ heirs/
investments/ whatever.

You're making the question more complicated than it should be. Whatever
the split is, and whatever the people eventually do with the money, they
almost always deposit it immediately in some bank. Do Wisconsin house
buyers normally run around with suitcases full of $100 bills?

A real estate closing is a series of contracts and bank
drafts passed across a table while everyone scribbles their
assent or witness and then some subsequent small electronic
transfers to settle out the various agent fees and balance
details. I've never seen any cash at a closing let alone a
suitcase full of it.

--
Andrew Muzi
www.yellowjersey.org/
Open every day since 1 April, 1971

AMuzi writes:

Radey Shouman wrote:
AMuzi writes:

Tim Bradshaw wrote:
On 2012-05-11 16:26:41 +0000, AMuzi said:

"That 900,000 ends up back in the bank"

Well, yes, after 30 years for the 95% of loans which don't default . . .
No, it ends up back in the bank right away: when I buy a house from
you, what do you do with the money? I'm guessing you put it in the
bank.

You might, but not necessarily. The usual split is mostly to pay off
the other mortgage lender plus a fee for interrupting their revenue
stream. The mortgagee moves his equity (after all the various
transaction fees) into another property or savings/ heirs/
investments/ whatever.

You're making the question more complicated than it should be. Whatever
the split is, and whatever the people eventually do with the money, they
almost always deposit it immediately in some bank. Do Wisconsin house
buyers normally run around with suitcases full of $100 bills?

A real estate closing is a series of contracts and bank drafts passed
across a table while everyone scribbles their assent or witness and
then some subsequent small electronic transfers to settle out the
various agent fees and balance details. I've never seen any cash at a
closing let alone a suitcase full of it.

So the money is in fact deposited in banks immediately or almost immediately.

On Friday, May 11, 2012 11:13:49 AM UTC-7, Jay Beattie wrote:

Apart from the cash going to the seller, in reality, the originator
sells the loan, so it gets its cash. The loan is then parted out in
the after market -- servicing rights, payment streams, etc. It is
bundled together into a CDO and sold again, and the buyer may get a
credit default swap (CDS), which, as we know, creats yet another
market. It's like seeing the cow move through the meat processing
plant.

-- Jay Beattie.

There are occasional exceptions.
The bank in my town doesn't sell the mortgages it originates.

Tom Ace