This family blog continues the one originally started by Luke. It is hoped through the sharing of stories, ponderisms, and pictures of family and events, that this online journal will serve to enhance and nurture our relationship and draw us closer to God and each other as we travel along life's road. Buckle-up!
This video is an education about money and the creation of our financial system. There are five parts. After each part, click on the link provided below the player.
I watched the first two videos tonight. It's tough to understand, not the videos really, because they are well done, but the whole subject. The video seems to be saying that money is mostly a scam between banks with the collusion of the government. But, supposing that a seller owns his property clear with no mortgage, and sells it to a buyer who then goes and gets a mortgage to pay for it. Where does the bank get the actual cash to pay the seller at closing? And if the seller in turn does not deposit that money in a bank, then it seems like the bank and or the government has just lost a bunch of money. Of course, they have the promissory note of the new buyer, but they had to pay out an awful lot up front to get it. Does the government just print money and give it to the bank in that situation, or do banks have actual capital for those situations? It seems like the video is saying that banks do not have actual money laying around.
Luke, Banks are required to maintain a percentage of their total deposits with the Federal Reserve bank. A "new" bank may not have enough money on hand or on deposit with the Federal Reserve to be able to lend a large sum to a home buyer. They would have to start out as a small checking and savings only bank, charging fees for checks while offering a modest interest rate for your savings deposit. As the banks customer base continues to grow, so too does amount of money on deposit. This enables the bank to start a loan program. Lending money for things like cars, jewelry, small construction, stuff like that at first. If all goes well the bank will at some point have enough money on hand or on deposit with the Federal Reserve to handle a home mortgage or two. To answer your question, although the bank does pay the seller a large sum of cash, but the amazing thing is that the promissory note is actually a negotiable instrument. Same thing as money in the financial world. When the local bank needs to make a deposit with the Federal Reserve to meet the percentage requirement, they can and probably will use that piece of paper that has the borrowers signiture on it as money. Same as cold hard cash. Copy and paste this url. I thought it was interesting. Let me know what you think. http://www.newyorkfed.org/aboutthefed/fedpoint/fed45.html
It seems like a criminal scam to lend 1000 dollars and only actually to have 100 dollars, but I guess I do see how it is possible.
I remember when I signed my mortgage papers there was a clause that said that the bank would in fact sell the note, but that my mortgage would still be serviced locally. It's possible that one of the companies going broke actually bought my mortgage. Thankfully, it's almost paid off.
I'm going to try to watch some more of the videos tonight.
3 comments:
I watched the first two videos tonight. It's tough to understand, not the videos really, because they are well done, but the whole subject. The video seems to be saying that money is mostly a scam between banks with the collusion of the government. But, supposing that a seller owns his property clear with no mortgage, and sells it to a buyer who then goes and gets a mortgage to pay for it. Where does the bank get the actual cash to pay the seller at closing? And if the seller in turn does not deposit that money in a bank, then it seems like the bank and or the government has just lost a bunch of money. Of course, they have the promissory note of the new buyer, but they had to pay out an awful lot up front to get it. Does the government just print money and give it to the bank in that situation, or do banks have actual capital for those situations? It seems like the video is saying that banks do not have actual money laying around.
Luke,
Banks are required to maintain a percentage of their total deposits with the Federal Reserve bank. A "new" bank may not have enough money on hand or on deposit with the Federal Reserve to be able to lend a large sum to a home buyer. They would have to start out as a small checking and savings only bank, charging fees for checks while offering a modest interest rate for your savings deposit. As the banks customer base continues to grow, so too does amount of money on deposit. This enables the bank to start a loan program. Lending money for things like cars, jewelry, small construction, stuff like that at first. If all goes well the bank will at some point have enough money on hand or on deposit with the Federal Reserve to handle a home mortgage or two. To answer your question, although the bank does pay the seller a large sum of cash, but the amazing thing is that the promissory note is actually a negotiable instrument. Same thing as money in the financial world. When the local bank needs to make a deposit with the Federal Reserve to meet the percentage requirement, they can and probably will use that piece of paper that has the borrowers signiture on it as money. Same as cold hard cash. Copy and paste this url. I thought it was interesting. Let me know what you think.
http://www.newyorkfed.org/aboutthefed/fedpoint/fed45.html
It seems like a criminal scam to lend 1000 dollars and only actually to have 100 dollars, but I guess I do see how it is possible.
I remember when I signed my mortgage papers there was a clause that said that the bank would in fact sell the note, but that my mortgage would still be serviced locally. It's possible that one of the companies going broke actually bought my mortgage. Thankfully, it's almost paid off.
I'm going to try to watch some more of the videos tonight.
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