> On Jul 28, 8:42 pm, "Mark M."
ztech.com> wrote:
> >>>On Jul 16, 1:46 pm, ro...@
telus.net wrote:
>>
>>>>On Sun, 13 Jul 2008 22:19:41 -0700 (PDT), Shrikeb...@
gmail.com wrote:
>>
>>>>>What doomsday device
>>>>>to the Georgists have?
>>
>>>>Reality. It's all around you.
>>
>>>You mean the reality that far too many citizens
>>>own land to give in to the demand to suck their
>>>land value dry with no compensation?
>>
>>Banks get the rent now as mortgage interest and they give back zip. At
>>least some of taxes go to the common good.
>
>
> Bank profits increase the supply of capital available
> for further mortgages, thus reducing the interest rate.
> Isn't that a common good?
The entire mortgage system is a swindle. We have been taught that mortgage
lenders help society by making it possible to own your own home instead of
renting. The same land and depreciated houses are bought and sold over and
over, passed from working people to working people, who imagine they are
"building equity" and investing in a comfortable retirement. Looking at
the bloc of homeowners, we should expect land owners to come close to
breaking even over a lifetime of buying and selling homes. But look at
what really happens. Of all the real goods and services transfered to
lenders as mortgage payments, only a very small fraction is consumed by
homeowners as net real estate sales profit, home equity loans, and reverse
mortgages. Nearly all the rent made as mortgage payments is consumed by
the mortgage lenders.
We are taught in school that the function of banks in a capitalist system
is to gather together savings to be used to fund real capital goods like
production tools. In this function, banks are useful, and in proportion
to their contribution, they receive a small fraction of production. But
this is certainly not the case with mortgage lending, which requires little
deposit of real labor, yet reaps the lion's share of rents.
To illustrate the enormity of the mortgage swindle, imagine a community of
homeowners who buy and sell without bankers. They employ land contract
financing, which means "rent to own." Instead of financing a huge cash
loan to buy a house, you pay rent for thirty years. One thing is obvious
from this model: No money at all is going to lending institutions. All
payments are from homeowners to homeowners.
So how much goods and service value is consumed by mortgage lenders in the
mortgage system compared with the hypothetical land contract system?
At the end of 2006, 51 million American homes carried a mortgage. Total
mortgage debt was 10.4 trillion dollars. If we figure a 6.7 percent annual
interest rate on this debt that leaves an interest-only payment of 67.1
billion a month, not including principal repayment. Minimum, that's an
average of $1315.68 a month per home that could be consumed by homeowners
instead of by mortgage lenders.
Mark M.
