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Before It’s News Briefly, lending is a no-risk, ‘asset-secured’ business, in its simplest form seeing borrowers liable only for the original loan, secured against the borrower’s assets, plus interest.
When the loan is payed back, the bank profits from the interest.
When borrowers default, they yield to the lender whatever securities they’ve put up, normally far exceeding the value of the original loan.
The lender still profits.
Most public loans are mortgages, where the home itself secures the loan. But over the 20-30 year payback period – his working life – the home buyer often returns more than 100% interest as he pays back at least twice the amount of the original home loan. And he can lose his home at any time, no matter how much he’s paid.
So in the simple lending business, the lender gets his money back, plus interest. In a default situation, he gets the securities against the loan which he sells off to recover the loan and should profit if he’s correctly valued those assets.
In the mortgage market, he doubles his money. This looks like an almost totally win-win situation for the banks. Depositors paying banks to lend them their money? Just more cream. More than just arrogant, too – it seriously begs the question, why such cheap exposure to inevitable discovery and publicitiy, possibly prosecution?
Or does “that’s just the way it is” have enough power to prevent close examination? “They” may own the legal system, the media, the educational system and the war machine… but the human soul?
No.
Is there a solution, any solution?
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Yes.
Localize your economy.
Start with Food Security.
Get off the grid.
Then look here – Preppers, Permaculture, Transition Cities and follow the links… the neurons of the Global Brain…
Tom Dennen