NO CASH TO PAY THE DEBT FOR EVERGREEN COLORADO REAL ESTATE
One of the major problems with our economic society is that we are a debt-based economy. The way we create money is for a bank to hold a 10% cash reserve and then to loan out the other 90% of the loan balance. This is called fractional reserve lending and it is the way money is created in America. So if you apply for a $100.000 loan the bank needs to have $10,000 in cash and then they create the $90,000 to close your loan. In effect they just created $90,000.
If you then deposit the proceeds from your loan into the bank then they can use the $100,000 you deposit from your loan to write a loan for $1,000,000; all this on a cash deposit of $10,000. If you were then to deposit the million in the banking system they can now loan out 10 million, again all they need to do is to keep a 10% reserve.
The major problem arises when you calculate the total cost of the loan including the interest. The $100,000 loan above will have a total cost $215,837 for a 30 year fixed mortgage loan at 6%. But the bank only created $90,000 in new money. Where will the other $125,837 come from? There is not enough money in the economy to pay off the loan. Hence, the liquidity crisis we are currently experiencing worldwide.
If you compound this scenario millions of time across the globe you can begin to imagine the true nature of the problem. It is as if you and I were stranded on a desert island and you had $100.00 in your pocket. I asked you to loan me the $100.00 and I would pay you 10% interest. But how can I pay you $110.00 back if all we have in our little economy is the original $100.00?
It’s time to return to the fundamentals. If You want to prosper in these tough times you will need to earn a profit, not just depend on stock price speculation, or bond interest which is less that inflation. Now is the time to be successful give us a call at MARK ENGLISH REAL ESTATE and DISCOUNT MORTGAGE SERVICES (www.aloan2own.com) and let’s plan you retirement income. We are the one stop shop for all your Real Estate needs in the Rocky Mountains. Whether a home of Your own, a retirement investment, an EVERGREEN COLORADO HOME LOAN or an EVERGREEN COLORADO MORTGAGE REFINANCE call us at 303-674-0148, Email us at markenglishrealestate@msn.com, or visit us on the web at www.evergreencoloradoliving.com.