I was thinking today, and that's probably a bad thing. I was thinking about where does the money to buy a house come from? You get a loan from a bank, but where does that come from? I learned that as the interest rates dropped last year, and loans were easier to get, the national debt started to really crank up. Then it hit me- we borrow the money from overseas. So, in reality, when the interest rates drop, and everybody goes out and refinances their house, or buys a new one, we are really shooting ourselves in the foot. Anybody else see this?

 

Um... I don't think that's quite right. I believe when interest rates drop it's because of the bond rates falling because of all the people who put their money in the bond market when stocks tanked here a couple of years ago. As stocks start to come back more people will start to put their money in stocks and the bonds will have to offer higher interest to get people to invest and interest rates will go back up.

I'm not an economics major but I think that's the way it works.

Banks loan out money that they have. They don't borrow it from overseas. They do borrow it from each other from time to time. Most of it is ours that we keep in the bank. That's why they can pay you interest on your savings account. They pay you more for a CD because you have to leave it there for a given amount of time so they know they can use it for that long.

 

No our money comes from the Federal reserve. They print and coin money courtesy of the GPO and secret service. When you get a loan it comes from the big bank of your district. There are 12 federal banks and they make loans to the government and other member banks. We don't borrow money from overseas they usually borrow it from us. Your post is so backwards I don't know all of the stuff that is right and this is all that I can think of right now.

 

Ok, so how does the national debt get so high then? I read yesterday that the cap on it was raised for the second time in 12 months. Why is it over 6.6 TRILLION dollars if all these countries owe us? We borrow money too.

 

If I remember economic class correctly, the money that banks loan out is money that people put in the bank or share holders invest in the bank. There's that one old movie that deals with that, which I can't think of the name of off hand. As for the national debt, that is the money the government spends, not the citizens. The government does borrow money from banks, just like other governments borrow from United States banks. I don't know a lot about economics but I do know that about the national debt.

On Edit: I also believe that bonds are basically loans to the government, which is why they adjust the interest rates to get more people to invest in bonds. Could be completely wrong on that though.

 

The National debt is a figure of speech. Its what our government owes to itself and programs like Social Security and medicare. Its all a big fantasy hype.


By the way, saving money is the worst thing you can do for our slow economy.

rrmike -- you got it pretty accurately there.

 

when you put your money into a bank, they pay you interest because they are using your money while its in there to make money off of loans...