Creating money

[Sava]

Originally posted by Lancer
He's not buying it outright, he's paying me a mortgage. The next guy buys the mortgage outright...He puts the value of the house in my ready fingers, and now he holds the mortgage.

I'm thinking about going out for Chinese food and a beer.

If the first guy doesn't buy it outright, then you are only getting one payment of $100,000... not two.

don't drink too much, brain cells don't grow back

[Lancer]

Well ok Imran, how about this case:

I buy a house for $50,000 and sell it for $100,000. I created $50,000, right? Simple, yes?

[Imran Siddiqui]

He's not buying it outright, he's paying me a mortgage. The next guy buys the mortgage outright...He puts the value of the house in my ready fingers, and now he holds the mortgage.

Still no money is created simply by that sale. The guy that bought the mortgage from you outright, will make a profit on the interest payments. YOU, on the other hand, will see no money from that interest.

You simply have no idea what you are talking about Lancer .

[Imran Siddiqui]

I buy a house for $50,000 and sell it for $100,000. I created $50,000, right? Simple, yes?

No, the value of the house just rose (ie, you didn't do anything). Unless you are saying you bought a house for $50,000 and sold it IMMEDIATLY for $100,000. Then yeah, you made $50,000 profit.

[Sava]

Originally posted by Lancer
Well ok Imran, how about this case:

I buy a house for $50,000 and sell it for $100,000. I created $50,000, right? Simple, yes?

no, you made a profit... and who would pay $100,000 grand for a house worth $50,000? Maybe if you had a good eye for real-estate... but judging from this thread... I wouldn't quit your day job

[Lancer]

"You simply have no idea what you are talking about Lancer"

Sure, but when has that every stopped me?

[Lancer]

Sava, I bought 2 houses in my life, and am now selling my second. The first I bought for $65,000 and sold for $172,000, 6 years later. The second hasn't been as good. I bought it for $70,000 and am about to sell it for $175,000, 14 years later.

...and I work nights.

[Lancer]

I've created $212,000 through this method alone.

[Sava]

Originally posted by Lancer
I've created $212,000 through this method alone.

you haven't accounted for inflation or maintenance costs, or any improvements/work that was done

[Lancer]

True, that would reduce it maybe $20,000.

Good to see that you agree it's created money.

[Imran Siddiqui]

Are you using 'created money' to mean profit? Because even if you are, your original example created no profit for you .

[Sava]

Originally posted by Lancer
Good to see that you agree it's created money.

You gained the money through transaction... you didn't create jacksh1t.... the government is the only entity that creates money... legally... they own the mints that print the cash. DUH!

[Lancer]

How so? Sure seems like I'm doing okally dokally...

[Imran Siddiqui]

How so? Sure seems like I'm doing okally dokally...

But you didn't create anything... and by selling a mortgage, you didn't make any money, unless you snookerd the guy that bought the mortgage from you outright.

[Lancer]

I made money where there was but vacuum prior. Some money went in, alot more came out. Waalaa...

[Imran Siddiqui]

That profit, not money creation, Lancer.

And in your original example, there is no profit in there for you either.

[Lancer]

Imran, ahh, in the thread example. No, I didn't make any money myself. I'm saying that money was created during the process.

Profit and money creation can be the same thing though, can't it?

Else how does an economy expand?

[Imran Siddiqui]

No, I didn't make any money myself. I'm saying that money was created during the process.

Not at that moment. Years later when all the interest is collected by the party you sold the mortgage to outright, yeah.

Profit and money creation can be the same thing though, can't it?

Else how does an economy expand?

Simply because you make more and more profit, doesn't mean that money is being created. You are getting that profit from someone else, who is paying you for it. You don't necessarily have to be creating money because of it, and in land deals you really aren't creating money by your profit (the value of the land just rose).

[Lancer]

Then how does the economy expand? Through the goverment printing more money? No! Through the people creating more value, which is really the same thing as money, since it is convertable, right?

[Kidicious]

Money was created with the mortgage. Selling the mortgage doesn't create any money. Is that what you guys figured?

[Lancer]

Sten would get a laugh outa this thread.

[Lancer]

The only thing I'm sure of at this point is that I'm going with the Szechyan chicken.

[Kidicious]

When a loan is created the money supply is increased. There are now two assets, the loan and the money that was loaned. Selling the loan is just trading assets though.

[Imran Siddiqui]

Then how does the economy expand?

Four ways: Increase in either consumption, investment, government spending, and net exports. So yes, the government spending DOES expand the economy (and causes inflation).

Production of goods and services results in expansion (as do banks lending money). It puts more money in the hands of the workers of that company. However, profit, by itself, does not. You sold land, you didn't produce anything. No expansion came about. You simply bought a piece of land, weighted for it to increase in value, and then sold it at a price. However someone had to pay that higher price. Taken by itself, that transaction did nothing to create expansion.

Now what you do with that money afterwards MAY expand the economy.

However, expanding the economy has nothing to do with creating money. All it does is alter the value of the money.

[Imran Siddiqui]

Money was created with the mortgage. Selling the mortgage doesn't create any money. Is that what you guys figured?

Bingo... at least that is what me and Sava figured. Lancer doesn't think so.