I watched a video called "thrive - what will it take". It is a conspiracy theory video, but not an overly quacky one. Like most conspiracy theory videos, it talks about the Federal Reserve & banks controlling everything. I somewhat agree with that, but not being one to just take the video at it's word, I have started looking into it. I have been looking at interest rates and inflation rates historically. My hypothesis is that if the Federal Reserve & big banks are in control of inflation, then they would never allow themselves to lose money on loans due to inflation surpassing interest. I.E. it would never be possible for you to "lock in" a mortgage interest rate that would result in the bank receiving less REAL MONEY (inflation for adjusted) on a year to year basis than what they loaned you. I researched the average price of a home 30 years ago in 1981: 87,000$. the interest rate in '81 was 15.75%; it dropped to 7.5% in 1986 so assumedly any homeowner would have refinanced, so I just used 7.5% to make the math less complicated. assume you took out a 30 year loan @ 7.5% in 1981 and made 608$/mo (7300$/yr) payments and payed it off this year:
Now watch what happens when I change the interest rate from 7.5% to today's interest rate of 4%:
so, if in 1981, if the bank had given you a loan at 4%, they would have lost thousands of dollars. So in order for them to be giving loans at 4% right now, they must know that inflation from now until 2041 will be less than it was from 1981 until now. IMO Banks wouldn't make a gamble with their profits like that unless they knew the odds. and, IMO, there's no possible way they could know the odds, unless they are the ones creating the odds.
what do you think?
Rich (BB code):
interest 7.50%
yearly payment: 7299.8
loan amount: 87000
year inflation rate real money given to bank
1981 10.35% $6,544
1982 6.16% $6,141
1983 3.22% $5,943
1984 4.30% $5,688
1985 3.55% $5,486
1986 1.91% $5,381
1987 3.66% $5,184
1988 4.08% $4,973
1989 4.83% $4,732
1990 5.39% $4,477
1991 4.25% $4,287
1992 3.03% $4,157
1993 2.96% $4,034
1994 2.61% $3,929
1995 2.81% $3,818
1996 2.93% $3,707
1997 2.34% $3,620
1998 1.55% $3,564
1999 2.19% $3,486
2000 3.38% $3,368
2001 2.83% $3,273
2002 1.59% $3,221
2003 2.27% $3,147
2004 2.68% $3,063
2005 3.39% $2,959
2006 3.24% $2,863
2007 2.85% $2,782
2008 3.85% $2,675
2009 -0.34% $2,684
2010 1.64% $2,640
total real money given to bank: $121,826
Rich (BB code):
interest 4.00%
yearly payment: 4984
loan amount: 87000
year inflation rate real money given to bank
1981 10.35% $4,468
1982 6.16% $4,193
1983 3.22% $4,058
1984 4.30% $3,883
1985 3.55% $3,746
1986 1.91% $3,674
1987 3.66% $3,540
1988 4.08% $3,395
1989 4.83% $3,231
1990 5.39% $3,057
1991 4.25% $2,927
1992 3.03% $2,838
1993 2.96% $2,754
1994 2.61% $2,682
1995 2.81% $2,607
1996 2.93% $2,531
1997 2.34% $2,471
1998 1.55% $2,433
1999 2.19% $2,380
2000 3.38% $2,299
2001 2.83% $2,234
2002 1.59% $2,199
2003 2.27% $2,149
2004 2.68% $2,091
2005 3.39% $2,020
2006 3.24% $1,955
2007 2.85% $1,899
2008 3.85% $1,826
2009 -0.34% $1,832
2010 1.64% $1,802
total real money given to bank: $83,178
what do you think?