There is no Spoon

I am actually quite amazed at the financial world sometimes. It's like, some businesses have crafted an ability to exist and make exorbitant sums of money ... for nothing.

If you actually look at this process, there is no spoon - errr ... money. Alice wants to buy a house, so she approaches Bob and obtains a mortgage. Alice now owes Bob money. Bob has lent out everything he's got and can no longer make loans, so he sells the mortgage to Charlie (the company in this case) for cash so he can repeat the process. Bob now has no risk and makes money on the interest Alice pays him. Now Charlie is stuck with all these mortgages. Because Charlie is bigger than Bob, Charlie ultimately has more of these together and rolls them up so that David, an investor, can buy them. Charlie essentially passes the "guaranteed interest payments" off as a return to David. In theory, David has no risk as long as all the home buyers do not default. Now Charlie has no risk and also has cash again so he can repeat his process - or invest it in something else to make gobs of money. Now imagine that David didn't buy the investment - Alice did. You have an endless loop of money paying itself while all the while, Charlie gets super-rich. Ridiculous!

There is no spoon. Our entire economy is make believe.

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