The banks have utterly distorted property prices which now appear to be about ten times annual earnings compared with just three times annual earnings in 1971.
This has happened because the banks discovered they could flood the economy with literally unlimited amounts of money if only they could find enough people (suckers) to lend it to.
This is simply because banks do not have to have any actual real money in their possession when they agree to make a loan. All they have to do is borrow money from another financial institution at the end of every working day when they find they have made more loans than they have actual cash in hand to lend.
This is the process by which the supply of money is constantly increased by the banks. When the loans are repaid, interest is added. And, while the original sum lent is repaid and thus eventually balances the bank’s books so they no longer have to borrow other banks’ cash, the bank which made the loan also receives a hefty dose of extra money in the form of interest.
This interest is extra money and now an extra amount of real cash added to the overall economy. It belongs to the bank which charged that interest on a loan it issued without actually having any real cash to lend in the first place. But the end result is more real money added to the economy and lots of luverly, luverly money for the bank to spend on inflated salaries and obscene bonuses. It is pure profit for the bank !
Money for old rope really ! I wish I could earn a living doing that. Then I too could build a hundred room country mansion like the banker Rothschild’s Mentmore Towers ! You can see how easy it is to become filthy rich very quickly when you are a banker.
So, this is a license to print money and for the banks to make unlimited profit at the expense of the poor fools who are forced to borrow to buy houses to live in or run businesses.
It soon becomes a form of extortion in the hands of unscrupulous bankers who worship greed as God, wouldn’t know what a moral was if it slapped them in the face, and couldn’t give a toss about how much misery their greed inflicts on the rest of the population whose faces they grind into the dirt like the lawless robber barons of history, many of whose descendants in recent times have been, would you believe, – bankers !
Banks used to struggle a bit to find enough people to lend money to. This limited the profit they could make by conjuring up this ‘new money’ and they realised if only they could get into the business of lending money to buy houses they would be able to earn gigantic amounts of extra money.
With a population of about 60 million people all wanting houses to live in, this would be a huge, virtually unlimited, lending opportunity enabling the banks to earn unimaginably vast amounts of profits.
But Building Societies used to be the people who lent all the money for buying houses, not the banks. Building Societies were owned by all the people who borrowed money to buy houses and so they were not rapacious, greedy, destructive, profiteering monsters. They had respect and consideration for their borrowers who, after all, were also the owners of the Building Societies. And all the profits always belonged to the homeowning borrowers themselves, and no one else.
So the banks lobbied Parliament to change all the rules which were there to regulate and control financial institutions and keep them from becoming violently out of control, greedy, fraudulent monstrosities.
With all that power and influence huge amounts of money can buy, the banks steamrollered Parliament into giving them a free hand to behave like buccaneering pirates in the financial industry.
Then they seized most of the Building Societies which now just became subsidiary businesses owned by the banks and just pretending to still be building societies, rather than money making machines owned and controlled entirely by the banks to fleece the house buying public of everything they could be conned out of.
The banks soon commenced engineering a ‘property bubble’ whereby property prices soared from three times annual earnings in 1971 to ten times which they have been recently.
In the frenzied greed the banks indulged in, the entire World economy was screwed up with one bank going bust because it was so fraudulent even other banks became reluctant to lend to it.
That was Lehmann Bros which went bust by the sheer fraudulent nature of their activities in the property market. This destabilised the whole World economy causing millions of people to lose their jobs and millions more to lose their houses and all of us to become poorer.
Below is a real life example, with real figures and a real person buying real property, which shows exactly what the banks have done and how they have priced first time buyers out of the market completely.
It also shows how the devious banks have contrived to make slaves out of virtually the entire homeowning population who are forced into paying an ever increasing proportion of their income to fill the pockets of bloated, greedy, banks.
And this will not stop. It will get worse and worse if the banks remain in control of house buying lending. They will continue to throttle everyone until they are stopped because they are greedy and unprincipled and couldn’t care less.
A Real Life Example of the Dishonest ‘Property Bubble’
Engineered by the Banks
When I was 23 years old in 1971 I was offered a job as a reporter on the Western Daily Press in Bristol on a salary of £1500 pa – or £30 a week.
I bought a four bedroomed maisonette carved out of one of those huge Victorian town houses in Redland, next to Clifton, the most desirable and expensive area of Bristol.
All the rooms were huge, the stairway to the upper floor a double width with carved ballustrade. It cost me just £4400, almost exactly three times my salary of £1500 p.a. I borrowed £3000 and mortgage repayments were about £16 a month – only a seventh of my salary.
That same property today is worth about £300 000 – £400 000; the current Zoopla property website estimate for 2012 is £300 000. At the lower estimate of £300 000 my salary as an ordinary 23 year old newspaper reporter would now have to be £100 000 p.a. to be able to buy this same property at three times annual earnings. Ordinary people do not earn £100 000 a year in their mid-twenties for doing everyday jobs.
But the salary for a 23 year old newspaper reporter today is likely to be about £30 000 which means a property bought at three times annual earnings can only cost £90 000. This doesn’t even buy a studio flat anywhere in Bristol today as far as I can tell.
If I now struggled to buy a typical small two bedroomed ‘first time buyer’ property I would have to borrow about £200 000. At about 5% interest on the mortgage that would cost me £10 000 a year or a third of the gross salary of a modest £30 000 earner like a junior newspaper reporter and many similar jobs with ordinary salaries. But the reality would be the mortgage repayment would really be about half my take home pay after tax, leaving just £10 000 a year to live on for, everything else. A bit tough if I also had to pay a British Rail commuter rail fare into London of maybe £3 000 a year as well, hey ?
That would leave £134 a week for ALL other living expenses. Loads of people have about the same amount of weekly income while on benefits, without the inconvenience of having to go to work to actually earn the money !
But, the real killer waiting in the shadows to really screw my life up if I borrow that £200 000 to buy an ‘average’ property as a first time buyer is the inevitable rise in interest rates which can be expected to rise by at least three percent in the forseeable future.
My mortgage repayments will shoot up then to £16 000 a year and leave me with just £4000 to live on out of my before tax salary of £30 000. I, along with millions of other homeowners will just not be able to keep up the mortgage payments.
Then the rapacious banks will simply pile on all sorts of extra charges to make it more and more difficult to even try and keep up the mortgage payments, until it is completely impossible to cope with the spiraling amount of debt as the banks deliberately make it increasingly impossible for the borrower to cope.
The mortgage debt will soar uncontrollably because the banks have a canny knack of organising their loans that way. A nightmare life awaits, often ending in repossession, where the homeowner is ruthlessly thrown out of his property while the bank and other vultures mop up whatever money and possessions owned by the hapless homeowner they can get their nasty, greedy, unprincipled hands on.
I’ve seen it happen. Millions of homeowners in America have too as entire neighbourhoods have been made derelict by the banks evicting a majority of the inhabitants.
People lose their homes, they become homeless with nowhere to go. They lose their possessions because they have nowhere to put them. They lose their health; they lose their jobs; they lose their families. They lose everything. A whole lifetime just goes up in smoke – obliterated by the venal greed of banks.
It will be a mortgage massacre here in the UK when mortgage rates rise as they surely will in the very near future.