About this video

• Video Title: Who's getting rich from your mortgage?
• Channel: Garys Economics
• Speakers: Gary
• Duration: 17:12

Overview

This video explains how the increasing size of mortgages contributes to wealth inequality, with the rich accumulating wealth while ordinary people accrue debt. It details the mechanics of a debt-based monetary system, where money is created through loans, and argues that increased mortgage debt for the middle class directly correlates with the wealth accumulation of the super-rich. The video also discusses how the rich leverage mortgage lending to acquire property without the direct management burdens, ultimately driving up housing costs and increasing debt for ordinary families.

Key takeaways

• Mortgages and Wealth Inequality: The video posits that rising mortgage debt for ordinary families is a direct mechanism through which wealth is transferred to the super-rich.
• Debt-Based Monetary System: All money is created as debt, meaning for every debt, there is a corresponding credit. This fundamental principle underpins how wealth is accumulated or lost.
• The Rich as Lenders: The wealthy, accumulating capital from various sources (including government stimulus), are increasingly using mortgage lending as a way to acquire property and generate interest income, bypassing the direct ownership and management hassles.
• Impact on Housing Market: This indirect ownership through lending drives up house prices, making it harder for ordinary people to afford homes and forcing them into larger, longer-term mortgages.
• Call for Rebalancing: The video suggests that to combat this trend, governments should increase taxes on the rich and decrease them on ordinary families to rebalance economic power.

The super-rich prefer lending money for mortgages over directly buying property because it allows them to benefit from house price appreciation without the burdens of property management, such as dealing with tenants, rent collection, and maintenance issues. This method allows them to accumulate wealth and drive up housing prices indirectly, while ordinary people take on the debt and management responsibilities.

The video explains that all money is essentially credit and debt by stating that money is created when a loan is made. For every person in debt, there is someone who is in credit. This means that money is always owed to someone. Even cash, like a banknote, is a promise from the government to pay the bearer on demand, making it a form of credit. Therefore, all money in the monetary system is created through debt, and all money held represents credit owed by someone else.

The video suggests three ways these cash flows can be balanced:

1. Ordinary people work more for the rich: However, the video notes this tends to just push wages down.
2. Ordinary families sell their assets to the rich: This is seen in reduced homeownership and pension savings.
3. The rich lend that money back to the poor: This is observed through increasing mortgage sizes.

The video explains that when the rich lend money for mortgages, it has the same effect on house prices as if they were directly buying the property. The housing market sees £500,000 coming in to buy a house, regardless of whether the rich individual buys it directly or lends the money to someone else to buy it. This influx of capital from lenders, who are accumulating wealth, increases demand and therefore drives up house prices.