The mortgage industry is bigger than the construction industry. If the mortgage industry is actualized around the profitability of interest based lending and fees for providing lending services, how in terms of annual revenue, is the interest based lending market larger than the construction market?
Let's say a house is built for 100k and sells for 150k.
Some of the 50k goes to the builder.
Some goes to the real estate agent.
None of this 50k goes to the lender, in fact the lender buys the house. A mortgage is actually a rent-to-own system, where the lender buys the house and you're allowed to live in it provided you pay off the 150k plus some interest to make this worth the lenders time.
Now there are two "products" floating around, both of them owned by the lender. A tangible asset, the house, and a "collateralized debt instrument", the interest expected to be paid on the loan.
Now, how many times have you heard anyone mention the house in discussions of the credit crissis? Never. We only discuss the agreement to pay interest on a loan, meanwhile thousands upon thousands of tangible assets sit there collecting dust, because the lender makes way more money on the fees involved in mortaged lending and even more in "bundling" mortgages as investment vehicles for people who have nothing to do with the tangible asset.
What's happened to the houses? Are the prices comign down so the pool of potential buyers could increase, or rather so the people who bought them when they couldn't afford them now can afford them? No, becuase the neo-conservative free market has nothing to do with buyers of products, producers of products or even servers of services, it has to do with rubbing money up against money and producing more money.
The result being the pyramid scam that our global system has become.
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