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RE: What is Money? Part 1: Real vs. Financial Assets
I’ll have to check out some of your videos about MMT, I haven’t heard of it before.
What’s the difference between the house and the car in your examples? Why is the car important as a real asset to the loan in the second one, but the house isn’t important to the mortgage in the first one? Wouldn’t it be the same situation - a loan for an asset/property?
Ah, sorry that's unclear! When I was talking about the house, I was focusing on the agreement between the two parties. In this case, the collateral (the house) is a bit of an afterthought of the financial instrument itself. It only gets involved in the terms of the instrument aren't followed.
When I was talking about the car, I was looking at the net balance sheet of the two-party economy in my example (me and the bank). If I add up all the assets and liabilities, both real and financial, of me and the bank, the only thing left is the car, because my financial liability cancels out with the banks financial asset.
Does that make sense?
... no :(
But that could easily be because I don’t know much of the vocabulary around finance, assets, etc. Probably would be easier for me to understand it if I were more familiar with those words and their definitions.
Damn. That's what I wrote the article to help with. :P