Do you count Investments as expenditure in a yearly budget?

grey_gym_sock

Pincher wrote: »

If you were a bank, and you accept £100 deposit at 2%, and lend it out at 3%, it's like you bought something (use of £100 for one year) for £2, and sold it for £3.

it's nothing to do with the topic, but that's not quite how banks work. the way you've put it sounds like the "loanable funds" model: i.e. banks need deposits in order to make loans.

actually, they don't: it's loans that create deposits. when a bank grants a loan, it creates 2 book entries: 1 records the amount that the customer now owes the bank, and the other credits an equal amount to the customer's deposit account. (this is the "endogenous money" model, since you ask. you didn't ask .....?)

Now, the bank has two books. On the deposit account side, it is listed as a liability, £100 to be paid back after one year. In the mortgage book, it is listed as an asset, because £100 will be paid back to the bank.

exactly. and initially, the deposit is in the account of the same customer who took out the loan. it will then move to somebody else's account when the customer spends it (or, if it's a mortgage, to the account of the person selling the house).