Danes Get 20-Year 0% Mortgages • Hacker News Board

Re: Danes Get 20-Year 0% Mortgages

#291

Post by onlyrealcuzzo » Wed, Jan 06, 2021, 2:12 AM UTC

lumost wrote: post #132

onlyrealcuzzo wrote: post #123

Earlier quoted context omitted.

In the US, >67% people own their homes: https://fred.stlouisfed.org/series/RHORUSQ156N Homeowners view this as a zero-sum game. If the 33% of non-homeowners are losing (and they definitely are), than the 67% of homeowners feel they must be winning (even though, arguably, the majority of them aren't).

As the price of homes rises, wouldn't you expect the 67% to shrink? fewer individuals would have the capital to afford a down payment, and some portion of the 67% will liquidate the equity for retirement and other activities.

Historically, there hasn't been a lot of correlation here.

I agree with your logic - it seemingly would make sense.

Re: Danes Get 20-Year 0% Mortgages

#292

Post by tsjq » Wed, Jan 06, 2021, 3:00 AM UTC

fifticon wrote: post #97

Dane here. A piece is missing. Interest rates may be 0%, but there is also an annual bank fee on the loans. As the interest rates have gone down, these fees have risen, and I believe the banks increasingly make their money on those. It's still good news for borrower, since the fees don't accrue interest.

That sounds like "Shariah compliance"

Re: Danes Get 20-Year 0% Mortgages

#293

Post by tathougies » Wed, Jan 06, 2021, 3:12 AM UTC

marvin wrote: post #277

tathougies wrote: post #195

Earlier quoted context omitted.

Yikes. As an American, I would have thought Norway would have a much more lenient form of debt relief based on everything I hear about Scandinavia from our local press. But what you're describing seems incredibly harsh. I wonder if this is why Norwegians tend to be more financially responsible. Only being able to declare bankruptcy once certainly would make people learn their lesson? Is that true? Does it work in pra…

An honest assessment would conclude that our laws are too creditor friendly. They allow lenders to take on more risk than they otherwise would have. I don't know how our delinquency rates compare to the rest of the world, but there's quite a bit of it. My take is that these laws are due to somewhat unflattering protestant cultural heritage, rather than a deliberate decision to encourage financial responsibility. I st…

I mean... I agree with you. I like Norway's model... Please don't be so confrontational.

Re: Danes Get 20-Year 0% Mortgages

#294

Post by apta_ » Wed, Jan 06, 2021, 3:35 AM UTC

kasey_junk wrote: post #285

apta_ wrote: post #250

Earlier quoted context omitted.

In Islam, there exists a notion of a Salam sale (بيع السلم), or (advance sale). These are sales contracts in which the price is paid for goods to be delivered at a later time. > The Prophet (ﷺ) came to Medina and the people used to pay in advance the price of dates to be delivered within two or three years. He said (to them), "Whoever pays in advance the price of a thing to be delivered later should pay it for a spec…

Yes that sounds like a classic futures contract to me. I'd never heard that usury rules applied to financial contracts before. Its interesting because advance sales are a positional bet similar to a short sell. Are you allowed to sell the Salam sale contract to a third party? Apologies for all the questions this is fascinating.

Short selling has several issues. Brokers usually charge a fee for the borrowed asset (stock), this fee is clearly usury/interest. Also, it creates risk with the hope of gaining money, without any corresponding value being created. Shorting exposes three parties to the risk of a stock or asset (the shorter, the original owner, and the new owner), compared to a regular trade where risk is transferred from one party to another, and no new risk is created. I found this article[0] that goes into details about the dangers of short selling (see the sections on margins and overshooting specifically). Salam sales do not have those issues.

Furthermore, goods for which the quality and quantity cannot be specified cannot be sold by Salam contracts, as per the Hadith in my previous post (e.g. gems or precious stones since each is considered different), and I've seen at least one source that also exempts stocks from being tradable in Salam contracts due to high uncertainty (called Gharar sales in Islam, also prohibited).

As far as selling Salam contracts before they are fulfilled, I do not know. What sorts of issues or benefits can result from selling such a contract before it is fulfilled?

Edit: I think it is prohibited as well, as now the buyer is selling something that he does not yet possess. So you have the same item being sold multiple times before taking delivery. This narration should be the basis of prohibition:

> The Prophet (peace and blessings of Allah be upon him) forbade selling goods in the place where they were bought until the merchants had moved them to their own location.

> Apologies for all the questions this is fascinating

No problem! I'll do my best to answer what I know.

[0] https://practicalislamicfinance.com/2020/02/17/short-selling...

Re: Danes Get 20-Year 0% Mortgages

#295

Post by apta_ » Wed, Jan 06, 2021, 3:49 AM UTC

kasey_junk wrote: post #285

apta_ wrote: post #250

Earlier quoted context omitted.

In Islam, there exists a notion of a Salam sale (بيع السلم), or (advance sale). These are sales contracts in which the price is paid for goods to be delivered at a later time. > The Prophet (ﷺ) came to Medina and the people used to pay in advance the price of dates to be delivered within two or three years. He said (to them), "Whoever pays in advance the price of a thing to be delivered later should pay it for a spec…

Yes that sounds like a classic futures contract to me. I'd never heard that usury rules applied to financial contracts before. Its interesting because advance sales are a positional bet similar to a short sell. Are you allowed to sell the Salam sale contract to a third party? Apologies for all the questions this is fascinating.

One important thing to note is that Islam also prohibits chaining together permitted contracts, with the intention being trying to circumvent or dance around the prohibition. For example, you and I can engage in the following set of transactions: I can sell you my phone for a certain price in installments (say $120 over 12 months, and $120 is the fair market value). Then, I go back and buy back my phone from you for $100 cash. The net result is that I paid you $100 and you owe me $120 over the course of the year. This is clearly usury, and placing an item in between is just kidding ourselves.

The same applies to more elaborate schemes that involve multiple parties or transactions. For example, it is possible to engage in a futures contract with the intention of gambling (buy oil or some commodity, and never take delivery of it and sell it immediately when the contract is due). This is gambling, your intention was never to actually possess the item, but only to immediately sell and either make a loss or profit.

Re: Danes Get 20-Year 0% Mortgages

#296

Post by ganeshkrishnan » Wed, Jan 06, 2021, 3:58 AM UTC

apta_ wrote: post #238

ganeshkrishnan wrote: post #174

Earlier quoted context omitted.

Its works the same across the world as everywhere there is fractional reserve banking. The other "Shariah Banking" is also just repackaged fractional reserve banking.

As a Muslim, almost every "Shariah compliant" financing contract I came across is not compatible with Islamic Law (Shariah). Unfortunately, we're just taking modern parasitic and usurious financial contracts, and wrapping them under "Islamic" terms, and selling them as such. Any actual investigation of such contracts reveals that they're nothing but interest and usury in disguise. Islam seriously warns about this sor…

>we would immediately rule out things like stock shorting, put and call options, margin and leverage trading, mortgages, interest bearing loans, selling debt for debt, and so on.

These are the very foundations on which modern society is built and which drives the entire humanity forward. Sure, some people have managed to race ahead but on a whole we, as humans, have progressed from clubbing each other for food to arguing anonymously over the internet thanks to all these

Re: Danes Get 20-Year 0% Mortgages

#297

Post by apta_ » Wed, Jan 06, 2021, 4:17 AM UTC

ganeshkrishnan wrote: post #296

apta_ wrote: post #238

Earlier quoted context omitted.

As a Muslim, almost every "Shariah compliant" financing contract I came across is not compatible with Islamic Law (Shariah). Unfortunately, we're just taking modern parasitic and usurious financial contracts, and wrapping them under "Islamic" terms, and selling them as such. Any actual investigation of such contracts reveals that they're nothing but interest and usury in disguise. Islam seriously warns about this sor…

>we would immediately rule out things like stock shorting, put and call options, margin and leverage trading, mortgages, interest bearing loans, selling debt for debt, and so on. These are the very foundations on which modern society is built and which drives the entire humanity forward. Sure, some people have managed to race ahead but on a whole we, as humans, have progressed from clubbing each other for food to arg…

With all due respect, this is a very fallacious argument. Just because it is widespread today does not make it acceptable or good in any way or form. It does not mean that it is the cause for our advancement (association fallacy, and correlation vs. causation fallacy).

As a matter of fact, I would wager that these practices are a main driving force of the wage gap we see today, causing instability and unrest, inflation, and tons of other problems. We have better solutions, it's just that no politician I've seen so far is going to dare admit that the modern foundations are corrupt. Very powerful people are not going to be happy (note that I'm not arguing for socialism or communism either, they are destructive in their own ways).

Re: Danes Get 20-Year 0% Mortgages

#298

Post by apta_ » Wed, Jan 06, 2021, 4:22 AM UTC

kasey_junk wrote: post #285

apta_ wrote: post #250

Earlier quoted context omitted.

In Islam, there exists a notion of a Salam sale (بيع السلم), or (advance sale). These are sales contracts in which the price is paid for goods to be delivered at a later time. > The Prophet (ﷺ) came to Medina and the people used to pay in advance the price of dates to be delivered within two or three years. He said (to them), "Whoever pays in advance the price of a thing to be delivered later should pay it for a spec…

Yes that sounds like a classic futures contract to me. I'd never heard that usury rules applied to financial contracts before. Its interesting because advance sales are a positional bet similar to a short sell. Are you allowed to sell the Salam sale contract to a third party? Apologies for all the questions this is fascinating.

> I'd never heard that usury rules applied to financial contracts before.

Islam prohibits something called Riba. Interest and usury fall under it, but Riba encompasses more than just loans. The example about purchasing gold on credit falls under riba for instance.

Re: Danes Get 20-Year 0% Mortgages

#299

Post by eloff » Wed, Jan 06, 2021, 4:56 AM UTC

0xfaded wrote: post #130

supernova87a wrote: post #66

There is a more basic economic question that I am curious about. I don't know how / can't believe how in the 1980s we had the era of 15% interest rates, etc (ok, I have some idea, central bank policies, inflation, etc) -- but it seems now we're in a "forever-0%-interest" situation. The reason I think is that interest/mortgage/etc rates just reflect how much people/banks/etc are willing to receive in profit for parkin…

In Denmark's case, the rates are set to defend the krone's peg against the euro. Denmark being above average in terms of stability within the euro zone sets negative rates to shoo people from parking their money there, which would otherwise drive demand and increase the exchange rate for the krone. In Europe as a whole, yes, it is in deep stagnation. There is no where near enough investment opportunity for the wealth…

> If you really want a laugh, read up on how banks are competing to acquire physical currency because cash is cheaper to store in a guarded vault than a database entry with the ECB.

I have read about that, and it was worth a good laugh and a "what's the world coming to" kind of head shake. Mind boggling.

Re: Danes Get 20-Year 0% Mortgages

#300

Post by eloff » Wed, Jan 06, 2021, 5:06 AM UTC

im3w1l wrote: post #117

dcolkitt wrote: post #110

Earlier quoted context omitted.

I'm curious why this hasn't been competed away. Short-term rates in Denmark are -0.6%. Couldn't banks just borrow short, write mortgages at 0% and pocket 60 basis points? It's a little screwy, because you're getting paid the lenders instead of the borrowers. But it's still fundamentally no different than a bank that borrows at 2.5% and writes mortgages at 3% APR.

It's very different, because it means you don't need the borrower to ever pay back. Meaning the banks will give loans to anyone the laws can be bent to allow lending to.

That doesn't make logical sense to me. The back would still lose the principal if you defaulted right? Doesn't matter the interest rate.