Why a $500,000 Mortgage Really Costs $1.17 Million — And What the Fed’s ‘2% Inflation’ Target Actually Means

Nick Giambruno, in the latest installment of International Man’s “myths of modern finance” series, walks through a mechanic most homeowners never see: when a bank approves a mortgage, it isn’t handing over savings someone else deposited — it’s creating a new loan on one side of its balance sheet and a matching deposit on the other. On a $500,000, 30-year mortgage at 6.8%, that means roughly $3,260 a month and, over the full term, about $673,000 in interest on top of the original principal — a total repayment near $1.17 million for money the bank effectively typed into existence. He notes the word itself comes from the Old French for “death pledge.”

Giambruno extends the same skepticism to the 2% inflation target that central banks treat as settled science. Nobody explains why 2% is optimal rather than 1% or 0%, he argues, and the official figure understates the real pace of currency debasement anyway — the long-run growth in money supply has averaged closer to 6.8% a year, a rate that erodes roughly half of purchasing power within a decade. In his framing, the technical jargon central bankers use — quantitative easing, balance-sheet expansion, liquidity injections — describes the same action every time: more currency entering the system.

None of this is an argument against mortgages or savings, which remain useful tools for most people. It’s a reminder that the ground under a long-term financial plan is quietly shifting even when nothing dramatic is happening in the headlines. A plan that already accounts for steady currency debasement, rather than assuming a stable 2% baseline, doesn’t need a crisis to justify holding real assets alongside cash and bonds.