[expat2]

But the problem here is that someone (the prior owner) has the original $500,000 that I paid for the home.

Why is thaat a "problem"?

I have said for several years now that the whole purpose of having the Fed buy the MBS that was created out of my $400,000 was to restore the original value of the mortgage [agreed]

......and "legitimize" the dollars that had been created out of thin air when I took on the mortgage.

Not sure what you mean here.

[Alberta's Child]

It's a problem because the U.S. government created $400,000 out of thin air to lend the money to the bank, the bank extended a mortgage to me to buy the home, and I paid the $400,000 to the previous owner as part of my $500,000 purchase.

If the ultimate holder of the mortgage -- whether it be the bank or the holder of a securitized mortgage bond -- isn't made whole, then someone is out $100,000 (the difference between the $400,000 mortgage and the $300,000 value of the property). It's easy to say they should just swallow the loss, but then they won't be lending money again the next time someone needs to borrow it.

This is where a deflationary cycle begins, and this is what the Fed has been trying to stave off with its QE initiatives.

[Stentor]

Not sure what you mean here.

The Biggest Scam In The History Of Mankind (In 7 Easy Steps)

Worth a watch in my opinion. It will answer your question.