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Fiat denominated debt and necessary supplies

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posted on Feb, 26 2012 @ 11:12 AM
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Hello all,

I make this thread in response to the recent video about the SHTF on the thrive movement. The man in the video asks advises us to get out of debt (reasonable). I am attempting to describe an idea that the debt you may be in could be worthless should that fiat currency collapse.

Lets take the dollar and my fictional character john smith. John is 35 and has a wife and 3 kids, a mortgage that covers say 20% of the monthly income of the house. John and his family live relatively comfortably. Lets also assume he could leverage the house to the point that 35% of monthly takehome is used before other expenses are addressed.

All of a sudden, John "wakes up" and realizes the whole thing is a scam, the dollars he has been working for are inherently worthless, and really thinks the SWHTF.

assume John has no savings. He thinks he wants to be reasonably prepped in a short time. Whats the best way to do this? debt, maybe a home equity LOC! Why you ask? say john can get 50k from this line. he buys 20k of gold, 10k of nonperishable food to feed his family for 2 years, 2k on a RO water system, 5k in guns and ammo, 5k on other supplies, 2k on energy machines (solar panels) 6k in other diversified materials (oil markets etc, things that will go up when the dollar goes down). And only pays 3-6% interest on it. Not too bad! He is now totally prepped in a short amount of time. If the dollar collapses, his dollar denominated debt is now relatively cheap, half the golds may be able to pay off the 50k now if gold goes up 5x in value vs the dollar. He can squat his house for months should the economy collapse, move somehwere and share supplies if need be. His family has nonperishable food for 2 years, enough guns to arm a platoon etc. Sure, he is in debt, but that debt is worthless to both the banks, on the new 1 world currency or whatever and himself as well. He can game the system that has gamed us.

I am not a legal expert, but a student of finance. To me, if he can reasonably cover the extra short term debt at a time when int rate levels are low, then perhaps why not?

Am really looking for some solid ATS input. Cheers.




posted on Feb, 26 2012 @ 11:16 AM
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reply to post by vonholland
 


...... years later it turns out the fear mongering of SHTF was from the banker elites to get the population to buy a bunch of stuff, take out loans like you suggest, in preparation of the end, and when the world doesnt end, everyone is in much much more debt, along with the valuelessness of the money they do have, and then they must submit themselves to the state and pay their crime/debt or meet violent force/imprisonment/death.
edit on 26-2-2012 by ImaFungi because: (no reason given)



they control the world now, they will control it then....... unless that changes, the ones being controlled must change it, or else that wont change.

i know this is not the solid input you were looking for, but first thing i thought of........ you are suggesting people look past the repercussions of debt from loans in the hope the world will be destroyed and the debt from loans will be void?
edit on 26-2-2012 by ImaFungi because: (no reason given)





also this give me a great insight to why the world is so snipped,,,,,, a finance student caring nothing for the law,, as long as those numbers get bigger.....
edit on 26-2-2012 by ImaFungi because: (no reason given)



posted on Feb, 26 2012 @ 11:28 AM
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reply to post by vonholland
 


What is the Secret Socities angle? Can you explain it please?



posted on Feb, 27 2012 @ 05:49 AM
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Originally posted by ImaFungi

i know this is not the solid input you were looking for, but first thing i thought of........ you are suggesting people look past the repercussions of debt from loans in the hope the world will be destroyed and the debt from loans will be void?
edit on 26-2-2012 by ImaFungi because: (no reason given)


caring nothing for the law,, as long as those numbers get bigger.....
edit on 26-2-2012 by ImaFungi because: (no reason given)




This is the type of comment I wanted.

We are not looking past the repercussions of debt. This is why I suggested taking out as much as deemed affordable, like an optimal capital structure. For instance, many bankers will not lend to you unless its only about 30 % of your income. Chances are you cannot afford it over that amount. Thats why I recommended that 30-35% range, so John could still cover his expenses should the stuff not hit the fan. Besides, I think gold usually appreciates at a rate faster than 4 or so percent that home equities are at, so you would be making money, have a discount on your tax code (through interest expense paid at your current tax rate, which makes the loan essentially cheaper to a rate of int%*(1-tax rate), and should it hit the fan, your debt is worthless.

For the thread, lets define "stuff" as bug out material, and "extras" as things like I-pads, nintendo Wiis and Louis Vuitton purses.

Should it all NOT hit the fan, you have the stuff, the precious metal and oil investments, which can still appreciate at a rate faster than your 3-4% interest loan, and can still afford your monthly mortgage payments with ease.

I think personally the fiat currency will hold for a bit, and the dollar and treasuries are actually extremely strong right now (although my investments would be in commodities right now, they are scheduled to outperform this year as denoted by JP Morgan and a few other big players). But these currencies are easily inherently manipulated and I believe people should not necessarily hold their investments in this. Investments in stocks, energy, commercial real estate and commodities are more my style. Holding stacks of cash doesn't return you anything, but if SHTF, Johnson and Johnson or agg products will be all the rage and they can sell it for a ton, which they might, and you get a chunk of it.

This also follows the law, you could pay back your debt. You are legally required when you sign up for the debt to pay it back in a certain currency. They dont tell you to pay back 250k in dollars, or should that dollar depreciate, 250k would of present value dollars in gold, euros etc. your debt is always denominated in $$, regardless of how worthless they become. It sticks it to the bank, lending presently valuable dollars and receiving back worthless dollars. Its called currency risk, and banks get compensated for it and hedge it internally.

And not caring for the debt, well, not true, but the bank takes that risk on and thats called credit risk
. I personally do not have many loans out and mommy cosigns on them so the rates are low
.



posted on Feb, 28 2012 @ 02:34 AM
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Originally posted by ImaFungi
reply to post by vonholland
 


...... years later it turns out the fear mongering of SHTF was from the banker elites to get the population to buy a bunch of stuff, take out loans like you suggest, in preparation of the end, and when the world doesnt end, everyone is in much much more debt, along with the valuelessness of the money they do have, and then they must submit themselves to the state and pay their crime/debt or meet violent force/imprisonment/death.
edit on 26-2-2012 by ImaFungi because: (no reason given)




People aren't prepping for the end of the world, just the end of the fiat currency; which will have terrible repercussions on the world as we know it, but the world will survive.

95% of America is in debt, are they going to imprison and kill everyone in debt? no, because prisoners can't repay. They will transfer the old debt into the new currency, and the cycle will continue. It's surviving the time in chaos in between that people are prepping for.

I think you're missing the point.



posted on Feb, 28 2012 @ 07:59 PM
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Yep stealth, exactly the point. Not sure what, if much at all, the dollars and Euros will be worth. Im thinking commodities etc (based off low and high volatilies, mixed bag) would work best. Things like wheat futures, beef, gold, silver, oil, nat gas etc would be worth most.



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