Dollar Melts and Bush takes no action

Originally posted by MrNice
Get OUT of any mortgage you have right away!

That is hardly a sound advice. What am I, packing up an looking for a place to rent? Rents here are notoriously high anyway. I'd be draining my cash fast. Given the wild ride the property prices had, anyone who has held on to the house for two years or more is doing fine.


[edit on 22-11-2004 by Aelita]

2 Yrs ago I was in Toronto and the exchange rate was very good for me. I just returned from a trip there and this time I couldn't help but notice the decline in the exchange rate.

Then $1 USD = $1.58 Canadian Dec 02
Now $1 USD = $1.18 Canadian Dec 04

It really made me wonder if the USD is loosing it's worth that MUCH or if the Canadian Dollar was getting that much stronger.

Originally posted by MrNice
It would probably be best if the dollar collapses completely.

Rubbish. That would be terrible. Of course since you personally keep your savings in silver, you'd profit form that collapse.

This is why I do not own 1 credit card and have ZERO debt.

I take it you inherited the house you live in, not everyone is so fortunate.

and I have no savings account (I put everything I want to save into silver)

So you don't really have fiscal flexibility.

Does she realize how worthless a savings account is? Does she understand banks make 45% interest on savings dollars yet only pay us prime? Of course not! She is one of those who will be hurt very badly in the upcoming depression. I feel sorry for her.

Don't be. It used to pay 4.5% in my recent memory and since the acounts are typically linked, a good place to keep the money that you don't want to invest. The current depressed rates are temporary.

While I can agree with much of what is read here,.. I am compelled to point out it is very unwise to put all you eggs in one basket.

I would find it foolish to alter your normal financial practices to a large degree.

It would be wise to hedge your investments with metal investments, but not a complete change into harder assets all at once.

To suggest that one should get out of any mortgage is a foolish suggestion in my opinion.

In the event any economic predictions come true to the degree suggested,... very few will be unaffected,... and holding hard assets will only be a short term fix.

Realistically I would suggest a well diversified and thought-out investment portfolio, which should include a mortgage, stocks, funds.. and yes maybe some hard assets as a hedge. It is an individuals risk-tolerance ability that should help to direct how to diversify.

I have gold,.. but it will never be a primary investment for me, to keep me propped up in a rental house. Instead a reasonable mortgage,... planned investments including retirement,... and if all-heck breaks loose,... I will be included in the extreme percentage of the majority affected.

Originally posted by Aelita

Originally posted by MrNice
Get OUT of any mortgage you have right away!

That is hardly a sound advice. What am I, packing up an looking for a place to rent? Rents here are notoriously high anyway. I'd be draining my cash fast. Given the wild ride the property prices had, anyone who has held on to the house for two years or more is doing fine.


[edit on 22-11-2004 by Aelita]

That�s a matter of opinion. I�m speaking of working from a pure debt position. I�m not in debt and think debt right now is a very dangerous to have.

Here�s an example: Dollar collapses slowly over 2005, 12 month period:

Home owner with $125,000.00 principle over 30 years at 5% is paying right now:

$709.00.

Pretty nice eh�manageable and I agree, much better than renting...

Now imagine the dollar has serious issues and the prime reaches 20% (don�t laugh, these rates were almost reached during Jimmy Carter�s administration and our debt was not nearly as bad as it is now).

Now you payment is:

$2088.00 a month.

But your home will not be liquid at these interest rates (no one is borrowing to purchase it). So it�s real value will plummet. How many people will keep their homes in these conditions? Not many, which pushes prices down even further as foreclosures skyrocket.

How many people have just a $709.00 home payments or only $125,000.00 in debt.

If you have a fixed interest rate that does not move with prime you�re probably all right (although debt scares the heck out of me) but if not then my original, non-professional, advice sticks.

Getting out of a mortgage does not mean renting. It might mean selling what you have now and buying something else much more modest with your equity.

Don�t have equity in your home? Gee..then you are essentially renting from the bank right now, except YOU are responsible for all taxes and repairs and other liabilities and THEY can seize your property if the economy goes south.

Buy some land and then build your home slowly, with cash, the old fashion way.

Thats only if you do not lock in your mortgage rate, and most people lock it in right from the start, and do not want to take the risk of having a floating interest rate.

Originally posted by MrNice
If you have a fixed interest rate that does not move with prime you�re probably all right (although debt scares the heck out of me) but if not then my original, non-professional, advice sticks.

Any sane individual who had variable rate already refinanced at the historically low fixed, so that's moot.

Buy some land and then build your home slowly, with cash, the old fashion way.

Assuming there is land.


The "cash and old fashion ways" disappeared for a reason, same reason as the sea shells the Indians used as a form of payment.

One has to be responsible in managing their debt, and that's all there is to it.

Originally posted by MrNice
Gee..then you are essentially renting from the bank right now, except YOU are responsible for all taxes and repairs and other liabilities and THEY can seize your property if the economy goes south.

But therein is exactly why it wont happen that way.

I would think,.. and do not have numbers in front of me,... that many many mortgage owners buy for a 7 to 10 year period. Equity is a tool commonly used, and can provide additional tax relief for those that use it. And when you build equity,... you can trade up, into the same affordability index as high as you can reasonably afford to until you near retirement, and then your needs decend.

But my point is,...


The dollar crashes,... and the banks come running to take away all these worthless dollar backed homes?

No,.... the banks dont want it on their books as a bad loan, and holding the title, and they never have wanted this.

There will be no mass-repo/eviction process,... as it would not help the bank at all. Otherwise they would be holding butt-loads of non-performing assets.

That is and always has been the case.

I do not think that if they repossesed all these things,... that they could liquidate them anyway,... at a stop loss,... and still stay in business.

And if the banks bust,.. your gold will not help you fish for food except as a sinker. More likely,... a worse case scenario like this would require a complete monetary change with much bank forgiveness or accomidation to the debt holder's.

Try to get forclosed now,... the bank will bend over backwards to keep it in your hands,... until no hope is available and they are forced to reclaim it.

Rubbish. That would be terrible. Of course since you personally keep your savings in silver, you'd profit form that collapse.

Profiting from Silver / gold is a misconception. I will NOT profit by storing savings in silver. I will preserve my wealth.

Please study how home loans are booked by banks as immediate earnings so they can loan the money out again. Banks can generate as much as 45% interest on every dollar you save.

Just because YOU get 2% interest on savings does not mean that�s what the banks are getting. It�s one of the biggest exposures to risk the banks are currently floating and it�s about to get very ugly.

Legally, they are supposed to retain 10% of total deposits on hand to make sure they cover normal transactions. But they are allowed to book loans they make as revenue / savings by some tricky paperwork (I think I can look up a good link explaining this if you can�t google it). This allows them to loan out 90% of your home loan AGAIN then 90% of that loan and so on (9 times).

So a bank with $1000.00 in deposits can expose themselves to a lot of debt ($9000.00) 900 + 810 + 729+�you get the idea�

So what happens when the housing bubble bursts?

Your banks will become insolvent VERY quickly. The government will bail them out by printing money. UP go interest rates (supply and demand), more insolvent banks. The cycle will continue until equilibrium is reached.

Now you might be ok with fixed rate mortgages unless the value of houses plummet. This is the equivalent of raising your interest rate because you will have no equity and large debt to service. In a bad economy this is not a good thing.

Still, 5-7% is not a bad place to be really. If you get lucky you�ll experience hyperinflation and can pay off that house VERY quickly (and then experience those $200,000 loafs of bread).

I didn�t inherit my house, I grew up VERY poor. Sorry, but buying cheap land and building myself is the only option I had. Still, I�m very happy I don�t have any debt and some hedge against money collapse.

I DID have quite a diverse portfolio before the tech bubble burst, then watched all my gains lost and the mutual funds deflated. No thanks, fool me once�.

I invest in hard assets that generate real income, preferably things that generate physical tangible product that people need and buy. Anything else is VERY exposed at the moment.

Originally posted by MrNice
Now you might be ok with fixed rate mortgages unless the value of houses plummet. This is the equivalent of raising your interest rate because you will have no equity and large debt to service.

This is only valid when you have to move and sell the house (which might indeed be the case), as you bought high and selling low. If you intend to stay for a while, the equity factor doesn't matter, what matters is the roof over your head.

So instead of "getting out of mortgages", your advice should read "reduce the investment in real estate to control risk". Given that most people have pretty modest accomodations, this is hardly practical either.

Thats only if you do not lock in your mortgage rate, and most people lock it in right from the start, and do not want to take the risk of having a floating interest rate.

That�s not necessarily true. I can�t seem to find good statistics on fixed vs. adjustable rate loans. I�m thinking it�s about 50/50.

The "cash and old fashion ways" disappeared for a reason, same reason as the sea shells the Indians used as a form of payment.

No fiat money system in the history of mankind has EVER succeeded. They have ALL crashed spectacularly. Gold and silver are the ONLY forms of payment that have lasted. Look at the trend of the value of the dollar from the time Nixon took it off the gold standard. It�s a downward trend, almost logarithmic in nature. We are at the end of a long cycle for a fiat currency, one of the longest on record (which is a testament to our great nation), but the dollar is going to bust�sooner rather than later.

so you don't really have fiscal flexibility.

Of course I do, I keep a small reserve in checking and can move silver in and out of the fiat money in about 3-5 days time. I don�t need to be more flexible than that. I don�t impulse buy and I tend to plan my finances at least modestly well.

Any sane individual who had variable rate already refinanced at the historically low fixed, so that's moot.

Many low-income buyers cannot get fixed rate. Also, if the buyer has any bad credit history, is putting down a low initial payment, or any number of things they get stuck with a variable interest loan. Many even choose adjustable rate loans. There are many reasons people take out these loans. �Flipping� has become a common practice on loans with (shudder) interest only payments becoming more common place.

Rumors (I won�t link to rumors) have it that Sallie Mae is seeing something like a 25% default rate on low-income mortgages recently. This is VERY telling.

The dollar crashes,... and the banks come running to take away all these worthless dollar backed homes?

They don�t. They try to sell them, as fast as possible. Problem is, no one will be buying.

And if the banks bust,.. your gold will not help you fish for food except as a sinker. More likely,... a worse case scenario like this would require a complete monetary change with much bank forgiveness or accomidation to the debt holder's.

I don�t agree, the new currency will not be floating (at least not at first) because that is what caused the crash of the dollar. So precious metals will be the ONLY way to issue a new currency.

Don�t think banks will even be around in their current form. France does not even use the term banks in their country after their fiat fiasco. �Bank� is not considered a good thing over there. I have a feeling the same thing will occur here.

Originally posted by MrNice

Originally posted by Aelita

Originally posted by MrNice
Get OUT of any mortgage you have right away!

That is hardly a sound advice. What am I, packing up an looking for a place to rent? Rents here are notoriously high anyway. I'd be draining my cash fast. Given the wild ride the property prices had, anyone who has held on to the house for two years or more is doing fine.


[edit on 22-11-2004 by Aelita]

That�s a matter of opinion. I�m speaking of working from a pure debt position. I�m not in debt and think debt right now is a very dangerous to have.

Here�s an example: Dollar collapses slowly over 2005, 12 month period:

Home owner with $125,000.00 principle over 30 years at 5% is paying right now:

$709.00.

Pretty nice eh�manageable and I agree, much better than renting...

Now imagine the dollar has serious issues and the prime reaches 20% (don�t laugh, these rates were almost reached during Jimmy Carter�s administration and our debt was not nearly as bad as it is now).

Now you payment is:

$2088.00 a month.

But your home will not be liquid at these interest rates (no one is borrowing to purchase it). So it�s real value will plummet. How many people will keep their homes in these conditions? Not many, which pushes prices down even further as foreclosures skyrocket.

How many people have just a $709.00 home payments or only $125,000.00 in debt.

If you have a fixed interest rate that does not move with prime you�re probably all right (although debt scares the heck out of me) but if not then my original, non-professional, advice sticks.

Getting out of a mortgage does not mean renting. It might mean selling what you have now and buying something else much more modest with your equity.

Don�t have equity in your home? Gee..then you are essentially renting from the bank right now, except YOU are responsible for all taxes and repairs and other liabilities and THEY can seize your property if the economy goes south.

Buy some land and then build your home slowly, with cash, the old fashion way.

here is the only thing though. If you have an adjustible then usually thier are caps that you have on the rate too. Which means it can only adjust 1 point a year or every 5 years or some such. And sometimes they have caps on how much your rate could be bar none. This means your rate cannot go over a certain set amount like 12 percent. This means no 20 percent rates over a year. Unless you are silly just got a morgage that changes every month.

is a largely useless commodoty (apart from in electronics and science related industry) which as it is is kept expensive through artificial means, and silver demand in industruial processes would make it far to volitile to base A WHOLE CURRENCY ON. I thought this gold standard arguement was well old hat... it is in the UK. To sort out US debt problems, banks have to get sensible and stop trying to spend their way out of recession. Cut domestic borrowing for consumer needs (you just gotta wait for that car and new TV), curb military spending and curb excessive currency selling abroad...

maybe...

but gold is def a bad idea....

Q

Some superb posts there MrNice. We think very much alike.

Here in Australia the 1997 Asian economic crash did not touch us here, but it really shook up quite a few Australians that could see and understand what happened.

Like yourself I have no debts or credit cards, no savings account either. Only a cheque account with minimal funds. I have all my money invested in silver bullion, silver mining shares, and gold mining shares, I own my own home and drive a modest twenty year old car.

I also agree that investing in precious metals is not to get rich, but to survive the coming economic catastrophe. Your personal links with Indonesia during the "97 financial crash must have been a very sobering experience. This next one will be far worse. Few people really comprehend the speed and ferocity of what lies ahead.

Good luck my friend, your knowledge and wisdom will carry you thorough.

We�ll see. I�ll point out that NO fiat currency in the history of the world has not crashed. Gold backed currencies do not crash. I will point out that central bankers work very hard to suppress gold and silver prices. If they were no threat to fiat currency you�d think they would not care. Printing you own currency with no backing is a sure way to go bankrupt.

Also, China has recently begun telling it�s citizens to start saving in Gold. India�s population saves almost exclusively in gold and silver. Argentina has made large gold purchases in the last 12 months (rumors are they are going to get out of the fiat currency game altogether).

But of course, that�s the point I�m making. No one believes there will be a fiat currency crash before it happens.

FACTS: Current national debt: 8 Trillion
Social Security Board of Trustees reports the "fiscal gap,": 72 Trillion
Total Credit Market Borrowings (non-financial and financial) increased at a $2.59 Trillion seasonally-adjusted annualized rate (22% of GDP) to $35.18 Trillion

Our debt today: 115.18 TRILLION dollars.

The dollar is toast folks!


[edit on 11/22/2004 by MrNice]

I think you have hit the nail on the head. Russia is increasing is gold holdings as well, and now has a gold coin in circulation. Then there is the introduction of the Islamic gold Dinar. All the eastern counties can see what is happening. They all have a long history of hoarding gold, and strong cultural links to gold.

Meanwhile all the white anglo saxon english speaking countries are in an orgy of debt and overspending. Speculation on the stock market, and property markets continue to spiral upward. It is a simple truth that everyone cannot sell at once and realise his or her paper profits.

There will at some stage be a waterfall of selling, only a few will escape. The majority will be decimated in the resulting panic to get out.

As I said earlier Russia has large amounts of gold and China is urging their population to invest in gold. After WW 11 huge amounts of gold were flown from Europe to Japanese Islands that captured at the end of the War. Japan and China are holding 40% of all U.S. paper.
China this weekend called Bush's Bluff and refused to devalue their currency. If they choose to flood the world with dollars. What do you think is going to happen to our Nation's Economy?

www.depression2.tv...

And I'm trying to make sense of it. My partner & I have sold all but one of our pieces of real estate just before we moved. We had planned to buy a house next summer, but now not sure if we should. In the meantime, we have close to 40k for down payment, some in a 6 month CD, some in a savings account and some at a local credit union.

I really don't know anything about investing in metals. Do you just go buy some coins or bullion? Where? And how do you know you will get your money's worth from it when it's time to buy a loaf of bread or whatever?

Should we leave the dollars in the bank? Stuff them under the mattress? The one thing we are spending some of it on right now is food, water storage, alternative heating, making sure our paid for cars are in tip top shape, and making sure we have the right guns and ammo for our needs. I figure if prices and jobs go wacky, at least we can eat, drink and stay warm for a while. I'm hoping the housing market bubble will burst while our dollars still have enough value to get a decent small house with room to grow our own food. And luckily our jobs are the kind that tend to stay around no matter how bad a crisis.

Any thoughts on how to make best use of our house grubstake? I don't see a chance of having this much cash in a pile again for a good long time.

--Saerlaith

Do a little research, do not just take one persons advice, especially from me !

It is fairly obvious that the US dollar is going to continue to lose more value as time goes on. So will property, as people are forced to sell, and the buyers dry up. Rising unemployment, and a severe fall in the stock market are not going to help either.

The price of precious metals is rising, but actually it is the dollars value that is sinking. Look in the phone book under coin and bullion dealers, and go and visit a few, and look around without buying anything at first. Talk to people, and research on the internet.

Spot price is the price you will always get when you sell. To buy from a dealer you will pay slightly more, which is the dealers margin. Bullion is traded for the value of the metal only. It will be stamped with its purity, and probably have a serial number. It is always the best way to invest in actual metal. Precious metals are soft, and a dirty battered old silver bar is worth exactly the same as a shiny new one. It will have the exact weight stamped on it. The physical condition of bullion will never reduce its value.

Next come rare coins. These will always cost far more than the metal content, but should be avoided unless you really know what you are doing. Something really rare can cost many times the value of the actual metal. Unless you can find an interested collector to sell it to, stay away from rare and special coins. The physical condition of the coin can have a huge impact on its value. It is too easy for the amateur to get burned.

Gold jewelry is often fake gold plated, or has a low gold content. Even if it is solid pure 24 carat gold, you are paying a premium for the artistic value. Jewelry is not a good investment, but it can bring a very great deal of pleasure to the wearer. Enjoy wearing your gold jewelry, buy it as a gift for someone really special, but do not buy it as an investment.

For reasons too complex to go into here, silver bullion is about to rise hugely in value, far more than gold. EVERYONE should have at least some silver bullion bars put away. It is unbelievably cheap right now at around $US 7.50 per ounce, or around $US 234.00 per Kg. For a few thousand dollars you can have quite respectable a pile of silver bricks stashed away.

Coin and bullion dealers make their money by buying and selling. They are very honest people, and make their living from regular customers and repeat business. I would be a bit wary of pawn shops, and e-bay.

It is important to understand that precious metal dealers make a living on a small margin. They operate like merchants of fresh fish, fresh fruit, and vegetables. The fresh fish guy buys his fish in bulk from the wharf, and sells his fresh fish to his customers. He does not really care about the price. If fish are plentiful, he buys cheap, adds his margin and sells cheap. When fish are scarce, he pays more, and charges his customers more. He lives on the margin.

Bullion dealers are the same. As the price of the metal goes up and down, he adjusts his price to suit. He will never refuse to do a deal with you. If you buy silver when is $5.00 he will charge you a bit more. When the price goes up to $10.00 he will gladly give you that for exactly the same silver. He will then sell it to someone else after adding his margin.

Precious metals are a very good store of value that can be bought and sold very easily. It is as good as money. It IS BETTER THAN MONEY !!!



[edit on 23-11-2004 by Warpspeed]

to cut the national debt in half the next 4 years. a matter of fact i think he said more than half. how is he going to do it, i guess hell have to do it with all of the oil he is going to take from iraq and possibly iran, if he decides to go to war with iran, bush is going to have to make an agreement with china to keep sending them oil at the same price they are paying iran now.