Posted on 05/30/2009 5:03:53 AM PDT by FromLori
Collapsing home prices and credit markets continue to put downward pressure on consumer spending, forcing the Federal Reserve to take even more radical action to revive the economy. Last week, Fed chief Ben Bernanke raised the prospect of further monetizing the debt by purchasing more than the $1.75 trillion of Treasuries and mortgage-backed securities (MBS) already committed. The announcement sent shock-waves through the currency markets where skittish traders have joined doomsayers in predicting tough times ahead for the dollar. Foreign central banks have been gobbling up US debt at an impressive pace, adding another $60 billion in the last three weeks alone. That's more than enough to cover the current account deficit and put the greenback on solid ground for the time-being. But with fiscal deficits ballooning to $3 trillion in the next year alone, dwindling foreign investment won't be enough to keep the dollar afloat. Bernanke will be forced to either raise interest rates or let the dollar fall hard.
(Excerpt) Read more at marketoracle.co.uk ...
How does that reduce the debt-load. If my dollar is weaker how that make my mortgage payment lower?
It doesn’t...it makes the value of the mortgage less.
Not in the eyes of my bank. It still have to pay the same amount.
These moves, like all recent moves, are designed to prop up the institutions that pushed all this cheap debt on us - not us.
I have over 100% equity in our house but that is dwindling. I doubt we will ever get to zero equity but a total collapse would bring us close.
HUGE ‘duh’ factor here is being ignored.
Historically, home mortgages are to be no more than 3X earnings.
ANYBODY checked out personal incomes, lately?
And either decision spells doom, a devastation that could have been entirely avoided had the usurper Obama not thrown away trillions in debt, PLUS increasing the size and cost of government and government social programs, and bailing out GM and Chrysler and his commie unions.
Raising interest rates will likey be the route Obama will choose in a too late attempt to reverse the damage he has done. Why? because it will hurt the "rich" (working middle class) more than it will hurt the non-working welfare class.
But the damage to the financial markets from the further collapsing of the housing market will cause Obama's efforts to save face fail miserably, and the dollar will fall hard anyway as Obama desperately increases debt to bail out banks, but will be unable to do so in the amounts needed to brevent widespread bank failures, and the runs on them which are inevitable.
As the value of the dollar goes down (aka "inflation") wages go up. (In fact, my first employer out of college had the policy of dividing my raise into "adjustment for inflation" and "merit raise").
The total number of dollars you owe on the mortgage doesn't change, but as the number of dollars you bring home increase it becomes much easier to pay that mortgage.
We'd probably all be better off to start thinking of value amounts in terms of ounces of gold, rather than fiat currency. The usefulness of fiat money then becomes its use to move gold without physically moving it.
Exactly. Anyone thinking wages will go up to compensate for a devalued dollar is daydreaming. That will happen at a much slower rate and take decades to occur, and that is assuming the economy will return to a stable, normal rate of growth, which isn't likely at all.
Yes the middle class are really going to take it hard. That housing recovery thing is looking very grim and those baloney modifications we have to pay for well thats not working out either...
http://articles.moneycentral.msn.com/Banking/CreditCardSmarts/banks-have-declared-war-on-you.aspx
An excellent article. Thanks for posting.
But everything in the above quote indicates not actual deflation but the setup for eventual deflation. Currently, prices are not tumbling and the purchasing power of the dollar is not increasing. The creeping increase cost of oil is an indication of both a devalued dollar and the future increased cost of production. That is inflation.
I'd say rather that what is happening is that anyone who is not wearing rose-colored glasses sees a major economic crisis in the next 12 months and they are preparing.
While the federal government continues to make the age-old mistake of making money and making it available to stave off the inevitable pain, people are holding on to that money.
Excuse the analogy, but it is like saving up all your dope for a huge binge. When the people start spending and when the newly printed fiat money hits circulation, the euphoria of temporary deflation will be so quickly bypassed that our economy will smash directly into hangover and withdrawal. The option is to quit the easy-money addiction and go through the pain of adjusting to realistic economic growth, not manufactured booms.
Yet another daydream. The government will confiscate gold just like they did in the thirties, making it illegal for anyone to own gold and forcing people to turn in gold for treasury bills.
Why nobody remembers this is baffling, probably because gold resellers and doing good business right now and don't want anyone to know this.
Bump for later read.
If every other costs is rising, as a percent, the mortgage is still the same to you.
3 times 0 = ?
How the media can so blatantly deceive the public by claiming Obama's "stimulus" is working, that the economy is recovering is criminal.
The stock markets certainly do not reflect that at all. And with so many nervous investors ready to pull the trigger in fear of a collapsing dollar, there are a lot of companies out there with stocks that have no where to go but bankrupt.
Your best investment: Guns and ammo.
That is how I view it also. I know many do not like the gloom and doom of the truth but I see the communist media as sucking them in to get their last dime before it all goes into the worse depression we have ever had so I just try to find sources that tell the truth.
I wouldn't say "best". An very important and necessary one to be sure, but you can't eat your guns and ammo.
You can't barter your guns and ammo for food that isn't available either.
I'd say your best investments are a good store of primary staple foods, rice, flour, sugar, rolled oats etc. , a rototiller, plenty of seeds, some fertilizer, canning equipment, jars, and some livestock; a few chickens, a breeding pair of goats, or a couple pregnant cows if you have the space, and gasoline, gasoline preservatives, brewing equipment, distilling equipment and supplies, good 1930's small tractor like a miniapolis Moline (you'll eventually run out of gas and need to burn alcohol)
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