A large mortgage on a property now only makes sense as the ultimate hedge against inflation because the government will be financing and subsidizing your tangible property for the duration of the loan.<\/p>\n
The reason why long term interest rates are so ridiculously low is that people running our economic system fear deflation so they are spending money that we do not have to kick the can (the day of reckoning) down the road. I think it is now obvious that our government will not allow a deflationary depression. We are heading for a lot of inflation in the future. The government will just keep spending more than it has to try to stimulate the economy.<\/p>\n
People really should know that we will not be able to pay our debts and entitlements in the future with dollars that are worth anywhere near what they are worth today. Other nations are already realizing this and they will stop purchasing U.S. debt as soon as they can find a good substitute.<\/p>\n
The Obama administration government is keeping long term interest rates insanely low through the monitory manipulations of the Federal Reserve. The government took over almost all mortgages and is taking huge losses on these mortgages and that loss is being added to our national debt. The latest rumor is that the Obama administration is now going to forgive part of the principle and adjust principle on mortgages to what a house can be sold for. That of course will impact the U.S. economy in several ways.<\/p>\n
It will increase the national debt by hundreds of billions of dollars causing the Federal Reserve to create even more dollars out of thin air. On the positive side it will stop many that are walking away from underwater loans so it will reduce foreclosures. The idea is that less foreclosures will stop depressing the housing market so the downward spiral in housing prices will end. That assumption is probably correct. If they do reduce principles on loans housing prices will soon bottom unless there is much higher unemployment, but the government will not allow that to happen either. (That statement will be explained later in this article.)<\/p>\n
With that said,\u00a0 I believe now is the time to buy as much real estate as you can for as long a term as you can. I can think of no better hedge against inflation and I will now tell you why.<\/strong><\/p>\n Interest rates for home loans are now about 4.5 % on a thirty year loan. If you are in a normal tax bracket about a third of that interest will be recovered as deductions in Federal and State taxes. So effectively most would be getting a 30 year loan at a 3% interest rate. Now look at the 100 trillion in debt and entitlements that will come due in the next few decades and tell me that inflation will average less than 3% a year for those thirty years? I think anyone suggesting that inflation will be that low in the years ahead should be locked in a rubber room so they do not hurt themselves and others with such financial advice.<\/p>\n We can look at the past and see that we had significant inflation since the Federal Reserve was created. I believe the dollar lost 97% of its value in that time. I do know that fifty years ago just about everything was 10% the cost in dollars that it is today. A candy bar was a nickle. Gas was 22 cents a gallon. A new car was about $1500 and a new house could be purchased for about $10,000. What was the inflation rate over the last 50 years for there to be a ten fold increase in prices? I will let you do the math but the inflation average was obviously higher than 3%. Heck, we had 18 percent inflation in just one year under Jimmy Carter.<\/p>\n Now we should look at the future. Do you think inflation will be higher or lower than it has been for the next 30 years? Even the government says it will be higher and they now manipulate their inflation numbers to be 1 or 2 percent less than what they really are. I believe it is very likely that the dollar will lose as much of its value in the next 10 years as it did in the last fifty.<\/strong> I think it will lose at least 95 percent of its value over the next thirty years.<\/p>\n Obviously those holding long term low interest notes are going to be the big losers (the government holds almost all mortgages today) and those with mortgages are going to be the big winners. If inflation averages 6 percent a year over those thirty years you are actually purchasing your house at a -3% interest rate. If inflation averages 10 percent (and that is probably closer to reality)\u00a0 you are purchasing your property at a -7% interest rate. If we go into hyperinflation as some suggest we will in the next couple of years, you essentially will have purchased your property for close to nothing (other than what you put down).<\/p>\n The bottom line is that the U.S. government will be subsidizing residential property bought today for the life of the loan. However, the taxpayers pay the bills and if you are a taxpayer you are going to pay for those that get a home mortgage at ridiculously low interest rates whether you get a mortgage yourself or not. So you can either just help pay for the mortgages of others through more taxes and a devalued dollar or you can get your fair share by financing all the residential property that you can qualify for.<\/p>\n You might want to look at the moral issues before you do this. I personally think it is just being a wise steward, and I will tell you why. Many are buying gold and other tangibles as a hedge against inflation in the future. Nobody sees anything wrong with that. You would just be buying a more practical tangible asset that you can enjoy and live in or rent. In the long term, a house should always be worth what it costs for the labor and materials to build it minus depreciation plus the cost of the land (they are not making any more land either but population continues to grow). The house and land will adjust with inflation in the long haul. Gold is very high now and although housing was artificially high it has now come down to near the costs to buy the land and build. Gold prices already have adjusted for some future inflation but housing has not. Besides, you cannot buy gold with low interest rates subsidized by the government but you can do that with residential property. So which is the better tangible to own knowing that inflation is coming especially if you do not have the cash or want the risk of gold speculation? (The government could confiscate gold at their own low rates; they have done it before.)<\/p>\n Some may argue that Christians should not go in debt but if you put 20 percent down on a house that has the right market value I would not call that debt. You are simply buying something tangible on installments. You can always sell the property. So if the property is worth what you paid for it you are not going into debt to buy it and the value of a well kept house in a decent area should now keep up with inflation in the long term.<\/p>\n Others may argue that there may be much more unemployment in the future and that people with mortgages will not be able to pay them. I do not see government allowing much higher unemployment to happen. If unemployment starts going up again they will just print more money and create public jobs or benefits out of thin air and just add the bill to the national debt (insuring that there will be even more future inflation in the future). As a last resort I think some administrations would even resort to war or an overblown crisis to keep people employed. The government is not going to allow deflation with high unemployment. They will continue to kick the can down the road as they always have and inflation will wipe out most debt (and savings). Your wealth during this inflationary period should be in tangibles unless you have your own connections to those with money and power.<\/p>\n It is really hard to say when the dollar will start dropping in value. I think it could only be months away but there are too many external factors possible for anyone to figure it out. But drop it will! <\/strong>This link will give a good perspective on the death of the dollar<\/a>.<\/strong> One thing is for sure, interest rates cannot go much lower and at the first sign of any inflation they will shoot up suddenly. Notice that whenever there is a bit of good news about the economy that oil prices go up. Whenever there is bad news it goes down. Well imagine what might happen if the world actually has an economy recovery. What do you think rising oil prices will do to the prices of everything else? Or suppose we or Israel bomb Iran. What will that do to oil prices and inflation? Inflation is not just going to be demand driven in the future either. Our debt burden and all the printing of funny money is going to devalue the dollar and higher interest rates will be demanded by those taking the risk to keep investing in them.<\/p>\n Everyone knows our day of reckoning is coming but they do not know what else is safe right now so they are holding dollars. If oil goes up they will be dumping dollars for sure. When that day comes it will come suddenly. At that point you can forget about being able to finance mortgages at low interest rates. So I think the wise and astute will get moving in the next few months while interest rates are artificially low if they want real estate as a tangible investment and the ultimate hedge against inflation.<\/p>\n Nevertheless, I am not a professional financial adviser, this is only given as food for thought. So don’t just take my word for it or blame me if you lose your butt on real estate. Think what I said through, and also pray about it. You might also read this article about the Desperate Economic Action ahead<\/a><\/strong><\/p>\n A large mortgage on a property now only makes sense as the ultimate hedge against inflation because the government will be financing and subsidizing your tangible property for the duration of the loan. The reason why long term interest rates are so ridiculously low is that people running our economic system fear deflation so they […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[339,95,37,169],"tags":[148,187,167,114,131,317],"class_list":["post-4548","post","type-post","status-publish","format-standard","hentry","category-constitutional-issues-and-patriot-topics","category-dangers","category-financial-collapse","category-obama-nation","tag-america","tag-economy","tag-food-for-thought","tag-logic","tag-obama","tag-perspectives"],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/pawsE-1bm","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/www.thepropheticyears.com\/wordpress\/wp-json\/wp\/v2\/posts\/4548","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.thepropheticyears.com\/wordpress\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.thepropheticyears.com\/wordpress\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.thepropheticyears.com\/wordpress\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.thepropheticyears.com\/wordpress\/wp-json\/wp\/v2\/comments?post=4548"}],"version-history":[{"count":2,"href":"https:\/\/www.thepropheticyears.com\/wordpress\/wp-json\/wp\/v2\/posts\/4548\/revisions"}],"predecessor-version":[{"id":6667,"href":"https:\/\/www.thepropheticyears.com\/wordpress\/wp-json\/wp\/v2\/posts\/4548\/revisions\/6667"}],"wp:attachment":[{"href":"https:\/\/www.thepropheticyears.com\/wordpress\/wp-json\/wp\/v2\/media?parent=4548"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.thepropheticyears.com\/wordpress\/wp-json\/wp\/v2\/categories?post=4548"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.thepropheticyears.com\/wordpress\/wp-json\/wp\/v2\/tags?post=4548"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
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