The Fed's last resort? $5000 gold

derryb

How to solve the sovereign debt crisis in 15 minutes

"History shows that raising the dollar price of gold is the quickest way to cause general inflation. If the markets don’t do it, the government can. It works every time."

Nothing like a good "re-set" for the currency.

ricko

Well... gold would be high, but in worthless dollars.... so what do we gain?? And yes, I do not have a degree in finance.... Cheers, RickO

johnny9434

i wonder if it goes to that if will be using that for milk and bread, just saying ( useless info )

derryb

@ricko said:
Well... gold would be high, but in worthless dollars.... so what do we gain?? And yes, I do not have a degree in finance.... Cheers, RickO

your gold insurance would have done it's job and protected your loss of dollar purchasing power. No "real" gain, but also, no actual loss.

3stars

And here I thought the market set the price for gold...

Jinx86

Would be nice to pay off my mortgage with worthless dollars from selling gold.

Baley

@Jinx86 said:
Would be nice to pay off my mortgage with worthless dollars from selling gold.

Something said many times here: gold goes to $5k/oz, i pay off my mortgage with my collection, and the house value quadruples?

Yes please! ( and dream on..)

jmski52

your gold insurance would have done it's job and protected your loss of dollar purchasing power. No "real" gain, but also, no actual loss

I do have a degree in finance, and this is the correct answer.

Something said many times here: gold goes to $5k/oz, i pay off my mortgage with my collection, and the house value quadruples?
Yes please! ( and dream on..)

Read the book, "When Money Dies" by Adam Ferguson. As the system gets more out-of-whack, more dislocations occur in the interactions between the currency, debt and taxes. Incomes and funding tend to lag, and this forces some really bad decisions on the policy-makers, including re-valuations, tax increases ahead of the curve, much higher money-creation - a whole host of changes. You can't count on paying off the mortgage with cheaper dollars unless you time it very well, before any new currency is implemented - and even then, there's nothing that says "they" won't come after you retro-actively.

As we saw in the late 1970's, nothing gets in the way of gov.com when it comes to "windfall profits". Or mandatory reporting of all transactions over $500 (remember when they attempted that just a few years ago?) Metals give you some advantages, perhaps. Let's hope it doesn't come to all that.

There's always a potential for metals to increase and then spike as the general recognition of our debt problems become apparent. Despite the attempts to manage every nook & cranny in this managed system, at some point, the metals will catch a wave, no question about it. That's when you realize your gains and give up some of your safety net, if you are so inclined.

TwoSides2aCoin

Truth is : they fixed this a long , long time ago. Only caveat is there is a minus (-) sign in front of our Strong Dollar. It looks like this , kinda:
-$1,000,000,000,000,000.99.

And we just keep adding zeroes. We're rich.

Baley

@jmski52 said:
your gold insurance would have done it's job and protected your loss of dollar purchasing power. No "real" gain, but also, no actual loss

I do have a degree in finance, and this is the correct answer.

Something said many times here: gold goes to $5k/oz, i pay off my mortgage with my collection, and the house value quadruples?
Yes please! ( and dream on..)

You can't count on paying off the mortgage with cheaper dollars unless you time it very well, before any new currency..

Well, come to think of it, isn't that exactly what we actually get to do?

Bought my first property in 1993, and still own it, 5 years left on the 30 yr mortgage, never refinanced.

The payment is just about the same as it was 25 years ago, but it's tripled in value, and the amount i rent it out for has doubled in the past 15 years since i moved out.

Slow, relatively steady inflation over long time has been a huge assistance in wealth creation- the number of dollars earned goes up, but the number owed goes down, even with interest payments figured in.

derryb

@Baley said:

Slow, relatively steady inflation over long time has been a huge assistance in wealth creation- the number of dollars earned goes up, but the number owed goes down, even with interest payments figured in.

Wealth creation? Not for most. Number of dollars earned has not been keeping up. Your slow, steady hidden tax of inflation eats away at it especially since the last recession. Note the chart is based on the "official" CPI, not the actual one.

Baley

Um ok, i guess half of the people are below average, too bad so sad-- they ought to listen to you and improve their results eh?

davidk

@Baley said:

@jmski52 said:
your gold insurance would have done it's job and protected your loss of dollar purchasing power. No "real" gain, but also, no actual loss

I do have a degree in finance, and this is the correct answer.

Something said many times here: gold goes to $5k/oz, i pay off my mortgage with my collection, and the house value quadruples?
Yes please! ( and dream on..)

You can't count on paying off the mortgage with cheaper dollars unless you time it very well, before any new currency..

Well, come to think of it, isn't that exactly what we actually get to do?

Bought my first property in 1993, and still own it, 5 years left on the 30 yr mortgage, never refinanced.

The payment is just about the same as it was 25 years ago, but it's tripled in value, and the amount i rent it out for has doubled in the past 15 years since i moved out.

Slow, relatively steady inflation over long time has been a huge assistance in wealth creation- the number of dollars earned goes up, but the number owed goes down, even with interest payments figured in.

It’s like magic.

Musky1011

Mortgage is paid..
Debt Free and Loving It

dpoole

I never understood why someone would loan someone else a bunch of money at something like 3-4% for thirty years.

What are the chances inflation will stay lower than that for thirty years?

jmski52

Slow, relatively steady inflation over long time has been a huge assistance in wealth creation- the number of dollars earned goes up, but the number owed goes down, even with interest payments figured in.

So, you're assuming that all of those interest payments plus the principal that adds up to more than 3X the value of the original mortgage loan...………..are negligible?

Call it what it is - a home loan is leverage and if the market turns against you like it did in 2008 and you are over-leveraged, you will owe more than the property is worth.

Most young'uns have never had to financially navigate a high debt load in a rising interest rate environment and there may be a bit of a problem when the expectation is that property values and stock prices will always rise.

Baley

@jmski52 said:
Slow, relatively steady inflation over long time has been a huge assistance in wealth creation- the number of dollars earned goes up, but the number owed goes down, even with interest payments figured in.

So, you're assuming that all of those interest payments plus the principal that adds up to more than 3X the value of the original mortgage loan...………..are negligible?

C'mon now, you know ya gotta live somewhere. The payments were cheaper than rent while i lived there, plus there were tax deductions. Then after moving out, the renters paid the mortgage, plus expenses and some positive cash flow income too, plus tax deductions.

As davidk said, it's like magic. Took 25 years, but 5 more, and then free house, as it has paid for itself over time.

The other properties are earlier in the curve, but making progress, day by day, month by month. As i said, it would be great if gold went to 5000 and i could sell some and accelerate paying down those notes.

3stars

"So, you're assuming that all of those interest payments plus the principal that adds up to more than 3X the value of the original mortgage loan...………..are negligible?"

It depends on the market, how long you intend to own the house, etc. My parents bought their house for $32k. 40 years later its worth $500k, Even a mortgage that was 3x initial cost was still a winner.

jmski52

As long as inflation rules the day, the leverage works. Simple as that.

derryb

ya gotta live someplace. As long as a mortgage payment is less than renting, the interest included in the mortgage payment does not matter. A homeowner has an asset at the end of the mortgage (and a partial asset during the mortgage) while the renter gets no return at all from his rent payments. What matters more is the value of the mortgaged property not falling below it's purchase price.

ReadyFireAim

I'm going to apologize before asking this because my background is biochemistry.

Suppose I make $100,000 / year and I buy a $106,000 house.
I'm still feeling pretty good about my financial position...Right?

3stars

Depends. What's your debt load on things like credit cards, auto loans, other loans? How much are you spending on insurance, taxes (state and federal), cell phone, IRA investments etc. The range of possibility could be from you're in great position to you can't afford it.

TwoSides2aCoin

I posted a couple weeks ago to
buy the banks. I read yesterday that's what WB is doing. My crystal ball's got an itch. .