Gloom & Doom SHTF Question - as it relates to Gold & Silver & The US Dollar
GRANDAM
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In such a situation,,, which I firmly believe is coming,,, the dollar falls and eventually becomes worthless. Gold & Silver skyrockets.
My question is what happens to the debt you have on paper committed to in Dollars. Say mostly the mortage balance due on your home? If you owe $50,000 I am assuming it stays at $50,000 as long as you have a fixed rate and pay on time. I guess I am asking can THEY inflate your debt as related to the falling value of the dollar on which this debt is based? So if the dollar falls by 50% can they rewrite your loan to $75,000 from the original $50,000?
What has happened in the past such as in 1994 Mexico when the Peso fell over 50%? Did paper debt on the books remain the same or did the GOVT somehow come up with a reason or plan to adjust it upward and stick it to the Joe on the street?
Thanks, GrandAm
My question is what happens to the debt you have on paper committed to in Dollars. Say mostly the mortage balance due on your home? If you owe $50,000 I am assuming it stays at $50,000 as long as you have a fixed rate and pay on time. I guess I am asking can THEY inflate your debt as related to the falling value of the dollar on which this debt is based? So if the dollar falls by 50% can they rewrite your loan to $75,000 from the original $50,000?
What has happened in the past such as in 1994 Mexico when the Peso fell over 50%? Did paper debt on the books remain the same or did the GOVT somehow come up with a reason or plan to adjust it upward and stick it to the Joe on the street?
Thanks, GrandAm
GrandAm 
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If the dollar is "worthless", then I wouldnt worry about any debt I might have, unless that debt is held by a neighbor with a gun.
Knowledge is the enemy of fear
Your mortgage terms are set in concrete. If you have a fixed rate loan, the principal balance will not change regardless of the dollar valuation. Essentially, the Feds' have to create inflation in order to weaken the dollar that will enable us all to climb out of the recession. Your $1000 mtge payment will efffectively be cut in half within 10 yrs because of inflation. That and other strategies will allow us to lighten the personal debt load.
I suspect that "they" would like to value their own liabilities as worthless and the worthless assets on their books as full value (which FASB already allowed them to do).
That being the case, it would put them in a very untenable position to try and have it both ways. Of course, "they" have already shown quite clearly that they can do just about anything that they want to do.
They've already destroyed bankruptcy law with GM & Chrysler. There is no reason that they won't try to destroy contract law just the same way.
Excuse me for being such a downer, but the politicians are in a bind no matter who is in control and no matter their best intentions. It's not going to be pretty regardless of who is in power.
I knew it would happen.
Guy making $75,000 in the yr before the 6 yr hyperinflationary period will be making $112,000 at end of year 6.
Lets say his mortgage is $1500/month. That represents about 24% of his monthly pay in that year before runaway inflation.
By year 6, his mortgage is still $1500, but now that represents just 16% of his monthly income.
In this example, we now see that hyperinflation is probably a GOOD thing for those who have just bought homes and are upside down on them right now. On the flipside, hyperinflation is simply disasterous for anyone close to retirement or actually in retirement on a fixed income!
Thanks for the input so far,,, GrandAm
would just bail the mortgage holders out, again. Fannie and Freddie
and the Banks. You owe the debt incurred by your gov't and would just
pay for it in taxes, etc.
bob
<< <i>Well dropping by 50% would make it worth alot less. I think my question is clear enough. >>
Your question is clear, but supporting assumptions are not.
Being worth less in not the same as being worthless. I will stand by my response to "worthless", and as to "worth less", then if you owe the bank $100,000 then you owe the bank $100,000, not $50,000 or $200,000. The bank doesnt care about the value of the dollar vs a basket of other currencies, a bushel or corn, or an ounce of gold.
Knowledge is the enemy of fear
How about a scenario where we have low growth ( high unemployment, low wages) and raising costs ( food, gas ,healthcare)
Given the way things look right now...this its not all that unlikely.
The "savings" of inflation might be offset by increasing property taxes and higher insurance/maintance fees down the read.
Its a rat race no doubt
Groucho Marx
Unless you have wage inflation or specific assett (that you own) inflation you have no advantage in my book.
Worry is the interest you pay on a debt you may not owe.
"Paper money eventually returns to its intrinsic value---zero."----Voltaire
"Everything you say should be true, but not everything true should be said."----Voltaire
Worse case SHTF scenario, the dollar colaspes. It takes a wheel barrel ful of them to buy a loaf of bread. Since the dollar is gone we need a new currency, The Ameros Dollar
This is my question, will the converted dollar to Amero Dollars bear any relationship to the former value or will we all get shafted?
I guess nobody will be able to really answer this question but that is why I wanted to know what has happened in the past in countries where it suddenly took a wheel barrel full of curency to buy a loaf of bread. What happened afterward with old debt?
GrandAm
<< <i>This is why a hyperinflationary period might be good. My salary will come close to keeping pace, yet my mortgage is a fixed amount. >>
Ahhh...Bernanke logic. When has that man ever been right on anything? I'll bet he won't even be able to start hyperinflation, the system collapses first.
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Gold and silver are what they always have been, precious and priced accordingly. For the USD enconomy, if the dollar is weaker and inflation higher, it stands to reason that gold and silver will cost more USD to get the same amount in the future. Those that have bought in already will benefit if they can just keep their greasy fingers offa da trigga. It's a win.
Those that can, will. Those that can't will sink lower in the pecking order and standard of living. SHTF is relative, there's people burning stuff in the streets like Watts and then there's pillaging ala Katrina, then there's just a little adjustment to your standard of living. Let's hope whatever SHTF we get will be the latter.
You only think your salary will come close to keeping pace. In a hyperinflation scenario, the first ones who get the money in their hands benefit, while the last ones who get money in their hands get hurt the most. The government benefits immediately, while it's anybody's guess how long it takes before your bosses decide when and how much of a COLA you would get (or how often). In 1923 Germany, the money deteriorated quickly, almost as if the issuer was writing bad checks. And actually, they were.
At some point during a hyperinflation people stop going to work because their pay isn't worth it, and they have more pressing things at home. Hence, the fear of a widespread breakdown of society.
Hyperinflation is the absolute best justification for keeping your assets in gold & silver.
I knew it would happen.
<< <i>Worse case SHTF scenario, the dollar colaspes. It takes a wheel barrel ful of them to buy a loaf of bread. Since the dollar is gone we need a new currency, The Ameros Dollar
You don't wait for them to "convert" anything. You take your wheelbarrel full of money and pay off your mortgage RIGHT AWAY!
Tell me, what do I do? If this starts it will spread across the country...you won't own anything!
The first thing I would do is to pay a visit to my congressman, in person and to demand to know what is going on.
I knew it would happen.
<< <i>This is why a hyperinflationary period might be good. My salary will come close to keeping pace, yet my mortgage is a fixed amount. So if we get 6 years of say 10% inflation, with at least a 7%/yr raise, then lets look at the following numbers:
In this example, we now see that hyperinflation is probably a GOOD thing for those who have just bought homes and are upside down on them right now. On the flipside, hyperinflation is simply disasterous for anyone close to retirement or actually in retirement on a fixed income! >>
Hyperinflation would be disastrous for everyone, mortgage or no mortgage. The benefit of being able to pay your mortgage would be far off set by what you would have to pay for everything else, the loss of any paper assets, and the instability in government(hhmmmm).
der spiegel
<< <i>
<< <i>This is why a hyperinflationary period might be good. My salary will come close to keeping pace, yet my mortgage is a fixed amount. So if we get 6 years of say 10% inflation, with at least a 7%/yr raise, then lets look at the following numbers:
In this example, we now see that hyperinflation is probably a GOOD thing for those who have just bought homes and are upside down on them right now. On the flipside, hyperinflation is simply disasterous for anyone close to retirement or actually in retirement on a fixed income! >>
Hyperinflation would be disastrous for everyone, mortgage or no mortgage. The benefit of being able to pay your mortgage would be far off set by what you would have to pay for everything else, the loss of any paper assets, and the instability in government(hhmmmm). >>
Why wouldnt paper assets such as stocks increase with hyperinflation? If the XYZ company sells food products, and today's strike price was $50/share, then why do you feel the share price would not rise along with inflation as the company takes in more cash because inflation caused a rise in the food products it sells?
My point is that so long as my wages came close to keeping pace with 6-10 years of hyperinflation, I would be in a great spot. My house (bought in 2006) would soon be worth more money than what is owed on it once again. The cost of my mortgage would be lower in relation to my income than it is now. And my diligence in stockpiling precious metals would be handsomely rewarded. These are "disasterous" things???
<< <i>Hyperinflation, is for those in control....workers like you and me are the one's who are left out to hang dry....Corporations as we once new them are no longer....cost of materials to manufacture are untouchable....farmers no longer farm...food is in short supply....it is something you do not want to experience. >>
Why would farmers stop growing food? A bushel of corn will sell for more money than ever if hyperinflation does occur.
Corn = $xxx today
Corn = $x,xxx in hyperinflation.
And you stop growing corn again why???
People also used wheel barrows to lug around money. When they went to the baker to buy a loaf of bread, he would throw the money into the fire heating the oven because it was cheaper to burn money then buy firewood.
I suggest you read up on the Weimar hyperinflationary period
Only food you will have is by your own hand, if your lucky to have any seeds....then you will need big guns to keep the starving off your back!
Gecko, when your money is worthless...you do not have money to buy anything not even a kernal! Sad picture isn't it!
<< <i>When your currency is worthless...your society will fail....your family will go hungry...There will be no stock market....you could only wish!
Only food you will have is by your own hand, if your lucky to have any seeds....then you will need big guns to keep the starving off your back!
Gecko, when your money is worthless...you do not have money to buy anything not even a kernal! Sad picture isn't it! >>
Where did I say that our money being worthless was a good thing? Go back and reread my premise. Its based on a 10%/year, 6-10 year inflationary period.
<< <i>This farm has been in my family for almost 150 years...if it goes up 1000% there is no way I can afford to pay the taxes or keep it... >>
Tax Details 2010
Period Description
2010-1 Beginning Tax 28,XXX.XX
2010-2 Beginning Tax 28,XXX.XX
Total: 56,XXX.XX
This was caused largely not by what our family did, but what happened around us... and I remember when nobody even wanted to live down here.
<< <i>An interesting, and disturbing, article from a major German magazine:
der spiegel >>
Excellent article, I think they have Glenn Beck pegged correctly, the problem isn't Mexicans and homosexuals.
Liberty: Parent of Science & Industry
As all these old threads you bumped showed predicting how things will work out is tough for most of us. There were a few posters that look pretty wise in some of these threads though so that's encouraging.
Interesting to see the number of posters that are no longer with us
This forum is pretty laid back compared to what you see over in the US coin forum. I was surprised at some of the things that were posted this weekend when I wandered over and clicked a few threads.
You really have to exert yourself to get bammed on the PM forum but some still manage to pull it off
I wonder what ever happened about the tax situation and how it was resolved.
Nothing has been solved, or resolved. The problem with a serious deflation is that the only cure is a serious inflation. The problem with a serious inflation is that it undermines confidence in the currency. When that happens, hyperinflation is a real possibility.
The problems haven't gone away and nothing has been fixed.
Precious metals may jump all over the place in nominal dollar terms as we go through this process, but at the very least - they are real, physical and verifiable. If the banks start restricting money or if liquidity freezes up, which I believe to be real possibilities (like in China at this moment), the confidence level will erode.
Most of our money is electronic now. We are very close to a totally-state-controlled situation.
Be careful how you manage your finances, especially now.
I knew it would happen.
The key in my mind is that the only place you can presently park your money is in US Equities. The S&P 500 companies are doing well with regard to both sales and profits. Europe is struggling as are the third world countries. The US Equity markets are the only place with a decent return at present.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
<< <i>so much for paying off the mortgage with the proceeds from selling a few ounces of gold >>
Worked just fine for me.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
Liberty: Parent of Science & Industry