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Inflation or Deflation WWRPS

Our economy is in a slow motion train wreck, I think most would agree. Will the next decade be plagued by inflation or deflation? WWRPS What would Ron Paul Say?



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The mistake

people are making is that you are calling these loans "Sub Prime"!

"Sub Prime" is a term that was dreamed up just like "Insurgents" in the Iraq war. What are "Insurgents"? This is the word used to describe people that want their country back. These are people that do not want to be occupied by the United States.

"Sub Prime" is the same thing. Here is why.

Most people that wanted to buy a house were led to believe that this was the best type of loan for them. I have several friends who are mortgage brokers, who told me the inside scoop on the whole process.

Unfortunately, the biggest purchase of your life, tends to be the least researched financial decision of ones life. The average "Joe" trusts the mortgage broker to get him the best deal. Well, as I was told by my mortgage broker friends,....If they got these people into these adjustable rate loans, they would get as much as 4 points on the back side.

So if you were purchasing a $400,000 home, the mortgage broker would receive $16,000 up front ( Instant Check) for just getting you into this BS type loan.

It gets worse.

Some companies were paying higher than 4 points. These loans were called "Negative Am" loans, where you would make a payment, but the payment was not even covering the interest. Any additional interest gets tacked on to the principle. So lets say you borrow $160,000 and pay $900 each month for 3 years. At the end of 3 years, you now owe $188,000 on the original loan. The payments that you have made has not even covered the interest. You owe more now, then the original loan amount!

These crooks......which starts all the way from the bottom up... Realtor, Mortgage Broker, lender, and Banks were all in on this.

People that sold homes turned into "Car Salesman".

The way it was presented was simple......Just sign up for this low payment loan, and in 24 months you will have gained so much equity just because of appreciation, you will be able to re-finance at a way lower rate. They never talked about what is happening now...Home prices depreciating.

So, everybody was making a *hit load of money at the home buyers expense, and now that homes are depreciating in value...they all are screwed.

So when the media says "Sub Prime", you need to think about these people. They were not "Sub Prime" going into the loan??? But they are now suddenly called "Sub Prime". Very interesting twist.

The firmament has fallen! We

The firmament has fallen! We are so freaking doomed!!

Will the next decade be plagued by inflation or deflation?

As Ron Paul has stated, we are in uncharted territory. Unfortunately this topic cannot be explained or annualized in just a few short statements.

My take is we are presently experiencing both, inflation and deflation. Food and energy including most imports are experiencing double digit inflation, while the housing industry is experiencing massive deflation in a lot of major areas of the country.

I would like to focus on the housing industry as it’s a huge part of the overall economy in this country, and the worst is not over. This is why the Federal Reserve is keeping interest rates artificially low so that barrowers with ‘arms’ can get out of them by refinancing into 15 or 30 year fixed rates instead. But it’s not working out quite the way they had planned, because many of their member banks have created a catch 22 for them selves. I will try to explain below.

The first domino to fall in our economy was a meltdown of all the failed sub prime loans. The majority of these barrowers never made it past their first or second payment. These loans should have never been made in the first place. As a result of this debacle, these failed loans are having far more reaching consequences into housing values than anyone could have possibly imagined.

After repossessing these homes, many banks are now electing to wholesale them out through auctions and other quick wholesale methods just to get rid of them. These home sales are being used by real estate appraisers as recent homes sales. So here comes the catch 22, and the next domino to fall!

This next domino involves a much larger number of homes loans known as ARM’s. These are barrowers who preferred 2, 3 or 5 year ARM loans because they weren’t planning on keeping their purchase for more than that period of time. Others took these ARM loans thinking they could get a better rate down the road. Granted some could not afford a 30 year fixed but by far the majority could. These ARM borrowers had to prove their credit worthiness in order to get these loans in the first place. The vast majority of these barrowers had very good credit.

Now their ARM’s are coming due, so they want to refinance, or they will pay much higher interest rates after the ARM period expires. Most can afford a 30 year fixed rate which is presently 5.75 -6.0. But in order for their new loan to be approved, their home has to be re-appraised first. This appraisal requirement was implemented by Federal Law after the S&L scandal of the 1980’s. It is illegal for any Federally Insured Bank to make a home loan without an appraisal first. And the bank cannot make a loan exceeding the appraisal. I think you know where I’m going.

These barrowers purchased for example a $400,000 home, and financed $380,000 on an ARM for two or three or five years. Their ARM is now running up, they need to refinance because they cannot survive the significantly higher rate that will come as their ARM starts to adjust upwards. These barrowers are getting a rude awaking, as they find out their home will only appraise for $300,000 because of the sub prime dumping in their area. They now have to produce the $80,000 difference, or they can't get their refinancing. My guess is that 90% of these barrowers cannot get theirs hands on that kind of extra cash, and therefore will not be able to refinance at all. We are talking about million and millions of these loans out there. The bulk of these loans will start coming to fruition by mid summer of this year. This part of the housing debacle no one in the government wants to talk about, it could make the sub prime mess look like child’s play.

The third and fourth dominos to fall will be credit card loans and auto loans, more than likely simultaneously. Many barrowers in these two categories will sacrifice there second NO-MONEY-DOWN auto and even credit cards (which are probably tapped out anyway), to save their home (shelter). It is my opinion that used autos will become very cheap in the very near future, especially gas guzzlers.

Each domino that falls will take out another, and another and another. So far these falling dominos have produced deflation in their respective categories. I’m betting on deflation, with investments in real money, not paper, to protect against inflation.

I will talk about the inflationary aspects another time.

Just my thoughts.

hjschaapman

The Winds of Change!

I belive that hyperinflation

I belive that hyperinflation will k.o. us.

It may be hard to get an answer

to this on the weekend because many are busy with other things. From what I have read there will be both. The money the Fed is creating is rebuilding the bank reserves because they are insolvent. After the bank reserves have been rebuilt. The Fed easing money will lead to inflation because they are creating money out of thin air. It is important to pay as you go don't borrow.
The countries over seas have more control of our economy than the Fed. When they stop buying our debt then we ready for anything including war.

"We can see with our eyes, hear with our ears and feel with our touch, but we understand with our hearts."

I think you will see both.

___________

Lisa C.

http://www.women4ronpaul.com/

Ron Paul "Sign Wave Across the USA" -- November 5th!

Any guess on a timeline?

Do you anticipate inflation for the first five years? And then Deflation? If we could get an accurate picture on this and proceed accordingly we can better prepare ourselves.

Does anyone know if their was a long period of inflation prior to the Great Depression hitting in 1929?

We are already seeing deflation in real estate, autos,

the US dollar... food and energy costs are increasing.

With the dollar still backed by metal and the Federal Reserve still a toddler, I would think some things were better before the crash than they are now. I've been trying to find reliable books outlining pre-Crash America but haven't as yet found a good one. I can tell you that life was good before the crash. People vacationed during the summer and then went back to work/school in the Fall and the rest is history.

___________

Lisa C.

http://www.women4ronpaul.com/

Ron Paul "Sign Wave Across the USA" -- November 5th!

pay down debt

If we could get an accurate picture on this and proceed accordingly we can better prepare ourselves.

Pay off all of your debts, including the house mortgage. Diversify out of the US Dollar.

Anyone?

Have any insight?