{ 50 comments… read them below or add one }

+2 Vote -1 Vote +1Mike
February 18, 2011 at 7:56 am

Last year there were about 1.5 million foreclosures, and right now there are 4.5 million people who are behind on their mortgages 90 days or more. Real estate prices are headed way down. Mike Maloney, the Precious Metals Guru, says that Silver will continue to rise in value until a median value home in the US can be purchased for about 500 – 600 ounces of Silver (forget “dollars” – as inflation will make the value of a dollar smaller and smaller). His belief is that real estate will bottom out about the same time, so you cash in your Silver near the top of the Precious Metals bubble and buy into real estate when that bubble has totally deflated. Then you ride the wave of the next real estate bubble / recovery.

While I agree with this, I can’t figure out what the future will look like. All these empty homes are going to have to be occupied – or they will just rot away. So I’m figuring the banks will accelerate their short sales, but that will cause a glut of supply, further suppressing the home prices. The only way out of this is with (I hate this) some government intervention, which usually ends up making things worse..

I would say to look for hyperinflation and a whole lot of people renting the homes that they used to own. I think that the banks will write down the loans to something people can afford, thinking that something is better than nothing, and this will help to stop the foreclosures. The banks’ losses will somehow be covered by the Federal Government (or the Fed), which will be another big bailout. This will cause some temporary stabilization, but then will prove even more inflationary….

It’s going to be horrible, any way you slice it….

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+1 Vote -1 Vote +1David Morris
February 18, 2011 at 9:08 am

To a certain extent, I agree with the “government intervention is the only way out of this” argument, but maybe not the way you would think. In my opinion, at the beginning & middle of 2001, it looked like the correction would happen at the end of 2001 or beginning of 2002. It would have been relatively gentile, but it needed to happen.

Instead, we had the September 11th attacks and the government stepped in to create massive growth. My guess is that the intent was to increase tax revenues to fund the war, but that’s just speculation.

As a result of government intervention in the form of pressure on banks to do less stringent underwriting, lowering interest rates, and tax incentives, real estate exploded instead of having a minor correction.

I’m a mountain guy, and this is similar to a wind loaded cornice. Basically, a wind loaded cornice happens when wind blows snow across a mountain peak, creating an unsupported overhang of snow. From the side it looks like a wave that’s about to crash, and it’s obvious that it would not be wise to stand on it. From the top, it looks stable and standing on wind loaded cornices leads to the injury or death of hikers and skiiers every winter.

Government intervention had the same effect…creating the illusion of growth on a stable platform when in reality it was growth that had no support.

How can government intervention help now? Well, if they would drastically cut wasteful government spending, there’s a chance that inflation would come down. The combination of lower inflation and slightly higher Treasury rates might allow us to keep the Chinese happy AND give us sustainable mortgage rates. In reality, it’s just a bandaid and the piper has to be paid at some point…we just have to be ready for when that happens.

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+1 Vote -1 Vote +1writeheiney
February 18, 2011 at 3:29 pm

Not to go off on a tangent, but some economists believe that so called “Muslim extremists” are working overtime to drag the US into protracted spending of the type you mentioned in this post. In other words, when we disengage from one hot spot, new ones will emerge because their plan is to bankrupt the USA and destroy it permanently as a power and influence.

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Vote -1 Vote +1SiliconSurfer
February 18, 2011 at 5:58 pm

You mean like we did to the Soviet Union in a very similar way? It worked there…

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Vote -1 Vote +1Grambo
May 28, 2011 at 4:16 pm

I don’t think it is only Muslim extremists–it’s everyone else in the world who is jealous of the United States and our way of life. If they can’t have it, they want to destroy it–isn’t that primitive response part of the human condition? Of course, another primitive response has to do with being fearful of something more powerful than self, i.e., the baddest dude in the West. The line between friendship and enemy is very thin. Could we be flaunting our power and technological expertise too much? Could looking down our noses at others by forcing our “help” on them be somehow misinterpreted? Maybe we shouldn’t try to be so helpful and stop arming other countries and fighting their wars for them and see what happens. It seems to me that what we are doing doesn’t seem to be working. How can we presume to lead other countries in the “right” way when we can’t even manage our own affairs very well? It seems that these “hot spot” countries choose to become a hot spot after they see what we pour into other hot spots! We just need to bring all our troops home, make our own country strong again by enforcing our laws, putting greedy crooks in jail for life or execute them (Enron, Madoff, etc), stopping ILLEGAL immigration and keep our cash at home. There was a day when no one could touch us.

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+1 Vote -1 Vote +1gfmucci
June 1, 2011 at 9:26 pm

I agree with Write and Grambo with one caveat. Rather than call them “Muslim Extremists”, it is more accurate to call them “Muslim Activists.” Orthodox Islam, by historical definition, is “extremist” from the west’s perspective. Basic Islam is extreme. To be a good Muslim one must practice Islam, which is extreme by our standards. And to gain power and influence, they need to neutralize western influence. And to help them do that, they have formed tacit alliances with leftists and others who have similar objectives of destroying the west, capitalism, our religions, and our culture. We are now in full scale retreat as a culture and as a financial and a military force in the world due in no small part to buying into the lie of how “horrible” we are as a nation.

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Vote -1 Vote +1Rham
April 6, 2012 at 9:03 am

BINGO, gfmucci! Islam is extreme by definition.

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Vote -1 Vote +1David Ozanne
February 18, 2011 at 7:58 am

The corn shortage is manufactured as well. Slovakian farmers planted more corn then the EU would allow. They were not allowed to sell it nor even to give it away, so it rotted. Wonder why??

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Vote -1 Vote +1David Morris
February 18, 2011 at 9:12 am

It happens in the US as well. Farmers have been paid by the Federal Government to NOT plant crops on their land for the last 25 years. It’s called the “Conservation Reserve Program” although many midwesterners call it the “Crop Reduction Program.”

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+4 Vote -1 Vote +1Jeffrey Calhoun
February 18, 2011 at 8:01 am

10 years ago my wife and I had our retirement home built for us just outside of the small community (pop. 14,000) that we lived in. It’s on 1 acre of land with rural water, natural gas. We needed to put in a septic system. I had a larger than required one put in just in case we had long term ‘visiters’.

We have a total of 20 homes around us for a small tight community. I plan on putting in a well in the near future.

I just refinanced my home down to 4.62%. This drop saved us over $400 a month. We plan on staying there thru any crunch that might happen. It’s defendable and sustainable. I expect some relatives to show up, but have told them they will need a ‘ticket’ to enter. The ticket will be food, ammunition, fuel. No one stays for free.

I have have 3 friends that have done the same thing within 20 miles of me. We stay in touch with each other thru the use of SSB CB radios and base station antennas.

I wish you’d touch upon communications in one of your next articles.

I have a command room in the basement. I have my short wave radio, CB’s, scanners in it. the antennas are hidden in the attic of my home. No neighbors even know that I have any radios.

Thanks for the newsletter, and keep up the good work.

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Vote -1 Vote +1David Morris
February 18, 2011 at 9:12 am

That’s a perfect use of these low interest rates!

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Vote -1 Vote +13rdMarDivCom
February 18, 2011 at 5:52 pm

Communications in the coming debacle will be problematic. You see, communication signals people that are prepared and organized. Communication also signals people that have supplies, electricity, generators and fuel. Long story short; you pop up with your ssb, cb, aviation or marine radio and you’ll stand out on the grid like a gigantic target for anyone that’s out there. Now you might think that all you have to worry about is the “Bad Guys” and that you can take care of them. That’s great and I’m sure that you can but I’m here to tell you that eventually the Armed Forces of the U.S.A. will come your way and ensure that you never transmit a signal again.

You and your friends might want to look into some version of this: http://www.radusa.com/10/Broadband_Wireless_Multiplexer/9886/?WT.srch=1&utm_nooverride=1&gclid=CPGvn_n_kqcCFS9m7AodmWOmdw#

Granted it looks expensive and all that but I’m sure that if you started looking you’d find what you need… this is just an attempt to guide you in the right direction.

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Vote -1 Vote +1Glen
March 28, 2011 at 3:14 pm

OK I’ll bite. What makes that radio better than the other choices?

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Vote -1 Vote +1Deborah Breckinridge
February 18, 2011 at 8:12 am

Are you related to the political analyst Dick Morris?

Is there a biography of you posted somewhere?

Thank you.

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Vote -1 Vote +1David Morris
February 18, 2011 at 9:13 am

I’m not related to Dick Morris :)

I am a pretty private guy and don’t have a consolidated biography anywhere.

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Vote -1 Vote +1pete
February 18, 2011 at 8:22 am

You failed to mention the effect of taxes imposed by the lying, cheating, stealing, blackmailing, eletist, bastards.

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Vote -1 Vote +1David Morris
February 18, 2011 at 9:14 am

You’re right. I figured that went without saying.

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Vote -1 Vote +1Woolval
February 19, 2011 at 5:36 am

LMAO!! Pete, please clarify… tell us how you REALLY feel.
I love it, and the laugh it gave me. OK, back to my garden.

Val

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Vote -1 Vote +1Don Ruane
February 18, 2011 at 8:31 am

Dave.
You are absolutely correct.
We are heading for soaring inflation in all areas. not just real estate and food.
Water, electric, gasoline, taxes both state and federal, medicine, healthcare, insurance of all types and any thing you need to buy for dollars.
My family lived in the Great Depression.
What is coming will make the Great Depression look like a Sunday School Picnic in the Park.

Just a kicker to make the uninformed set up and take notice, the real rate of Unemployment, in the USA, is 15.6% right now.
Our government keeps changing the way they calculate the Unemployment rate to keep us FAT, DUMB and HAPPY.
The highest it was in the Great depression was 23%.
In the month of my birth, November 1937, it was 19.8%.

My relative lost there jobs in 1933 and did not have a steady job until they began working in WAR plants in the early part of 1941

Don Ruane

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Vote -1 Vote +1David Morris
February 18, 2011 at 9:17 am

Unfortunately, most of the reports from the government are lies. Fortunately, they’re consistent and we don’t really have to spend any time trying to figure out wether or not they’re telling the truth…we can just save time and assume they’re lying.

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Vote -1 Vote +1Ed S.
February 18, 2011 at 9:22 am

Don,

FYI, this morning Fox News reported that a recent poll of 18,000 people across the US disclosed that the true unemployment rate is really at 20 percent. The poll included part time and underemployed workers, such as laid off lawyers stocking shelves at the local Home Depot, just to keep food on the table. The government has been lying – and continues to lie – to the American people about unemployment and the fact that the economy has remained flat for the past year. Personally I take government statements with a grain of salt.

Ed

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Vote -1 Vote +1arkaty
July 22, 2011 at 11:44 pm

This was also AFTER the banks shut down, they confiscated the gold, they destroyed herds of cows( saying they might be diseased). People were glad to get a SS number , in order to get a govt job. My grandparents literally lived on dried peas for months.
This will be a big push to encourage everyone to get an electronic chip ID card.

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Vote -1 Vote +1AB
February 18, 2011 at 8:32 am

Citi Bank is apparently accepting payoff’s of second mortgages at less than 20% of the remaining balance. That may help you as the property owner depending on your first mtg.

I’ll bet other bank are willing to cut to that level as well.

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Vote -1 Vote +1George Feist
February 18, 2011 at 9:14 am

Hello David.

I think your analysis is spot on.

The first wave of foreclosures took out the people that were way out of line financially and therefore weak and suseptible to the economic downturn. There are a vast majority of people and families who are now on the very precipice financially who will go over the edge if food and energy prices rise much higher.

Higher interest rates will compound and exacerbate the already lagging job market as well putting more people into foreclosure and onto the public dole further increasing costs.

You haven’t even mentioned higher income and property taxes which are inevitable.

My wife doesn’t agree with my preparedness position but as I tell her, it’s better to be safe then sorry and the time to plan is now.

We hope for the best, but try to prepare for the worst, which I’m afraid is just about innevitable at this point.

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Vote -1 Vote +1David Morris
February 18, 2011 at 9:23 am

Thanks, but I still hope it’s completely wrong.

Property taxes have been an interesting monster. In Florida, home prices dropped and the amount of taxes owed stayed the same…in some cases effectively doubling the tax rate.

As foreclosures increase and cities tax bases shrink, they’re cutting services and looking for every way possible to increase revenue.

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Vote -1 Vote +1John Sherman
February 18, 2011 at 5:58 pm

As a former renegade assessment officer in Florida who loved to reduce assessments when appropriate, and had the authority to do so, I have long observed that the tax assessor culture is for all out high numbers, as if their pay depended on it. It doesn’t. The right kind of pressure can sometimes open their eyes.Don’t be bashful.

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Vote -1 Vote +1Ike McArthur
February 18, 2011 at 9:22 am

The increase corn prices is due to a world wide shortage of food. Countries like China, India, and others plus the entire continent of Africa, have increased their populations by 50% in the last 25 – 30 years. All of them have decreased their food production during the same time. Many of them depend on US Foreign Aid to feed their people. This Aid is often our food products instead of Cash as most people think. China has increase their food import by 70% over the last 25 years. Much of the Dept of Ag’s budget is for things like the School lunch program, Foreign Aid, and disaster relief donations.

Those who blame ethanol for the increase in corn prices and demand for planting acreage for the increase in AG land prices need to go back to school. City expansion and people moving “Back to the Farm” are the root cause of Ag land price increases

As for Ethanol (A) It takes approximately 1 bushel of corn or grain sorghum to make a gallon of 90 proof alcohol. What is left is water and brewer’s grain, which has the same Total Digestible Nutrients as the grain had to start with. When dried, it is sold as “Dried Brewer’s Grain” for livestock feed at about the same price as the grain originally cost.

(B) Most of the cost of Alcohol for fuel is caused by Governmental regulation and Taxes. The distillation process could be simplified and cheapened by half if the BATF&E and the rest of the Federal Gov. would get out of it. Good luck on that!!

(C) Ethanol cleans your engine and keeps it running longer, which over time will of set the drop in energy per gallon. Without Governmental intervention the cost of fuel would be decreased more than the decrease in energy by the addition of Ethanol. 15 to 20% ethanol does as much good for your engine as 85% does and your engine is more efficient at that mixture. So why is the Government pushing E85?

(D) We have enough oil to run this country for more than 100 years, that is not counting our coal and natural gas or nuclear energy potential. Our current price increases in Gasoline and Diesel are entirely due to the actions of our President and inaction by our Congress. The Federal Courts have said the President’s actions in the Gulf and elsewhere are Unconstitutional. The Courts have even issued the President Contempt Citations for his continued defiance of their rulings. Yet the President acts as if he is above the Law and Constitution and continues his illegal activities. Hurry up 2012.

I do agree with much else you have in the article. I personally subscribe because you are saying what I have been saying and doing for more than 40 years.
Ike

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+1 Vote -1 Vote +1Vicki Slayton
February 18, 2011 at 9:32 am

I am a single female. Own my stick built house in Dewey, AZ.
Looking for a property where I could be self sufficient with its
own well, etc. I know how to can, sew on a Singer treadle machine,
am very practical, own guns, used to work on ranches, a young
age 61, I need a group, or person, to work with. Is there
anyone out there?

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Vote -1 Vote +1Joseph Valdez
February 18, 2011 at 6:42 pm

I support your efforts and hope you find the partner/s you require. I believe in being self sufficient and would love to see more also be prepared for any event.

There are many groups that also believe in being prepared and you don’t have to be paranoid about it

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Vote -1 Vote +1S A E
February 18, 2011 at 9:56 am

The overriding fallacy in all of the above is that it assumes one SHOULD borrow money to buy a house; that one NEEDS to borrow money to buy a house. This is WRONG.

No one should EVER buy ANYTHING they cannot pay for as they go–and this includes housing. Do not borrow your way into a home, but save and pay cash for a lesser home then make it livable within your budget fixing the most important things first and the fluff if later ever comes.

Better yet, if you have reason to borrow, (and there are some reasons) save the amount you will need to pay for the house, then make a large enough down payment to force monthly costs down to almost nothing. Don’t count on a paycheck to cover your mortgage, but be sure you have a banked reserve large enough to cover it should you lose your job(s). Pay the mortgage from this account.

Live not to spend freely, but save to live free. I believe Dave Ramsey says: Live like nobody else so you can live like nobody else.

This has been our policy for over 45 years and IT WORKS. We never owed money then and we owe nothing now. How set to survive are we? It takes discipline. The ball is in your court. SAE

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Vote -1 Vote +1David Morris
February 18, 2011 at 10:26 am

That’s not a bad philosophy, but the simple fact is that housing prices are determined by people buying with mortgages, not cash buyers.

The fact that you paid cash for your house is great, but it will have no impact on the market value of your house.

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+1 Vote -1 Vote +1Walt
February 18, 2011 at 10:30 am

I enjoyed reading this article and thanks for the newsletter David. I am a licensed real estate broker and have made my living investing in real estate at one point in my life. I stopped turning homes just prior to the run-up in prices in 05-06. I also have an intense interest in self-reliance and the economy, since it will affect my current RE holdings. I read about the economy and study self-reliance for hours every night as a hobby. I have purchased two small farms with water and have slowly been improving them to serve as food security/retreats for my family. I realize that the welfare of future generations of my family will rise or fall based on decisions and actions that I make today.

My personal opinion is that it is difficult to say that food prices specifically, and inflation/interest rates generally, will act to exert downward pressure on RE prices. There are varying complex factors that will interact and its difficult to predict what their effect will be. It’s possible that higher interest rates and food cost percentages of disposable income will dampen home prices, but there are other factors that may impact market dynamics:

1. Monetary inflation will cause building materials to increase, which should cause the intrinsic value of existing homes to increase ( the cost to replace an existing home will increase, and the cost to build a new home will increase).
2. I have studied resource scarcity for many years and believe in “peak everything”. In addition to monetary inflation, increasing scarcity of resources
(builiding materials), should cause the intrinsic value of homes to increase.
3. Peak oil ( it’s debatably here already) may have conflicting impacts on home prices. It will most probably contribute to inflation of building material costs, yet suburban values may decrease as commuting costs become prohibitive to some families.
3. Household formation marches on regardless of the economy. The young adults who are getting married were born 20-30 years ago and demand for homes is being pent up as home purchases are delayed in the current market.
4. Inflation typically causes a flight to tangible assets, which RE and homes are. In past periods of inflation, home values have typically increased.
5. Expectations of inflation are sometimes very powerful in causing inflation. Believe it or not, there is a lot of money sitting on the sidelines (both corporate and individually). If there is an expectation that RE values are going to increase, some of that money will start to flow into the market, further increasing values.

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Vote -1 Vote +1David Morris
February 18, 2011 at 5:20 pm

Hey Walt,

Great points and I HOPE you’re right about me being wrong.

There’s a couple of points that I want to challenge you on and get your feedback on.

On your point #1 about intrinsic value, I completely agree that as materials prices go up, the replacement value of housing will go up. It’s probably only a fun late night conversation, but I wouldn’t agree that the replacement value of a home is the same as the intrinsic value.

That being said, the price of a house is whatever the market will bear, so if the free market value of houses are less than te replacement value, it probably means that construction practices will have to change. In any case, people will pay what they can pay and it won’t matter what the replacement value of the house is.

On #3, #4, and #5, I agree with you that if today’s housing prices had a basis in reality, then inflation would have a generally positive effect. But keep in mind that inflation ONLY increases the price of houses if incomes keep up with it. But fundamentally, the prices that we’re experiencing today are artificially high due to monkeying around by the Federal Government. Once mortgage rates reflect a realistic rate of inflation and a risk premium for lenders, loans are issued with REAL underwriting, and the government stops their short term housing credit programs, THEN prices can start going up with a relatively stable foundation.

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Vote -1 Vote +1Andy
February 18, 2011 at 10:40 am

We patented our property several years ago due to intrusion by the city concerning my activities in earning part of my income with activities they frowned on. Since patenting, we have endured no further problems with “code enforcers” stomping around on our land in our absence and taking pictures of “illegal activities” to be used against us in court. According to our patent we are in compliance since it was established prior to the city annexation into it’s city limits. My question is what protection does the patent really establish as protection against foreclosure (in the event that it isn’t addressed in the mortgage contract) and if there really is any protection from government auction for unpaid back taxes, especially with the thieves we currently suffer from that are “in charge”? I wonder if the patent process might offer others a bit of security.
Another thought on self sufficiency…We have solar that we installed ourselves for far less than any commercial establishment could compete with. We use battery bank storage and inverters for our 110 volt needs. We run a small manufacturing facility strictly on solar, isolated from the grid. As a backup that we so far have not needed , we have a propane generator. What we feel should be a consideration is that propane stores over long periods without the degradation of gasoline and the need for cleaning varnish from small carburetors. Propane is also more available when power from the grid closes most gasoline stations that provide fuel. For those just begining to establish themselves with becoming
independent, that may be a consideration. Thanks for all the information posted here. We will survive, partly due to your help.

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Vote -1 Vote +1Bartley
February 18, 2011 at 10:52 am

David – I’ve been in a real estate agent for 32 years and I just finished my continuing education requirements at school. One of the courses was in the stock markets and general economic conditions. Speaking for the Phoenix area only, they say 67% of Arizonans are underwater in their homes.

He says that over 100,000 homes are in line to be foreclosed on now, but the banks didn’t want to show it on their books in 2010, so they have started these foreclosures starting January 1st 2011. BUT.. thats not the worst part…..

The worst part is that he says that there will be a HUGE stock market crash in late summer/early fall THIS year. It will be much worse than 1929. He says some government report that is normally issued in late summer will be the feather that tips the scales. A report that Obama cant Screw with, like he did the unemployment stats. Actually the unemployment rates for the US and AZ is over 19%. Incredible! He says this will be the big one.. complete social upheaval. He suggests getting out of the Stock market early summer, and converting to Gold/Silver AND other “things” that will see you through for upwards of a year.. He meant food/water/supplies.. although he did not say those exact words. Some of the liberals in class would have freaked out. I am just starting out as a prepper. Take care!

-Bartley

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Vote -1 Vote +1Tom R
February 18, 2011 at 2:37 pm

Dear David,
Love your newsletter and am a subscriber to your course.
I’m developing an Excel spreadsheet that allows you to setup foodlist and then generate daily menues for breakfast, lunch, dinner based on a required calorie intake. Then using this you can determine how much of the different foods you need to stock over time to ride out a storm for 1, 2 3 6 or 12 months.

The amount of food needed is surprisingly large and I haven’t tackled the water situation yet either. I’d be glad to share this with you once I’ve completed it.

Thanks for everything you are doing.

Tom

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Vote -1 Vote +1Doug
February 18, 2011 at 4:02 pm

That would be a great tool.

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Vote -1 Vote +1Doug
February 18, 2011 at 3:54 pm

These are all valid & valuable replies to a good article. It’s demonstrative of how complex and interwoven the world economy is. That said, I believe that although the powers that be may try to make certain things happen, the real power lies with the consumers. Unfortunately, too many consumers have been sold on poor financial concepts. Fortunately, more and more are getting themselves up to speed every day.

Of our 14.5 trillion debt, a total of about 4 trillion is foreign investment. The remainder is all domestic pension funds & such. Of the foreign debt, less than 1 trillion is held by China (little under 6%). Debt is still debt, but I’m much more comfortable knowing that the bulk is held domestically.

For an uncountable number of reasons, food will go up in cost. In some areas houses will go down in value significantly. In other areas, especially rural, land will go up in value. Things of intrinsic value will continue to increase while others will decline. Pruning our lives of the unfruitful branches.

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Vote -1 Vote +1Valerie Bate
February 18, 2011 at 6:41 pm

I agree with David almost 100% of the time. I am currently living in a house I bought last year to flip to help towards buying out in the country. At this point that’s just not going to happen. First of all I am a mortgage loan officer so my income has dropped by about 75% and our beloved Barney Frank and Chris Dodd have made it their mission to destroy the mortgage industry! Sorry I got sidetracked……so I will indeed be “Surviving in Place” . The foreclosures are nowhere near done….in 2004,2005, 2006 ARMs (adjustable rate mortgages) were still being written in 5/7/10 year terms so they will be coming due this year, next year which means the rates will be going up if the people haven’t already refinanced it. I have a very low pymt of $281.00/mo and feel I could make that working at McDonalds and that’s why I decided to keep it for myself at this point. Turned my laundry room into a food pantry and have really ramped up after Christmas. I probably have at this point 2 mo supply for myself and my family (total 12 people) who all will be coming here. I dream of 1 yr but working towards 6 mo……..my motto now has become “It’s not where you live, it’s how you live”

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Vote -1 Vote +1tim
March 18, 2011 at 1:39 pm

valerie, don’t forget the toiletries and herbal seeds. It would be best for you not to tell your neighbors of your storage plan because the govt. will be looking for anything to confiscate at gunpoint. also look into bicycles and mopeds as ways to get around cheaply.

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Vote -1 Vote +1E. Todd
February 18, 2011 at 10:29 pm

The price of gas is a bigger issue to me than food. I can grow and or store food but I can’t grow gas. My wife and I let a house go back to the bank and moved closer to work because the cost of gas was as high as our house payment, and the cost of gas is a lot higher now than when we moved just 3 months ago. We reduced our monthly gas bill by $400 (at the time of our move) and got a forclosed house that was almost twice the size of our old one with a $150 smaller payment. Higher food prices are as you said a result of gas prices but if we start seeing hyper inflation it will drive up the price of everything including housing. I have also noticed a change in the exchange rates lately. Items I purchased from overseas are going up in price and the value of the dollar is dropping fast.

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Vote -1 Vote +1Allie
February 20, 2011 at 11:57 am

I have the unfortunate distinction of living in New Jersey, where property taxes are the highest in the country. My mortgage payment is over $700 a month, but my property taxes (on an old, ratty split level!) work out to over $500 a month! If it weren’t for custody considerations, I’d have been out of this state long ago, but as it is, I have no choice. At any rate, property taxes definitely have to be factored in for some of us, and they are horrific.

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Vote -1 Vote +1andrea francis
February 23, 2011 at 5:03 pm

I have a question about storing food. It seems that anything over 70 degrees significantly reduces the time your food would keep. What if the electricity goes off for whatever reason, and you have 3 tons of food stored? It is a kind of catch 22! our ancestors stored food usually over the winter when it was cold, and in the summer they had stone spring houses, which would keep things good for a few days , and when ice came they would put some ice in, which increased the keeping time. I live in the midwest , where it is quite warm and humid. If it wasn’t for air-conditioning I would -well, let’s just say I need to work on learning to be hot! So, can anyone tell me what they think about this, and what they will do bout their 2 tons of food they have stored when it’s 102 degrees.

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Vote -1 Vote +1tim
March 18, 2011 at 1:45 pm

try digging out a root/cold cellar or even an aboveground cellar with dirt heaped over top and the entrance on the north side. the ground several feet below you will average 52 -58 degrees year round and using cooling you could keep everything cool and fresh for a low cost

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Vote -1 Vote +1Jay
February 28, 2011 at 11:01 pm

“So, a bank might offer 2% interest on CDs, turnaround and loan it out at 5%, and if the borrower pays on time, they’ll make 3%.”
Sorry – your math is wrong. The bank is buying at 2 and selling at 5 – the bank is making 250% on their investment, not 3%. Even if you’re saying that they make 3% on the loan over time, you mislead folks by the way you state it. You need to look at the profit generated by making the loan. How do you think they can build those huge bank buildings? Even the 2% they offer isn’t their money – it belongs to depositors that get less than 1% interest so the profit margins get even higher. Want to make a lot of money? Start a bank.

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Vote -1 Vote +1David Morris
March 3, 2011 at 5:01 pm

Hey Jay,

Thanks for your comment.

You’re partially correct. I addressed it as much as I wanted to in that article with the next sentence, “Historically, the spread has been about 2.7%, but it tends to get smaller as rates go lower and get bigger as rates go higher.” I’ve got a background as stock broker with several designations as well as quite a bit of exposure to the inner workings of banks and financial institutions. I’ve explained the concept that you’re describing in over 100 face to face and front-of-the-room speaking engagements, and in my experience, it causes people’s eyes to glaze over. I didn’t want to distract from the central message of the article with a rabbit trail, so I didn’t go into the detail that you wanted me to.

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Vote -1 Vote +1Jay
March 8, 2011 at 3:31 pm

You’re welcome, David, and thank you, as well. I understand the “eyes glaze over” comment. (LOL) It’s happened to me on more than one occasion. :o ) Keep up the good work.
Jay

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Vote -1 Vote +1Martin Fano
July 9, 2011 at 1:26 pm

The American way of life, the American dream is dead…why….because the average American is stupid..lives way beyond his or her means..hooked on material things..keeping up with the “Jones”..driving a fancy car. In other words Americans define themselves by thier possesions (toys) ..saves no money for his / her retirement. I have a house..paid off and 100% mine. I did not use my house equity as an ATM machine..I will have a house for my retirement..I feel for those you have lost thier jobs and their homes..but I do not feel for the fools who were stupid enough to get in over thier heads. The Government is partly to blame because they failed to regulate the banks properly. Self regulation of banks and financial markets does not work..as folks are stupid and greedy!The US is facing some of the biggest problems it has ever faced in its very short history. The politicians need to get their collective heads out of their butts to fix the problems. Land of the free…what a joke…Land of the exploited more like it.

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+1 Vote -1 Vote +1William Unger
January 13, 2012 at 8:33 am

I would like to know if the entire United States of America goes “belly up,” what happens to all the mortgages? If the banks fail, the mortgage companies fail, credit unions fail, etc. What does that mean?

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Vote -1 Vote +1Linda Chapman
April 4, 2012 at 4:18 pm

When I first was married 39 years ago, we paid for everything in cash.Until it came time to buy our first home. We could not go in and pay the whole thing in cash. We had a really healthy sizable amount of it in cash but, none would give us a mortgage with out first establishing credit. We had to buy something on time that we could pay for in cash just to get the home loan. This was crazy,we paid cash for our cars, we owed nothing, until we needed to borrow 15,000 in cash to pay for our home. I remember the banks talking to us as if we were stupid in not understanding their reasoning. What has changed between then and now?

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