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http://inflation.us/2010inflationreport.pdf
NIA considers it to be hideous that CNBC and other mainstream media outlets continue to invite on and give credibility to people like Dave Ramsey. Ramsey calls precious metals, "dumb", "speculative", "volatile", and one of the "weirdest" investments. He recommends to his viewers that they purchase CDs and tells them that once they save up enough money they should buy rental properties because, "People always need housing."
On the surface, U.S. dollars appear to people like Ramsey to be a safe and stable asset because they have a number on them that always stays the same. They fail to realize that when gold prices jump around, it’s not the value of gold that’s changing. What volatility in the price of gold is actually showing us is the unstableness of the U.S. dollar.
Gold is the most stable asset the world has ever seen. In 1970 you could buy a nice men’s suit for 1 ounce of gold or $35. Today, you can still buy a nice men’s suit for 1 ounce of gold, but $35 will only buy you a nice t-shirt.
If the U.S. dollar was stable like Ramsey thinks it is, gold would still be $35 per ounce. Gold rising from $35 to above $1,200 shows us that the U.S. dollar has lost over 97% of its purchasing power in terms of gold. His recommendation to buy CDs is completely idiotic, when short-term CDs are paying only 0.3% in interest. If you buy CDs, you are guaranteed to lose about 5% of your purchasing power each year (based on the current rate of price inflation), which is why we are so confident banks will soon start lending their $1.045 trillion in excess reserves.
In regards to owning rental properties, Ramsey needs to look back at what happened to landlords in Weimar Germany during hyperinflation. During the years 1912-1913 in Weimar Germany before hyperinflation occurred, the average household spent 30.2% of their monthly expenditures on rent. By the third quarter of 1923, rents fell to just 0.2% of the average household’s monthly expenditures. At the height of hyperinflation in Weimar Germany, households were spending 91.6% of their monthly expenditures on food, making it impossible for landlords to raise rents in any meaningful way. With a piece of fruit costing more than a month’s rent, landlords saw their real rental income 12 National Inflation Association - www.inflation.us
evaporate.
Unfortunately, the majority of Americans don’t think for themselves. They get suckered into believing the financial advice of Ramsey and others who spew the same nonsense. Ramsey, who should’ve been chastised for being so wrong about the U.S. economy for so many years, is now quoted in the media more often than ever and was rewarded by FOX Business with his own television show.
Real Estate is not a good hedge against inflation because it’s an asset that is very difficult to sell. In today’s market it usually takes at least 12 to 18 months to sell a house and the transaction involves inspections, mortgage approvals, contracts, brokers commissions, etc.
NIA pays very close attention to the median U.S. home price/silver ratio. The national median home price is currently $166,100 or 9,100 ounces of silver. When silver reached its all time high in January of 1980 of $49.45 per ounce, the median U.S. home price at the time was $62,900 or 1,272 ounces of silver. If we see the median U.S. home price/silver ratio return to its low from 1980, we will see another 86% decline in Real Estate prices, in terms of silver. NIA believes if you invest your cash into silver today, instead of Real Estate, you will be able to afford a house that is at least 7 times nicer within the next 5 years or so.
There is currently a huge shadow inventory of homes that have been foreclosed on but held off the market as banks setup the infrastructure necessary to sell them and wait for housing demand to recover (wishful thinking). NIA believes this shadow inventory is now up to approximately 2 to 3 million homes and many of them could begin hitting the market in the second half of 2010.
As the millions of homes in the shadow inventory begin hitting the market, those who have been patiently trying to sell their home for the past 12 to 18 months without receiving an offer that is acceptable to them, will rush to lower their asking prices in order to dump their homes as quickly as possible. Currently, about 1/4 of all mortgages are underwater, but as homeowners readjust their asking prices, the underwater rate could quickly reach 1/2 of all mortgages.
NIA considers it to be hideous that CNBC and other mainstream media outlets continue to invite on and give credibility to people like Dave Ramsey. Ramsey calls precious metals, "dumb", "speculative", "volatile", and one of the "weirdest" investments. He recommends to his viewers that they purchase CDs and tells them that once they save up enough money they should buy rental properties because, "People always need housing."
On the surface, U.S. dollars appear to people like Ramsey to be a safe and stable asset because they have a number on them that always stays the same. They fail to realize that when gold prices jump around, it’s not the value of gold that’s changing. What volatility in the price of gold is actually showing us is the unstableness of the U.S. dollar.
Gold is the most stable asset the world has ever seen. In 1970 you could buy a nice men’s suit for 1 ounce of gold or $35. Today, you can still buy a nice men’s suit for 1 ounce of gold, but $35 will only buy you a nice t-shirt.
If the U.S. dollar was stable like Ramsey thinks it is, gold would still be $35 per ounce. Gold rising from $35 to above $1,200 shows us that the U.S. dollar has lost over 97% of its purchasing power in terms of gold. His recommendation to buy CDs is completely idiotic, when short-term CDs are paying only 0.3% in interest. If you buy CDs, you are guaranteed to lose about 5% of your purchasing power each year (based on the current rate of price inflation), which is why we are so confident banks will soon start lending their $1.045 trillion in excess reserves.
In regards to owning rental properties, Ramsey needs to look back at what happened to landlords in Weimar Germany during hyperinflation. During the years 1912-1913 in Weimar Germany before hyperinflation occurred, the average household spent 30.2% of their monthly expenditures on rent. By the third quarter of 1923, rents fell to just 0.2% of the average household’s monthly expenditures. At the height of hyperinflation in Weimar Germany, households were spending 91.6% of their monthly expenditures on food, making it impossible for landlords to raise rents in any meaningful way. With a piece of fruit costing more than a month’s rent, landlords saw their real rental income 12 National Inflation Association - www.inflation.us
evaporate.
Unfortunately, the majority of Americans don’t think for themselves. They get suckered into believing the financial advice of Ramsey and others who spew the same nonsense. Ramsey, who should’ve been chastised for being so wrong about the U.S. economy for so many years, is now quoted in the media more often than ever and was rewarded by FOX Business with his own television show.
Real Estate is not a good hedge against inflation because it’s an asset that is very difficult to sell. In today’s market it usually takes at least 12 to 18 months to sell a house and the transaction involves inspections, mortgage approvals, contracts, brokers commissions, etc.
NIA pays very close attention to the median U.S. home price/silver ratio. The national median home price is currently $166,100 or 9,100 ounces of silver. When silver reached its all time high in January of 1980 of $49.45 per ounce, the median U.S. home price at the time was $62,900 or 1,272 ounces of silver. If we see the median U.S. home price/silver ratio return to its low from 1980, we will see another 86% decline in Real Estate prices, in terms of silver. NIA believes if you invest your cash into silver today, instead of Real Estate, you will be able to afford a house that is at least 7 times nicer within the next 5 years or so.
There is currently a huge shadow inventory of homes that have been foreclosed on but held off the market as banks setup the infrastructure necessary to sell them and wait for housing demand to recover (wishful thinking). NIA believes this shadow inventory is now up to approximately 2 to 3 million homes and many of them could begin hitting the market in the second half of 2010.
As the millions of homes in the shadow inventory begin hitting the market, those who have been patiently trying to sell their home for the past 12 to 18 months without receiving an offer that is acceptable to them, will rush to lower their asking prices in order to dump their homes as quickly as possible. Currently, about 1/4 of all mortgages are underwater, but as homeowners readjust their asking prices, the underwater rate could quickly reach 1/2 of all mortgages.
3K is worth 100K+ interesting when you look at it from that perspective isnt it.... You could buy a house for that amount now in cash... Go to phoenix and offer 100K cash and i would almost guarantee a bank would accept that offer on a house that used to sell for 300K three years ago..... And thats just based on Cindy's down payment, not the actual purchase price in 1975...
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