US Dollar Will Collapse In 2013

[momopi]

Momnopi is right about the re-inflation of the housing bubble but that was intentional the entire time.
To make the banks eat the lost values on homes around the country would mean certain death for at least three of them. The Government knows the public would revolt if they tried to bailout the banks again.
So they have kept interest rates negative and backstopped the banks in hopes real estate prices would go up once the majority of foreclosures finished.
This is now the case in some parts of California, especially in the LA area. The problem is of course larger than before.
1) The buyers are generally overbidding for property. Not a problem for large hedge funds who are making the massive investment - http://www.motherjones.com/politics/201 ... ure-rental
In hopes of making it back in by renting the properties since most people would have a hard time getting a home loan with the more restrictive requirements.
2) This puts prices back out of the reach of the average family looking for a home, will this lead to the relaxing of loan requirements and speculation (again?)
http://www.motherjones.com/politics/201 ... ure-rental

1. From cash-flow investor perspective, the price at which the property is purchased is critical. Just a rough estimate in my head:

Scenario A: $250k purchase price, 25% down, investor loan 4% @ 30 years, mortgage + property tax + property manager + insurance + gardener = probably ~$1400/month
House rents for $2200 - 1400 = $800/month cash flow, * 12 = $9,600/year
25% of 250k = $62500, let's round up to $70,000 to account for various fees and repairs.
$9600 annual cash flow / $70,000 investment = 13.7% returns on the cash. Hopefully I'm doing the math right (?)

Scenario B: $350k purchase with 25% down, same loan terms as above, monthly cost = ~$1800/month
$2200 rent = $1800 cost = $400/month * 12 months = 4800
25% down = 87500, let's round up to $95,000 for total costs
$4,800 / 95,000 = 5% returns on your cash (pay more and get less!)


2. From flipper perspective, what matters is how much it'd cost to fix up the house, and how much premium you can add to the sales tag afterwards. Depending on if you're a contractor (or have your own crew) vs. having to pay someone else to do the repairs, the difference in cost can be double. If you bought the property for 250k and sold it for 350k, but the repairs costed you $60k, then you're not making much after all the expenses and fees. But if the repairs can be done for $30k, then the numbers will look much better.


3. From a primary residence perspective (not short term residence), if the same SFR rents for $2200/month, buying it at either $250k (preferred) or $350k (less preferred) is still better than rent. Even with 20% down and taking a larger loan, the monthly cost is still lower than rent.


If the value of the property is evaluated based on how much it can be rented for, then the property is still under-valued, but that's very much due to the low interest rate.

[odbo]

but the fact that it is even brought up and supported by people like Paul Krugman is extremely alarming.

Then we have nothing to worry about. Krugman is a political prostitute and completely full of shit. He's an "economist" in the sense that he'll say whatever he's paid to say. There's a reason why Jews like him won so many Nobel prizes in the last half-century, it's the same reason they won all those Oscars.

[Taco]

although it will soon be exactly 100 years since the Federal Reserve Act was passed...
http://en.wikipedia.org/wiki/Federal_Reserve_Act

You bring up an interesting point. The Fed might have a hard time getting its contract to print US dollars renewed later this year considering there was no income tax before it came along, who's going to agree to it. However, if the US is under martial law when the Fed's contract expires it will have no problem getting its contract renewed. Crashing the US dollar could easily lead to such a senario.

[Maker55]

Guys, once the U.S. dollar goes, all currency around the world is going down with it because the U.S. dollar is the resolve currency around the world.

The dollar has lost at least 95 percent of its value since 1971.

I will say within 3-7 years, the U.S. dollar will return to its true value.....zero.

Cash is trash. Start buying silver and buy food storages and water.

The inflation is going to drive up the prices of gold, food, silver, oil and real estate so if you're a real estate investor, that's good news for you.

Silver is a bargain right now.

Start buying 1 ounce America silver eagles.

Once the market crashes, you can say goodbye to your U.S. dollars.

Our paper currency was taken off the gold standard in 1971 so it's not backed by anything anymore.

Cash is worthless paper.

The Federal Reserve is printing so much of this trash that our paper currency has become debt.

Money is debt and that's why this inflation is driving up prices.

It'll only get worse, eventually, food prices will double or triple.