Many good points – as I have also wondered if the Fed will bail the housing market out. So what is the Fed going to do?
They could slash rates again; however, the dollar sell-off would be significat. The dollar has already been selling off, and that is in an environment of rising Fed rates. With a dollar sell-off, long term rates would rise dramatically. As it is, Iran and Russia are working to sell oil in a basket of currencies (or primarily the Euro). Once these oil bourses get up and running, many of our dollars will come back home – this will only add to the rampant increase in the current money supply.
As it is, we borrow close to 3 billion from foreigners every day. To add to that, here is a quote from Rich Dad’s Robert Kiyosaki about the state of our government’s finances: “According to the U.S. Treasury Department, America’s first 42 Presidents, from George Washington (1789) to Bill Clinton (2000), borrowed a combined total of $1.01 trillion from foreign governments and financial institutions. From 2000 to 2006, the Bush White House has borrowed $1.05 trillion alone. Yes, that means we have borrowed in the last 5 years what we had previously borrowed in the first 211 years of our country.”
What does all of this ultimately mean? The Fed will continue to raise interest rates, but will halt at some point. They will let the housing market take a hit before they realize how bad it will really get. By the time they think they will be able to lower rates again, we may be on the brink of a dollar collapse – read up on Germany’s hyperinflation in 1923, John Law of France in 1719, and Rome’s inflation around 300AD. Inflation happens when humans control the flow/amount of money in circulation – it is inevitable.
As some posts stated above, it will probably be good to get out of high-density cities. Unfortunately, people will get desperate. It is probably prudent that people prepare now – the government is not going to bail us out. With the national guard overseas, immigration issues coming to a head, and an economy that is headed for an eventual fall, our security is at issue. Prepare for it the best you can.
