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Dr Doom

Homes Are Nationalized

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I've just finished reading "The Creature from Jekyll Island - A Second Look at the Federal Reserve" by G. Edward Griffin.

An excellent book about the history of central banking in the United States and the world.

Final two chapters were pessimistic scenario and realistic scenario about how things are likely to pan out if nothing changes.

I'm sure this excerpt will be of interest to those contemplating the deflationary vs inflationary recession, and what the effect will be on those holding a mortgage.

Homes are Nationalized

One of the first industries to feel the raw power of "emergency measures" was the home industry. During the early stages of inflation, people were applying their increasingly worthless dollars to pay down their mortgages. That was devastating to the lenders. They were being paid back in dollars that were worth only a fraction of the ones they had loaned out. The banking crisis had caused the disappearance of savings and investment capital, so people were afraid to sell their homes under such chaotic times and, if if they did, very few were willling to buy with interest rates that high. Old loans were being paid off, and new loans were not replacing them. The S&Ls, which in the 1980s had been in trouble because home prices were falling, now were going broke because prices were rising.

Congress applied the expected political fix by bailing them out and taking them over. But that did not stop the losses. It merely transferred them to the taxpayers. To put an end to the losses, Congress passes the Housing Fairness and Reform Act (HFRA). It converted all Bancor-denominated contracts to a new unit of value - called the "Fairness Value" - which is determine by the National Average Price Index (NAPI) on Fridays of the preceding week. This has nothing to do with interest rates. It relates to Bancor values. For the purpose of illustraiton, let us convert Bancors back to dollars. A $50,000 loan on Friday became a $920,000 loan on Monday. Few people could afford the payments. Thousands of angry voters stormed the Capitol building in protest. While the mob shouted obscenities outside. Congress hastily voted to declare a moratorium on all mortgage payments. By the end of the day, no one had to pay anything! The people returned to their homes with satisfaction and gratitude for their wise and generous leaders.

That was only an "emergency" measure to be handled on amore sound basis later on. Many months have now passed, and Congress has not dared to tamper with the arrangement. The voters would throw them out of office if they tried. Millions of people have been living in their homes at no cost, except for county taxes, which were also beyond the ability of anyone to pay. Following the lead of Congress, the counties also declared a moratorium on their taxes - but not until the federal government agreed to make up their losses under terms of the newly passed Aid to Local Governments Act (ALGA).

Renters are now in the same position, because virtually all rental property has been nationalized, even that which had been totally paid for by their owners. Under HFRA, it is not "fair" for those who are buying their homes to have an advantage over those who are renting. Rent controls made it impossible for apartment owners to keep pace with the rising costs of maintenance and especially their rising taxes. Virtually all rental units have been seized by county governments for back taxes. And since the counties themselves are now dependent on the federal government for most of their revenue, their real estate has been transferred to federal agencies in return for federal aid.

All of this was pleasing to the voters who were gratified that their leaders were "doing something" to solve their problems. It gradually became clear, however, that the federal government was now the owner of all their homes and apartments. The reality is that people are living in them only at the pleasure of the government. They can be relocated to other quarters if that is what the government wants.

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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