If you paid attention to the mainstream financial media, then you may be forgiven in thinking that the dollar is the best thing since sliced bread.
Just check out some of these headlines:
- The U.S. Dollar is on Top of the World!
- Can the US Dollar Save the World?
- The Return Of King Dollar
Is the dollar really that valuable? Does the greenback really warrant such a massive comeback? Will it continue its supremacy as the world’s reserve currency?
In short, no. No it does not. It’s not the best thing since sliced bread; to me, it smells more like moldy, subsidized government cheese.
I don’t believe for a second that the dollar is going to keep up its meteoric rise.
There are far too many things working against it. That’s why I recently placed a $450,000 bet against it…
No, I didn’t back up the truck on gold.
I didn’t buy TIPS (Treasury Inflation-Protected Securities).
And I sure as hell didn’t load up on rubles.
I did something radical. I bought my family a house with a 30-year fixed rate mortgage. And it may be the best possible move you can make if you’re worried about the falling dollar. Here’s why..
A Fistful of Dollars
I’m sure I don’t need to give you anymore reasons why the dollar won’t keep up this ridiculous rise. If you’ve been reading Outsider Club, you know the underlying issues here very well. For the sake of brevity, I’ll simply list them:
- The Fed’s Quantitative Easing program has added $4 trillion to its balance sheet. While it’s a complicated system, the chickens always come home to roost. We’ll have to answer for the sheer amount of money pumped into the economy. Historically, we’ve seen it happen in Germany during the 1920s, Italy in the 1970s and 80s and of course Zimbabwe’s horror show in the 2000s.
- Our national debt has ballooned to $17,859,583,673,998. That works out to $55,979.16 per person if divided equally amongst all U.S. citizens. If current trends keep up, we’ll reach over $26 trillion in the next 10 years. In order to even keep pace, the U.S. economy would have to grow 6% a year — and our current average is closer to 3%. That doesn’t inspire much confidence.
- Other countries, like Russia, have been threatening to counter the dollar as the U.S. reserve currency. Andrey Kostin heads VTB, Russia’s second largest bank, and has set up a timeline for dropping the dollar. He contends that within two to three years, Russia could move international monetary settlements to the ruble. He has also warned of deals with China to circumvent the dollar for energy deals. “Given the amount of bilateral trade volume with China, we are working on the expansion of settlement in rubles and yuan,” he claimed at a meeting earlier this year with Vladimir Putin. Time will obviously tell, but they are clearly doing the homework to make ruble and yuan-backed settlements a reality.
Perhaps most importantly, the Fed itself actually wants more inflation. One of its stated goals is to get official inflation back over 2%. If it is successful, this will indeed mean a drop in the dollar’s value and a boon for anyone with a fixed-rate mortgage.
So, even if you agree with me about the downwards trends in the dollar’s value, you still may be asking: how in the world does going into hundreds of thousands of dollars in debt save me from the dollar’s collapse?
The answer is actually quite simple…
Making a House a Home (For Your Money)
A 30-year, fixed-rate mortgage is one of the most tried and true hedges against the dollar. When the dollar dives, inflation increases. While that makes your current money worth less, the fixed-rate mortgage makes your monthly payments more valuable.
If you can get a favorable interest rate, there is nothing that can take that away from you when rates indeed begin to rise again and money becomes tight.
And 30-year fixed mortgages are lower than Obama’s approval ratings. Check out the chart:
I’ve never seen rates this low in my lifetime, and I likely will never see them again. You probably won’t either. Nor will Warren Buffett, which is why he’s been buying up depressed property at low rates for the past few years.
Even right now, after a bit of a housing recovery, Buffett himself still says that mortgage rates are a “no-brainer”.
“You would think that people would be lining up now to get mortgages to buy a home,” Buffett said last week at a conference. “It’s a good way to go short the dollar, short interest rates. It is a no-brainer.”
The dollar will be going down, and interest rates will be going up. It’s merely a matter of time.
Even if you do not need a home for yourself, a 30-year fixed mortgage still makes sense for protecting your wealth against inflation.
If you can afford it, not only are rates at all-time lows, but rental prices are near all-time highs. Right now, according to home reality website Zilllow, “Americans making the national median income ($53,216) should currently expect to spend nearly 30% of their monthly income on rent, the highest rate ever.“
Bad news for renters, but great news for landlords.
In fact, millennials are now known as the “rental class”, since they have no trust in home-ownership as the key to financial freedom. And I don’t really blame them. They watched the subprime mortgage blow up in our faces in 2008 and aren’t rushing to plunk down 10-20% of a home value for the bragging rights of owning a home.
And right now, it’s incredibly difficult to get approved for a home loan. Even Big Ben Bernanke himself couldn’t refinance his home.
“I recently tried to refinance my mortgage and I was unsuccessful in doing so,” Bernanke recently divulged at a conference. “I’m not making that up.”
When I got my mortgage, the lender we used was emphatic that the pendulum has swung way too far in the other direction. While it was obnoxious to fill out pounds of extra paperwork, and painful to drop a massive down payment in one fell swoop, I’m happy to see that liar’s loans — subprime loans given out to anyone without actually verifying employment, assets, etc — have gone the way of the buffalo.
While it is certainly a bummer for first-time homebuyers without the necessary funds, and Ben Bernanke’s inability to refinance [insert the world’s saddest song on the smallest violin here], it opens up great opportunities for qualified buyers. If you have the means, the timing couldn’t possibly be any better… this is a historically good time to buy a home for yourself, or for a rental property.
But you don’t have to plunk down tens-of-thousands of dollars to do it…
We’ve discovered a way to buy homes for far less than you ever imagined. In fact, this one obscure government document can get you started for less than $1,000. Like Minded People subsribers have access to the document, so sign up and see if you qualify today.
