Inflation/Hyperinflation - we may be in for a painful ride

[Beefitarian]

Soooo, if you were in a position where you need to re-mortgage your home/possessions.

Would lock in for 1 / 3 / 5 years at today's interest rates?

It could get expensive if rates go up significantly.

I locked in for 25 years with http://www.firstline.com/ yes 25.

So far I'm losing but it's more expensive to do now though, I don't know if that's a sign or not.

[Cat Driver]

There is no doubt in my mind what I am going to do.

How well I remember 1981 and what happened when interest rates went through the roof and almost every builder went broke over night because they just could not pay the new rates and the houses could not be sold.

Hell by locking in for five years at least I can sleep at night knowing I can pay my mortgage for five years, because for sure rates are going up...real soon I think.

[Mig29]

that actually happened in places like Argentina and Easter Europe in early 90's .....it sounds surreal to people here, but I remember my folks lived through some crazy hyperinflation where at one point our mortgage rates were 20-30 Deutsche marks a month but you could barely survive on monthly basis, as you exactly pointed out....

will that happen here? why not? problem is when super powers fall (USA in this case) they tend to draw in their collapse many other countries as well....just like when huge battle ship sinks, it sucks every person and debris in it's vicinity. And guess what, we are US's closest debris along with Mexico....except that Mexico may be able to swim better then us, since they haven't had the chance to live a luxurious life (by many standards) like us in Canada....

Cheers

[Beefitarian]

Why wouldn't you lock in for 10 or as long as you could?

[bizjets101]

Why wouldn't you lock in for 10 or as long as you could?

Actually that's the best thing you could do. The circumstances that have brought about the lowest interest rates in our lifetimes - we will never experience again in our lifetime.

With that in mind, there is only one way for rates to go - and what may seem expensive now - looking back in the future - you've no idea how 'cheap' they are.

As long as you can afford the payment - you should lock in as long term as possible - and just forget about it.

[Cat Driver]

I haven't asked my bank if they will offer a 10 year lock in, but I will.

The reason I chose five years is because that was the longest they offered...but I will ask about a longer term, however I imagine the rates will be a lot higher than the 3.99% I have been offered now.

Sometimes I wonder if buying this new motorhome was a good idea.

[ehbuddy]

Just wait............the economy in North America should collapse in the early part of 2013.

Once the masses have realized that 2012 did not bring an end to the world they will now have to start paying off all of the crap they bought on credit thinking the world was going to end anyways.

I imagine millions of people will rack up a huge amount of debt in 2012.

My 2 cents worth.

[Cat Driver]

Credit is an interesting subject.

How do you get credit without the ability to pay it back?

[double-j]

Soooo, if you were in a position where you need to re-mortgage your home/possessions.

Would lock in for 1 / 3 / 5 years at today's interest rates?

It could get expensive if rates go up significantly.

I locked in for 25 years with http://www.firstline.com/ yes 25.

So far I'm losing but it's more expensive to do now though, I don't know if that's a sign or not.

Those are some shitty-assed interest rates from a second string bank if you ask me..

Jj

[Beefitarian]

Soooo, if you were in a position where you need to re-mortgage your home/possessions.

Would lock in for 1 / 3 / 5 years at today's interest rates?

It could get expensive if rates go up significantly.

I locked in for 25 years with http://www.firstline.com/ yes 25.

So far I'm losing but it's more expensive to do now though, I don't know if that's a sign or not.

Those are some shitty-assed interest rates from a second string bank if you ask me..

Jj

Probably. I'm not sure if CIBC is a second string bank but maybe.
Will those rates look better in six years when RBC is offering your renewal at 15%?

[double-j]

LMAO!

If those are the best rates you can get today from CIBC then best o' luck to ya!

Question. When was the last time interest was at 15%? Tell you what, if (and when) interest rates go to 15% in the next 5 years I will buy you a beer! Save this post beef.

Will you buy me one if they don't?

Just because your paranoid don't mean they're not after you..



Jj

[Beefitarian]

I didn't memorize the date but it was after people made fun of my parents for locking in at 8% for 25 years.

[KAG]

Credit is an interesting subject.

How do you get credit without the ability to pay it back?

Cat, You open a bank and call it the Federal Reserve .

Bizjet, I did read about the Hunt brothers, and how they cornered the Silver market. Times have changed. Back then silver was not as widely used in industry, also Government(s) had billions of ounces in reserve, and today they have none. The known ground reserves are 95% used up, meanwhile industrial use is increasing. There is also the paper market (ETF’s, certificates, futures, ETC) that trade around 100 times the amount of actual physical silver. If enough people were to “trade up” to physical, the paper market would implode. The All time high of silver is $50/ounce. But corrected for inflation thats around 120/ounce - were no where near that number. Check this out
http://www.silver-investor.com/

There are so many very smart people stating that silver is the best investment in commodities because of it’s severely undervalued price. That and the average can afford to buy some.

Obviously I can only regurgitate what I read, I have no actual knowledge about what silver/gold/the economy may or may not do. To me transferring money from a stock account to physical just seems like a prudent thing to do.
Again, time will tell.

[double-j]

I didn't memorize the date but it was after people made fun of my parents for locking in at 8% for 25 years.

Now that's some sound financial advice, thank you.

Historically, variable rates have always outdone fixed. You just need the intestinal fortitude.

The bottom line is don't bite off more than you can chew when it comes down to mortgages. Follow the market trends and be prudent. You will be fine.

Choosing long term mortgages on the theory on the 'sky is falling' principal only makes your banker cream himself at night.

Jj

[Hedley]

Banks aren't stupid. There's a reason they have a lot of money. No sane person would lend out money right now for a long period of time, locked in at a low interest rate, with the looming tidal wave of government debt and resulting currency devaluation heading straight at us.

Back in 1978-1981 during the incredible inflation in Canada, my parents owned a house in Oakville, which they purchased in 1973 with a 25 year mortgage. When the heavy inflation hit, devaluing the currency, my mother used to joke that the phone bill was more than the monthly mortgage payment. We eventually sold that house for 10x what we paid for it, in 1973 dollars, at the peak of one of the looney Toronto housing cycles. God, I'm glad to be out of there forever.

Anyways, sitting on a shrinking pile of cash during a period of high inflation is not a good strategy. You can expect to see some astounding purchases by the Chinese in the next little while. A trillion dollars is a lot of money. At least, right now it is

[Never Mind]

As brought out by KAG's first post on this thread this issue will affect aviation. It's true some companies are hiring at the moment but it's on the momentum of $70 - $80/barrel oil. West Texas Intermediate reached $100 today and Brent Crude sits at $116/barrel. Is anyone concerned about making a career move to another flying job right now?

Never Mind

[Beefitarian]

Historically, variable rates have always outdone fixed. You just need the intestinal fortitude.

Strange, my parents live at the same address at one point their phone bill was sometimes more than the mortgage. There were a few people back then that had to move/sell their house for a dollar because they couldn't afford to renew their mortgage.

The bottom line is don't bite off more than you can chew when it comes down to mortgages. Follow the market trends and be prudent. You will be fine.

That's true but if you have a mortgage at 3% and it renews at 10% did you take a small enough "bite"?

Choosing long term mortgages on the theory on the 'sky is falling' principal only makes your banker cream himself at night.

Jj

Yeah I was sad when I got my mortgage because I thought a thousand bucks a month was too much to pay for a place to live.

[double-j]

If you were to lock in at 9.65% monthy for a 25 year closed mortgage on 200k your interest... Only interest would work out to be..

Are you ready for this?!?

322612 IN INTEREST!!!

That does not include the 200k you paid off in principal!!

Just so you know, the last time the interest rate was close to 10% was 1991. 20years ago..

A fool and his money.. You know the rest.

Jj

[Hedley]

Can you run the numbers again for 20% inflation? IIRC I bought some Canada Savings Bonds in 1980 which returned almost 20%.

[double-j]

And what has Canada savings bonds brought you in the last, say 20 years?.

If you guys are so worried about events that happened over thirty years ago perhaps you should think about pulling out those dusty plans on building the bomb shelter in your back yard.

I am not here to school you on elementary economics. If you choose to lock in some ridiculous interest rate on the pie in the sky notion that things may collapse I will leave you to it.

Or maybe I should buy shares in second rate banks..

Jj

[Beefitarian]

JJ you have not used my favorite denial statement, "The banks don't want the mess they had in the 1980s when they forclosed on everyone and were stuck with all that real estate."

My second favorite was when during a chat the RBC lady was giving one of the guys asked if real estate was a good investment over the bonds that where rewarding at around 7%. She said, "Real estate's not bad but you'll never see the increase your parents did."

Buy shares in the right banks and dump them when they jump you'll make off like a bandit as long as you convert your booty to the right currency when a bunch of them go "Zimbabwe" soon.

If I were single I think I'd buy some cheap houses in LasVegas and rent them out as furnished vacation homes while I wait to see if sin city makes a comeback.

[helio]

http://www.chrismartenson.com/sites/all ... &width=760

Interesting info. I watched it two years ago and felt that it was worth another watch.

PHYSICAL silver = good

Morgaged real estate = bad

Interest rates will have to go up or our paper currency will go into hyper-inflation. Both Canada and the US have huge debt. Debt never ever seen before during any time. Look back to history to see what happens next then expect worse.

House prices will fall just like they climbed in the mid 2000's. Real estate is a huge bubble. When morgage rates increase and your morgage is now $500 buck more a month it will be hard to continue paying off a house that is now worth $60 000 less. We have been living in a time of wealth and goodness that is almost to hard to even see because we have been living it for so long. Its now time to pay for our weath. This is what happens when people choose debt. Saving used to be cool.....I don't know what happened.

There are a lot mainstream economists preaching this and have been for a while. I just don't see a way out. The math is elementary and this has happened with every fiat system.
Prepare for the worse hope for the best. Becoming a farmer and a member of the local gun club looks pretty good right about now.

[Dex]

I wonder if this is good for Canadians? That works out to around $1000 per Canadian citizen in the year 2010; just to get an idea. There was a surplus in 1991 though.... hmmmmm.


Canadian Trade Deficits with China
------------------------------
2010 $31.6 billion deficit
2009 $28.7 billion deficit
2008 $32.5 billion deficit
2007 $29.3 billion deficit
2006 $27.2 billion deficit
2005 $22.7 billion deficit
2004 $17.9 billion deficit
2003 $14.6 billion deficit
2002 $12.4 billion deficit
2001 $8.7 billion deficit
2000 $8.0 billion deficit
1999 $7.4 billion deficit
1998 $5.1 billion deficit
1997 $4.0 billion deficit
1996 $2.1 billion deficit
1995 $1.4 billion deficit
1994 $1.7 billion deficit
1993 $1.5 billion deficit
1992 $0.3 billion deficit
1991 $0.1 billion surplus

http://www.statcan.gc.ca/trade-commerce ... ee-eng.htm

[KAG]

An entertaining (but extremely important) video explaining our monetary system
http://www.youtube.com/watch?v=OYRdlegDYwo

[Mig29]

Great video Stewie!!!

Thank you!