Good afternoon,

 

 

+++ A fun event to get involved in next year, if you like golf, would be the  2012 PGA Professional National Championship at Bayonet Black Horse Golf Course,

in Seaside, from June 24 through 27, 2012. I just sign up as volunteer...some good business opportunities can be found. This was revealed after I visited 2 Fairway Drive.  

A very well built home, it has a nice flowing floor plan, built with top quality materials. I visited a large number of properties in the Monterra area but I would put this new development

as a good investment opportunity...I will get more information. I heard that lots are selling for as low as $425,000...use to be $1M

 

If some of you are interested in the tournament here is the link https://ems.pgalinks.com/volunteers/index.cfm

 

+++As I was working on sharing my analysis from the book Aftershock by David Wiedemer, Robert Wiedemer and Cindy Spitzer with you,

I found out they are putting out a video. I did not pay to much attention to it, since the main job is to sell their own product, but the rest of the video

has a lot of good information, go check it out Aftershock

 

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The Dollar Bubble

Due to a rising bubble economy, investors from all over the world were getting huge returns on their dollar-denominated assets. This made the dollar more valuable

but also more vulnerable. Why? Because we didn’t really have a true booming economy underlying the growth, we had a multi bubble economy.

 

The Government Debt Bubble

Weighing in at more than $15 trillion by the end of 2011.

The whopping U.S government debt  is currently the biggest, baddest, and scariest bubble of all, relative to other bubbles in our economy.

Much of this debt has been funded by foreign investors, primarily from Asia and Europe.

 

All combined, America’s rising bubble economy helped boom the world’s rising bubble economy.

Once all six of our economy-supporting bubbles are fully popped, life in the post-dollar will be quite different than most analysts are now predicting.

It seems that the aftershock due to the last two will move quickly to the post dollar-bubble world. So although there is much more economic change ahead,

it will happen in increasingly shorter and shorter periods of time.

 

All loans made by lenders were repackaged and sold to investors as mortgage-backed securities…this is why you understand the complexity of the short sale…

We are not dealing with lenders but investors…but since lenders sold mortgage-backed securities to investors, lenders are now obligated to accommodate investors at their best.

 

The foreign and other investors considered them as secure as government bonds, but with a higher interest rate. The bond rating agencies, like Moody;s and Standard & Poors,

encouraged these sentiments by giving most of the bond packages their highest AAA rating companies which is the same as the U.S government.

The high rating was often required for many investment funds to buy the bonds.

 

But, as it turned out for Bear Stearns and the rest of Walls Street, making money by making bad investments and then selling those bad investments to another is

a very bad long-term strategy. Home prices cannot rise dramatically faster than income rise over any significant amount of time.

 

There are only two ways to get home values to rise again: Either re-inflate the bubble, which at this point is not possible, or have real economic reasons

for a rise in home prices, which currently do not exist.

 

Private debt bubble…now we actually think if an unqualified buyer cannot get a loan or cannot get the best rate possible, then we have a credit crisis.

 

When dollar bubble pops, we will mostly have a massive credit crunch., very few businesses or individuals will be able to get a loan at this point. More importantly,

not long after the dollar pops, the massive government debt bubble will burst and the U.S government will not longer be able to get credit either.

  

What is inflation? Inflation is an increase in the price of goods due to the dollar losing its buying power.

 

What causes the dollar to Lose Buying Power? It comes to the very same economic forces that set the value (or price) of everything: supply and demand.

The Fed can control supply of money by buying or selling bonds so it will help the economy grow without inflation.

 

As Inflation rises, so do the interest rates, and as interest rises, asset values fall. The only way you can get someone to lend you dollars is if you offer to pay them

an interest rate that at the very least compensates them for the inflation rate. Therefore, in time, interest rates tend to be a bit higher than the inflation rate.

 

QE “quantitative easing” in plain English it simply amounts to printing a whole lot of money

The plan from the Fed was to use QE1(in 2009 was $800 billions), QE2 (November 2010 another $600 billions) and few to follow to buy U.S mortgage and treasury bonds.

 

They are fully aware that massively increasing the money supply carries a potential risk of causing inflation and rising interest rates, but that is

a risk they are willing to take, rather than letting the stock market, real estate go down again.

 

Then the Fed is thinking that when the economy picks up again, they can eventually reduce the money supply by selling the bonds they bought with QE1, QE2...

taking the money “off the book” so to speak, thus reducing money supply before dangerous inflation and high interest rates can kick in.

 

When prices go up due to demand and supply, a shortage of supply will put price up but it is not inflation.

The true inflation occurs when the Feds increase the money supply at a faster rate then the economy needs it. As Nobel Prize-winning economist Milton Friedman said,

“Inflation is always and everywhere a monetary phenomenon,” meaning it can only be created by a central bank, such as the Federal Reserve, creating more money.

 

One of Nobel laureate Paul Krugman says a mere $2-3 trillion of additional money is nowhere near enough, we would need $8-10 trillion

of money printing to save our weak economy. Many experts like Krugman have the false idea that we are merely in a down market cycle and it is eventually followed by an up cycle.

 

But like many generals out of touch with some basics reality, many economic experts today are trying to fight the last war, the Great Depression,

while ignoring the current situation. Even modest money printing would have prevented the Great Depression.

 

Unlike 1929, today we have a falling multi bubble economy, and adding massive money printing to a falling multi-bubble (multi bubble) economy is like throwing time-release gasoline on a fire.

 

                                                    “Figures never lie, but liars always figure”

The Fed has changed the way of measuring inflation in 1990. Actually Alan Greenspan changed the way the CPI is calculated to lower its growth rate as well

as to reduce cost of living increases in Social Security Payments.

 

Wait! Didn’t we Survive High Inflation in the 1970s?

We did have significant inflation in 1970s and early 1980s but circumstances were considerably different. We didn’t have a bubble economy.

The Fed could reduce the money supply and raise interest rates substantially to reduce inflation.

 

Exactly When Will Inflation Begin?

The same people who are now saying that increases in the money supply will not cause inflation or will cause only mild inflation that can be easily controlled,

are the very same people who said housing prices could not fall significantly. Due to the “lag factors” it typically takes about 2 years from the time the money

supply  is increased, due to the way the Fed will use it  to hold off inflation, significant inflation will begin in 2013-2015 range.

 

The Deeper Causes of Inflation?

What economic forces have driven ours government in the last 50 years to increase their money supplies so massively and so fast?

 

To put it in three simple words, it’s a “failed tax system.” By failed tax system, we mean a tax system that does not collect enough taxes to cover government expenditures.

Of course, you could also say the problem is not due to taxes being too low, but due to spending to be too high.

 

From an economic standpoint borrowing money is more expensive than spending cuts or raising taxes, but it is much more politically saleable

 

Thanks and see you next week.

 

 

Christian Viollaz, Realtor