Mortgage Meltdown: Local Government Meltdown and Benefits


How to Benefit from the Mortgage Meltdown:

Tax assessments are heading south along with home valuations — at the moment. Price declines from lower demand and oversupply will continue in many places for years to come. 

If the experts are right, the first thing we can already see happening is that revenues from taxes based upon real estate valuation are declining and will decline by at least 15% by end of 2008, joined by decreasing revenue from issuing permits for new construction and all the administrative fees that go along with new construction, old construction, filing fees for deeds and mortgages etc.  

One ray of sunshine is that inflation has begun its launch into the twilight zone. As the value of each dollar goes down, that means it will take more dollars to buy something than it did yesterday. That means the absolute dollars in price and valuation will start to increase. If you know the dollars are worth less than yesterday, you will ask for more today when you sell your labor or even your couch at a yard sale.

So we have two opposite forces at work on prices here. One is a loss of demand and continuing oversupply causing what would ordinarily be a net loss of valuation and a net loss of tax revenues, and the other being inflation which will cause the price and valuations of things to buy or sell to go up in absolute dollars. Those dollars are becoming worth less and less as time goes on, so people are demanding more and more of them as payment for goods, services and taxes. 

Cities and Counties who assess real estate taxes expressed as a percentage of valuation will most likely see some relief. Hyper-inflation, expected by mid-2008, will result in much higher “prices” (expressed in dollars of declining value). 

While contracts and employment compensation will eventually be tied to some inflation index that people trust (not the CPI or PCE),  the lag time between the increased valuations and revenues resulting from inflation and the payment of contracts and compensation based upon older fixed dollars will produce a net gain for local government — and individuals. It could amount to a “windfall.” 

Consumers and borrowers can take a hint from all this. The price everything is going to increase exponentially while we take the hit from hyper-inflation caused by the largest case of economic fraud in world history. 

But your mortgage, consumer loans, lease and other contracts are expressed in old dollars: these are dollars that were worth far more then than they are now and dollars that will be worth far less in another year or two. 

It behooves you to take advantage of this bounce by going after compensation based upon fixed dollars adjusted monthly for inflation (resulting in receiving more dollars that are worth less) and paying old debts and payables in their original fixed amounts which have been devalued along with the dollar.  

Yes, it is complicated. But we all have an opportunity to game the system and get back part of what we will be losing as a result of the criminals who created this mess.  



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