I have written a few pieces on the future of the American economy, reverse interest rates, and other futuristic depressing economic predictions. Basically, what is happening in Japan could happen in the United States and it looks like we are going down the same path, but are behind by a few years.
Japan’s Bubble & Our Government’s Borrowing Habit
Japan had a huge Real Estate bubble about 25 years ago. The bubble crashed, but prices never went back up again. They went down and down and down slowly and still continue to go down. The government is borrowing all of the available money for its humongous national debt. Interest rates are also negative. But, it seems to me that regular folks are not allowed to borrow or not borrow that much. The same situation is happening here, only not as severe. As our government’s debt gets higher and higher, banks will have to artificially keep interest rates low (they have been doing this for a few years now it seems) otherwise Uncle Sam will be out of business which means that we all will be out of business too or would have to pay 30% extra in taxes which would ruin the econony.
Your Home Will Lose Value
As the government’s debt gets higher, interest rates could become artificially lower so that the government could stay afloat without issues. This means that banks will have less money to lend to borrowers. That means that they will have less money to pay if bidding on your home which means your home’s value should be going down little by little over the next thirty years. The problem with this is that you will lose most or all of the equity in your home little by little over decades and be left with little or nothing when it is time to retire.
It doesn’t make sense to put all of your assets in your home like middle class people have done for generations. It makes more sense to keep your wealth in gold, land, cash in the bank, as well as very stable stocks such as blue chips, etc. These types of investments would be more stable than a home in a bad depression and will survive economically upside down times.
Surviving Being Upside Down
Prepare for upside down conditions. It’s happening already in Japan. The problem is, it could wipe you out. After people are stripped of their life savings that was stored in the equity of their homes, if the economy tanks on top of that, then you would be out on the street. So, be prepared, and try to act sensibly to protect your family from the inevitable. If you own a house, do it the Christian way — pay for it in cash or pay your loan off completely. Borrowing is forbidden in several religions as it leads to economic slavery, multinational financial collapses (Greece, Portugal, and soon us) as well as upside down consitions. The secret to survival is to not be a part of this insanity and keep your wealth in solid assets without borrowing!