The Current Economy, Foreclosure, and You

With the recent cut in interest rates by the Federal Reserve, the value of the dollar has dropped further and prices for oil and precious metals (such as gold and silver) have risen. Although the Fed will claim there is "low" or "no" inflation, everyone who eats food or drives a car will soon experience how untrue this statement will be. Every consumer, especially homeowners already in danger of falling behind on their bills, really needs to begin to establish some sort of backup plan, in case the wheels do come off the roller coaster we call the economy. Most of those rising prices we will be noticing in the very near future are from the drop in the value of the US dollar, not really an increase in the price of oil or food.

Months ago, the Fed pumped several billion dollars of newly printed money into the market to revive the economy from the collapse of the subprime mortgage industry. This is pure counterfeiting of money and steals the purchasing power out of the pockets of citizens, while investors and large banks and hedge funds get to use the money first. That is why investors on Wall Street see increases in stock values and think this is a good sign for the economy, whereas common people see increases in the cost of everything they buy and realize they can not keep up with the increases for much longer. Many of them may be forced to consider bankruptcy or other options to prevent foreclosure.

Stock prices can rise 6 or 8 or 10% annually with newly printed money continually injected into the economy. The Fed fudges the actual inflation numbers, declares the inflation rate to be at 2% or nonexistent, and every investor believes he has made 4-8% profit over the rate of inflation. Of course, the Fed's core inflation rate does not take into consideration energy or food prices, which take up huge amounts of consumers' budgets, and which have risen much faster than 2%. Homeowners in Michigan are experiencing their own economic recession, while more affluent communities are not hit as hard.

Possibly the best thing for common people (like almost all of us) is to have some extra backups in case things get tough for a few months. That might mean investing in silver/gold, or having an extra month's food supply on hand, or having 3-6 months of income in an emergency fund. This is especially important as the US moves into the winter months, which brings along higher energy costs in the form of home heating bills. Even if nothing happens system-wide to shock the economy, this planning can really help every consumer get through a temporary hardship. Just as no one can accurately predict the future course of the economy, it is no easier for families to predict a financial crisis, such as a sudden medical expense.

Another good reason to have this kind of backup plan is if there is some sort of natural disaster (Katrina style hurricane, San Diego style wildfires, etc.). Does any homeowner really want to have to make his way to the nearest large stadium for FEMA-administered starvation and disease, with all of the loss of civil liberties and freedom this entails? Or would the family rather be able to survive on their own even for just a few weeks until the crisis has passed and they can start working on rebuilding and recovering? Especially with all of the foreclosures that happened in the region after Katrina and the hurricane season, it would be a good idea to have some sort of plan in case things go very wrong.

But becoming more and more self-reliant will help every homeowner to ignore what the Fed and the markets say and do. We can not control them, and it would be a mistake to try to do so. All homeowners can work on is their own family's financial situation and what their plan will be if something happens. Simply planning for the possibility of foreclosure can mean that it never becomes an issue to begin with. Likewise, not planning for such a financial crisis almost guarantees that any setback can push the homeowners straight into missing bill payments, considering filing bankruptcy, or facing the danger of losing their homes due to an entirely avoidable foreclosure.