Hyperinflation questions and comments

[HSmomto4]

Thought we could have a thread just for this topic as well as we MAY be heading there.

I'll start:

If Hyperinflation happens will things like our house payment rise or will they remain the same? What about power bills and other services like that?

[BeNotAfraid]

If you have a fixed rate mortgage, it shouldn't rise, right? My guess is that utilities and such will rise. They will pass their costs on to us. They will have to increase wages in a futile attempt to keep up with inflation to keep workers on the job.

[BeNotAfraid]

http://www.usagold.com/germannightmare.html

[Rondaben]

Thought we could have a thread just for this topic as well as we MAY be heading there.

I'll start:

If Hyperinflation happens will things like our house payment rise or will they remain the same? What about power bills and other services like that?

I am going to assume a classical definition of hyperinflation as 50 percent per month or higher.

Fixed rate mortgages will maintain the same monthly payment as ever. Variable rate will adjust periodically as they are scheduled. Once the mortgage adjusts you will be paying the current rate unless there is a provision that limits the amount that the rate can go up in any one time period. Truthfully, mortgages will be unlikely to be your biggest concern because there will typically be a lag between the onset of hyperinflation and any adjustment to payment schedules.

Groceries, utilities, gasoline and all other consumables will adjust in price dynamically with the current rate of inflation. Salaries will lag behind but will also begin to increase dramatically and you will be payed much more frequently (perhaps several times per day). If you are able to maintain payments throughout this on your mortgage the amount you pay to the bank will be greatly decreased (you are using cheaper dollars to pay a fixed rate mortgage). The problem is that you won't be able to do this unless you have a relatively substantial next egg set aside right now. Once you get hit with higher food, utility, gasoline prices you will be unable to pay your mortgage and will default. The bank will speedily sieze the asset before it's book value declines even further.

[tygerkittn]

I am going to assume a classical definition of hyperinflation as 50 percent per month or higher.

Fixed rate mortgages will maintain the same monthly payment as ever. Variable rate will adjust periodically as they are scheduled. Once the mortgage adjusts you will be paying the current rate unless there is a provision that limits the amount that the rate can go up in any one time period. Truthfully, mortgages will be unlikely to be your biggest concern because there will typically be a lag between the onset of hyperinflation and any adjustment to payment schedules.

Groceries, utilities, gasoline and all other consumables will adjust in price dynamically with the current rate of inflation. Salaries will lag behind but will also begin to increase dramatically and you will be payed much more frequently (perhaps several times per day). If you are able to maintain payments throughout this on your mortgage the amount you pay to the bank will be greatly decreased (you are using cheaper dollars to pay a fixed rate mortgage). The problem is that you won't be able to do this unless you have a relatively substantial next egg set aside right now. Once you get hit with higher food, utility, gasoline prices you will be unable to pay your mortgage and will default. The bank will speedily sieze the asset before it's book value declines even further.

We have about two years worth of food, and for utilities we have planned to cut them on for 3 or 4 hours a day, maybe 6-9 pm, get everything done, (baths, dishwashing, baking, etc) and then cut them off to avoid waste, I don't know how well that will work, but it should help. We'll use the refrigerated food before going to our food stock, or we can keep the circuit with the fridge running, if necessary.
Does that mean we should be able to use our inflated dollars to pay off our deflated debt? Gas won't be an issue, DH works close by and could ride a bike if necessary.

[jds6958]

I am going to assume a classical definition of hyperinflation as 50 percent per month or higher.

Fixed rate mortgages will maintain the same monthly payment as ever. Variable rate will adjust periodically as they are scheduled. Once the mortgage adjusts you will be paying the current rate unless there is a provision that limits the amount that the rate can go up in any one time period. Truthfully, mortgages will be unlikely to be your biggest concern because there will typically be a lag between the onset of hyperinflation and any adjustment to payment schedules.

Groceries, utilities, gasoline and all other consumables will adjust in price dynamically with the current rate of inflation. Salaries will lag behind but will also begin to increase dramatically and you will be payed much more frequently (perhaps several times per day). If you are able to maintain payments throughout this on your mortgage the amount you pay to the bank will be greatly decreased (you are using cheaper dollars to pay a fixed rate mortgage). The problem is that you won't be able to do this unless you have a relatively substantial next egg set aside right now. Once you get hit with higher food, utility, gasoline prices you will be unable to pay your mortgage and will default. The bank will speedily sieze the asset before it's book value declines even further.

Good post!

Do you believe that some legislative action may pass to delay forclosures for 90 days after default? Isn't there something in the works now?

What about litigation surrounding forclosure? Isn't that another opportunity for delay? Mortgage companies may not even be able to produce proof of deed in the courtroom and one may realize property windfall gains as a result. It has happened recently.

These are all what ifs but also something to keep in mind.

You are correct though from what I have read about other hyperinflation scenerios throughout history. There will be a "crunch" period where consumers will have a very difficult time making ends meet (worse than now) because of inflation. Once it acheives critical concern demands will be made to employers to increase wages. Then as I understand it wage inflation begins (I would imagine that this would have to be supported somehow by the Fed to generate the cash necessary). Once wage inflation begins inflation really accelerates from there. This is where it may be easier to begin to pay off the fixed debt.

[chel0524]

This actually makes me feel a little better about our mortgage. I have been worrying myself sick about it. That is really the only debt we have other than a few medical bills. Those would certainly fall by the wayside!

If we can all stock up on food and supplies now, we'll be much better off so that we can maintain our mortgage payments which may be the only stableized bill that we'll have.

Praying for all of us here that the Lord leads us to do what is best for whatever situation each of us is in.

[Servant4light]

From the USA Gold article

"Once a snowballing financial and economic deflation gets underway, it could develop with breathtaking speed. Soon the government, instead of worrying about inflation, would be using desperation measures to halt the collapse, even if it had to run budgetary deficits of 100 billion or more. In the short run, in a pragmatic sense, Washington would simply feel that it was tackling an overriding emergency, relieving hardship, etc. In the long term, what it would be doing was to inflate up to the point where most of the huge debt burden was wiped out, and a fresh start could be made. Of course, this would be at the expense of millions of savers who would lose most of their capital. Hopefully the expropriation would be less drastic than it was in Germany."

Does that sound familiar or what?

[Tammy]

chel0524 I was thinking the same thing. If we have the extra food now and maybe cut our elec. like tygerkettn said maybe we will be able to make the house payment. We have a mortgage payment and a Harley payment. We will be paying the Harley off in about two months (2 years early). I would like to keep that just because of gas being so high.

[Rondaben]

Does that mean we should be able to use our inflated dollars to pay off our deflated debt?

That would be ideal if you can manage your expenditures otherwise and stay current with your mortgage. Most people living paycheck to paycheck that are overextended and have made no preparations will be pinched from increasing costs. They will likely default on homes before inflated wages can allow them to pay it off.

Do you believe that some legislative action may pass to delay forclosures for 90 days after default? Isn't there something in the works now?


Personally I believe that there will be some type of legislation to "help" homeowners in trouble. It will have to be a Federal response, however, because of the scale of the problem that is coming. Quite honestly i see HUD/Freddie/Fanny stepping up and taking on the mortgages. The net effect is that public property will be nationalized (legally owned by the government) at a rate and a scale neverbefore seen. Think of it as backdoor imminent domain where they get your property for pennies on the dollar to "save you" from foreclosure by those big mean ol' banks.

And if you own your own property outright? good luck paying your property taxes if you have no means/money/savings. Then they can just outright sieze it for delinquency.

What about litigation surrounding forclosure? Isn't that another opportunity for delay? Mortgage companies may not even be able to produce proof of deed in the courtroom and one may realize property windfall gains as a result. It has happened recently.

Agreed...currently this is an option to delay a foreclosure because of how CDOs have clouded ownership/lienholder status on mortgages. Once the Feds assume ownership of those mortgages that tactic will no longer work as it will only take a stroke of the pen (legislatively) to make it impossible for you to sue the Feds.