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How will banks handle my mortgage during Hyperinflation?

August 23, 2010 by  

Dear Bob,

Hi: An article I read that came from you talked about the falling value of the dollar. It made me wonder what would happen to a homeowner like myself when out-of-control inflation makes a situation that the dollar I repay as a monthly repayment on my home doesn’t satisfy the repayment value for the home.  How do the banks handle this type of situation? Many would be in same situation. Are we all on the street while many home are empty? There would be many of us that would not be able to fill a wheelbarrow of cash, plus I can’t imagine asking a government for a daily payment so as to buy food before it went up in price. What do you think?

Kind regards,

Dear Paul,

There is a difference between what happens with the falling value of the dollar and what happens in hyperinflation. The dollar has been losing its value slowly since the Federal Reserve instituted a fractional banking system. That’s because as more fiat (unbacked) dollars are printed the value of each of those in circulation is lessened. The dollar has lost about 95 percent of its value since 1910 (the Fed began in 1913). That is why you see rising prices in commodities. An ounce of gold will buy essentially what it would 100 years ago in terms of oil and commodities, yet it takes $1,200 to buy that ounce as opposed to $27 as in 1910.

In hyperinflation the cost of goods skyrockets. To keep up, governments print new currency adding zeros. Your salary as a worker would have to increase; otherwise you would not be able to afford essentials. In Weimar Germany during hyperinflation, workers were paid in wheelbarrows of cash and they would hurry to the store to buy bread before the price increased again. It was so bad that people were burning the equivalent of their $1,000 bills for fuel because that $1,000 bill was worth peanuts.

The good news is if you hold a mortgage with the bank that mortgage is going to stay the same. Say you owe $100,000 on your mortgage and your mortgage payment is $1,500 per month. In hyperinflation you will still owe $100,000 on your mortgage but your salary will have to increase in order to keep up with the cost of goods. So, if you are able to set aside a certain percentage of your rising income you should be able to pay off your mortgage sooner. The banks will be the loser in that case. However, the cost of all goods will rise exponentially in hyperinflation so it will continue to be difficult to buy all your essentials and have any left over, even as your paychecks increase regularly.

This is why we recommend you keep as little of your money in cash as possible. Keep enough in the bank to cover your monthly bills, keep enough to pay off a couple months worth of monthly bills at home, and put the rest in precious metals. Precious metals are going to be the only thing that has value when hyperinflation comes. We also recommend you store food, which can be bought relatively cheaply now as opposed to when prices start to rise, and guns and ammunition. These will be essential for survival and will also make good barter items when the crash comes.

Best Wishes,

Bob Livingston

is an ultra-conservative American and author of The Bob Livingston Letter™, founded in 1969. Bob has devoted much of his life to research and the quest for truth on a variety of subjects. Bob specializes in health issues such as nutritional supplements and alternatives to drugs, as well as issues of privacy (both personal and financial), asset protection and the preservation of freedom.

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  • Elaine

    That’s just fine…”your paycheck will increase to keep up with inflation, so you can payoff your mortgage sooner”…but what about those of us who are on a fixed income, (Social Security) which is broke NOW! We won’t get an increase, but most likely no check at all. Will we be able to pay our mortgage with an IOU???

    • Bob Jamieson

      Social Security in bankrupt, thanks to President Johnson who took the trust funds and put the cash into the General budget in exchange for a note. This has been going on ever since, and now President Clinton taxes our benefits. Remember, we paid into SS with after tax dollars and now we have to pay tax on it when we get it. It is bad enough that we only get pennies on the dollar, but it is a disgrace to what our government has done to the people. I should clarify that a little more, the Democrats (who have effectively been in charge of the Congress – they make the laws and spend the money) who have wasted away our future, and fixed income folks like us are damned as we would have to go back to work to catch up.

      The solution is for our country to do what the Constitution states. There is nothing in the Constitution nor Bill of Rights that permits foreign Aide, paying for illegal aliens (feeding their children, free medical, free school, etc,) and all the other social programs. These things fall to the States, and the main reason for the Federal side is to protect our citizens, from our enemies, foreign and domestic, to provide for justice in our court/legal system, support a Army and Navy, and basically to get out of our face and leave us alone.

      Then comes progressive socialism and the re-engineering of our education system. We need to get back to basics, teach our children the true history of America, protect our borders, and have term limits on politicians before they become totally corrupt.

  • Fred Rehders, Sr.

    Your getting an IOU now, in the form of a check. The system will work the same but the dollars will continue to purchase less and less the more the government prints and puts into circulation. After all, it’s only a paper Federal Reserve Note, which is in fact an IOU. I’m not sure if that means “I owe you”, but it won’t matter much, because it will be hard scrabble for all, even the best prepared. My great grandfather lost his farm in the last depression and farmers were much better off, than business men and office workers. Pray it doesn’t happen, but prepare like it’s inevitable.

  • Jo

    This has been on my mind. If the banks fail and the economy collapses, who will be around to foreclose on your home if you can no longer make payments. I am assuming more people than not will be in that boat.

  • Jack Dumbauld

    While guns gold and ammo are necessary things to stock up on, a long departed friend who was a child during the Great Depression told me that his father got anything they wanted by bartering with a room stockpiled full of booze.

    • Bob Jamieson

      I’d drink to that

  • Laurie

    I agree that if there is a collapse we will revert to a barter system. Things like cocoa and coffee would be good to stockpile as well. I’ve noticed a lot of communities have their own form of currency to encourage shopping locally.

    • Bob Jamieson

      AND remeber, the barter system is non taxable

  • gordy b rown

    1. Weimar, d.e., 1923,(fixed) mortgages easily paid off w/
    inflated currency.
    2. = ‘fiat money in france,’ 1 7 2 7, data says banks etc.
    asked for more money on loans, and/or (til banned) payment in p.
    3. see Zim bob wae: it limits atm w/drawals, etc. now
    4. =
    “worlds worst inflations” e.g. Hung. ’45 us$= 9 x 22 zero’s pengoes

  • Marine patriot

    If social security checks stop if my veterans disability stops if my union pension runs out of money there isn’t anybody taking my property or house without a fight and believe me I won’t be the one to loose. Stop giving all these foreign countries aid and take care of our own vote for Romney that’s at least a better choice than the Destroyer.Get rid of the ACLU and the Atheist non believers and bring back things like the pledge of allegiance, also drop the corporate tax and get our bussinesses back home. This will put people back to work and also take care of health care. One more thing put social security back the way it was suppose to be and left just for that!!!!

    • Libertarian

      Thomas Jefferson and a few other founding fathers were atheist. Read a book once in a while and you might learn something.

  • beth g

    Some may have been atheists, but they still believed in country, man and doing things that would benefit the new country. As for the GOD thing…they may have rethought this, since their friends did say GOD and country. Religious freedom, they knew all abut that…atheist or another religion….all free to practice…workng toward a common goal.


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