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Paper Money Will Be Worthless?

March 8, 2010 by  

Dear Bob,

If, as stated in your summary report of the pending economic crisis (Surviving A Global Financial Crisis and Currency Collapse), paper money will be worthless because it is not backed by gold or silver, how will one be expected to pay their loan payment or utility bills? I have my paychecks automatically deposited and the same with my monthly pension payment. Are those checks supposedly worth anything during the economic collapse and what will the banks do with them? Could I become a victim of the system and lose my home because nothing I have to pay my mortgage with will be considered of any value? I really feel that there isn’t much I can do to prevent a lot of this because every source of income I have may have no more value than paper money. I don’t have a huge stash of gold and silver coins and it’s a little late and way to expensive to consider buying enough to make mortgage payments with. Any advice you can offer would be appreciated.

Ted Smith

Dear Ted Smith,

In the last days of the system, as its collapse is occurring, you will still have to make payments with cash or checks based on the inflating fiat currency. So you will have to exchange your gold and silver for paper. In Weimar Germany people were being paid with wheelbarrow loads of cash then rushing to the store to buy bread before the price rose again. I expect something similar to occur here. The key is to have something on hand for after the system collapses so you can continue to buy what you need.

Best Wishes,
Bob

Bob Livingston

is an ultra-conservative American who has been writing a newsletter since 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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  • http://none Bill Good

    Bob,
    Regarding your Mar. 8th reply to Ted Smith regarding worthless currency.
    I have purposly not paid off my house loan,(I could), with the plan to pay it off with inflated currency. (which has been the case for many years now) Are you saying my fixed payment, paid religiously for many years could be legally increased by the loan company to the actual inflated value? If so, I need to pay it off, huh?
    Bill Good

    • pauline bergeron

      yes Bill , you need to pay off your mortgage…all your paper money will be worth pennies so it will take more of them to pay your mortgage when the crisis hits. thats why everyone needs to get out of as much debt as possible NOW and if possible then buy up as much precious metals as you can…this is for the average joe out there.

      • 6079smithW

        Your fixed mortgage payment can’t change, period. Inflation is GOOD for people who owe fixed debt payments. Pauline Bergeron’s answer is COMPLETELY WRONG.

        • http://www.boblivingstonletter.com/ Bob Livingston

          Dear 6079smithW,

          You are absolutely correct.

          Best wishes,
          Bob

      • http://personallibertydigest Jennifer Swanson

        Pauline I read your advice to someone and was wondering if you could advise me on what to do with our 401k? Where do you purchase golddand silver? And what do you do with it when you purchase it? I hope this isn’t too much to answer in an email.
        Thank you,
        Just looking for answers.
        Jennifer

      • Edeter

        Bob –

        You really should step in on this and clarify for our readers here that 6079smithW has it right, and Pauline Bergeron, wrong.

        Indeed, it is a great/great idea to be up to your ears in dollar-denominated debt should the gov go even more bonkers and turn the printing press on full steam (for so long as that steam remains). “Inflation,” by definition is “any increase in the supply of money, or credit, or both … inflation always and everywhere eventually results in higher prices.”

        It is essential to note that “inflation” does not equal “price rise.” It is the government that inflates the money supply; it is the market that responds to such irresponsible action by an increase in prices, to compensate.

        N.b., prices go up because there are more pieces of paper chasing the goods available for sale. As the number of pieces of paper increases, the paper pieces are, each, worth less; so, it takes more of them to buy the unchanged (in the short run) supply of goods, which do have a real value. People eat food. They don’t eat paper.

        Food has intrinsic value; money only has value that is inversely proportional to the amount of it that government prints. The more it prints, the less value money has, the more of it takes to buy things of real value, like food. So, prices go up for things of real value as the value of money goes down, as more and more of it is printed. The only difference between $2 and $20 hamburgers is that the $20 hamburger was purchased with dollars, each worth 1/10th the value of those dollars used to purchase the $2 hamburger. The hamburgers are identical in value; the dollars are not.

        The trick is to contract for a future deliver of hamburgers at $2 so as to still be getting them for that price when the nominal price increases to $20, as a result of there being more and more dollars, each worth less and less in terms of valuable commodities, e.g., hamburgers, or gold, or silver, or moon rocks, or, and yes, real estate.

        By debasing currency, government transfers real wealth and purchasing power from savers to borrowers, from the future to the present, from those who use the debased currency to those who print it, and from abroad to the country of issue.

        So, yes, it is a great idea — if you believe our government will continue to debase the dollar — to get up-to-our ears in dollar-denominated real estate debt. We get control over real assets in perpetuity, in exchange for ever worth less, perhaps even worthless dollars, in the future. Dollars are, after all, “legal tender for all debts public and private.”

        So, Bob, please speak up. If you’d like, I can scan and forward to you mark notes from the Weimar Republic. In those days of galloping inflation, they would date the bills! And, with time, the bills became mono-color, smaller, and then, printed on but one side.

        As Ludwig von Mises is said to have observed that — “Government is the only social organism known to man that can take a valuatble commodity such as ink, and a valuable commodity such as paper, and by the simple application of the former to the latter, render the both, worthless.” Personally, I think you can bank on that. Well, so long as it’s not a savings account, that is!

        Best regards,
        Edeter

    • http://www.boblivingstonletter.com/ Bob Livingston

      Dear Bill Good,

      If you believe that hyperinflation is on the way, as I do, then hold off on paying off your debt. Your mortgage payment is fixed and will remain fixed no matter how many zeros government has to add to currency as it debases it.

      Best wishes,
      Bob

      P.S. See Edeter’s post below for a more thorough explanation.

  • Qaz

    Signs of 10%/y “latent” inflation (as tracked by several highly credible news letters–sorry, I lost the links) may portend inflation well above the IMF’s 4%/y target. The U.S. Fed./Treasury’s sad history-tested campaign to reflate the economy strongly favors borrows (e.g., both home borrowers & the World’s largest borrower, Uncle Sam interests) over lenders (e.g., Japan, Canada, & China) because borrowers get to repay lenders in cheaper dollars. 6% inflation would equate to 6% per annum P&I debt reductions, fully offsetting a home-owner’s 6%/y deductable interest costs (not bad, it would seem, for homeowners). “Successfully”- reflated economies, however, generate no jobs or wealth, while feeding bubbles (e.g., sovereign bond markets) and hastening economic collapse. I trust these letters – by John Mauldin, frontlinethoughts.com; Martin D. Weiss, weissinc.com + moneyandmarkets.com; & worldcurrencywatch.com.

  • http://ordy@fedtel./net Eric g

    generaly Ted if he keeps his Job should be able to still make his payments . It should be kinda nice for Ted to take his worthless money and make his payments . IF HE CAN KEEP HIS JOB ? The money may become worth less but many places our money is worth more not less . If the government had not steped into our economy in a big way I think our money would have been worth a lot , but maybe not our banks or even our government .
    Over priced houses on the coasts are actually worth less not more . IN years past sometimes we had variable intrest rates , I got cuaght on a couple of these back in the early eighties paying 20% intrest. Thats like paying for your house in 5 payments and still owing the purchase price of the property . In life their are always some surprises . Some of them are good and some are bad . Don’t be to afraid

  • jimjimny

    Hey! Folks it is the real interest rate that drives business. US business should be starting to grow rapidly as should Canada. The Chicago School economists are reverse Keynesians as the fondly think the market can be controled by controling inflation. Canada has a target set at 2.5%. Now given a freehand all this stimulus spending should create inflation negative interest rates should ensue as happened in the 70′s. Real fortunes can be made during times of negative real interest rates but the centeral banks are determined to choke growth by raising rates. Controlling the housing market with interest rates is very damaging to the overall economy

  • Ed Taz

    I believe the biggest problem in our country is that people are reactive and not pro-active. Example: when we see changes in our economy and election of liberals, we should know we are in trouble. Don’t wait until the crisis hits us in the face. I had the good fortune and sense to pay off my home loan, car loan, everything several years ago because I like to deal with problems before they happen. I saved thousands of dollars of mortgage interest because my savings were paying 1-2%. When CD’s were paying almost nothing,when they came due..I bought gold. Thanks to God’s blessings I have been able to provide for my family. Folks be Pro-Active now. Ed

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