First of all let's understand what stagflation is.
Most folks don't know and kind of gloss over the word when they see it in the newspaper or hear it on TV.
It is serious.
We went through it in 1973 - 74 and it caused the stock market to crash 40%.
Many businesses failed.
It means your 401K, your IRA or whatever long term savings/retirement plan you had was seriously hurt.
The stag part mean stagnant.
All business slows down.
The difference of now and 1970's is we are now in a global economy rather than just a U.
S.
economy.
You, Mr.
Consumer, have been providing 70% of the energy for our economy by overspending.
Much of the overspending came from borrowing on home equity, but that is long gone and will not be returning for many, many years.
The flation part of the word is from inflation.
Our great benefactor Uncle Sam is now telling us not to worry about inflation.
It is "only 2%".
And pigs can fly.
The inflation rate figured by the government is what they call a "core rate".
It does NOT include energy or food.
Such nonsense.
The real inflation rate from the statistics I have been able to gather is about 11%.
That's not a misprint.
Eleven percent.
But you know that if you heat or cool your home, drive a car or eat.
Along comes this smooth talker on TV, probably a well known movie actor who now says he is going to rescue you from debt and starvation by giving you an income every month based on the assessed equity in your home - an income for life.
A thousand or $2,000 every month.
Where do I sign? Whoa! Hold the phone.
Read the fine print.
You must maintain the property and pay the taxes as you have been doing.
Because tax revenues have been declining many counties are increasing real estate taxes.
Water and electric rates are going up.
Oh, and let's not forget that 11% inflation for food and energy.
If this keeps going (and it will) that specified amount you will receive every month will buy less and less.
What about a leak in the roof, a broken water pipe or the carpet needs replacing.
Don't forget your homeowners insurance.
The lender does not seem to realize you will not be able to maintain the property in its original condition.
When you leave the lender will acquire a property worth less than the original appraisal.
This is a lose/lose proposition for each party.
The borrower will have diminishing purchasing power and the lender will end up with a home less valuable than originally appraised.
Ask the smooth talker who wants you to sign away your home about a Cost of Living annual adjustment clause based on inflation.
Without that the reverse mortgage will guarantee you a diminishing life style.
If that clause is not in the contract do not sign.
Most folks don't know and kind of gloss over the word when they see it in the newspaper or hear it on TV.
It is serious.
We went through it in 1973 - 74 and it caused the stock market to crash 40%.
Many businesses failed.
It means your 401K, your IRA or whatever long term savings/retirement plan you had was seriously hurt.
The stag part mean stagnant.
All business slows down.
The difference of now and 1970's is we are now in a global economy rather than just a U.
S.
economy.
You, Mr.
Consumer, have been providing 70% of the energy for our economy by overspending.
Much of the overspending came from borrowing on home equity, but that is long gone and will not be returning for many, many years.
The flation part of the word is from inflation.
Our great benefactor Uncle Sam is now telling us not to worry about inflation.
It is "only 2%".
And pigs can fly.
The inflation rate figured by the government is what they call a "core rate".
It does NOT include energy or food.
Such nonsense.
The real inflation rate from the statistics I have been able to gather is about 11%.
That's not a misprint.
Eleven percent.
But you know that if you heat or cool your home, drive a car or eat.
Along comes this smooth talker on TV, probably a well known movie actor who now says he is going to rescue you from debt and starvation by giving you an income every month based on the assessed equity in your home - an income for life.
A thousand or $2,000 every month.
Where do I sign? Whoa! Hold the phone.
Read the fine print.
You must maintain the property and pay the taxes as you have been doing.
Because tax revenues have been declining many counties are increasing real estate taxes.
Water and electric rates are going up.
Oh, and let's not forget that 11% inflation for food and energy.
If this keeps going (and it will) that specified amount you will receive every month will buy less and less.
What about a leak in the roof, a broken water pipe or the carpet needs replacing.
Don't forget your homeowners insurance.
The lender does not seem to realize you will not be able to maintain the property in its original condition.
When you leave the lender will acquire a property worth less than the original appraisal.
This is a lose/lose proposition for each party.
The borrower will have diminishing purchasing power and the lender will end up with a home less valuable than originally appraised.
Ask the smooth talker who wants you to sign away your home about a Cost of Living annual adjustment clause based on inflation.
Without that the reverse mortgage will guarantee you a diminishing life style.
If that clause is not in the contract do not sign.