What Happens When A Paper Currency Fails?

[neilgin1]

this is a historical occurence i just learned now...oh boy, things could get hairy.

again, from zerohedge

http://www.zerohedge.com/contributed/wh ... ency-fails

not a pretty story.

[argent_pur]

"Dollarization" has occurred several times in many countries when their currencies were in trouble,and it seemed to bring about stability. If the USD were to collapse, what currency would we switch to? Will the USA be "silverized" or "golderized"?

[neilgin1]

"Dollarization" has occurred several times in many countries when their currencies were in trouble,and it seemed to bring about stability. If the USD were to collapse, what currency would we switch to? Will the USA be "silverized" or "golderized"?

more like martial law...in the best of times, folks trample one another when they have sales at big box stores, so in the worst of times...?

[Pennybug]

There MAY be one REAL silver lining to this scenario for those of us who are preparing for it...

IF this were to happen... I believe that a mortgage would still be based on the old currency "value" (since it was a contractually agreed upon dollar amount). Therefore... if the US dollar became a 10:1 ratio fairly quickly, you'd be able to pay off a 100K loan effectively for 10K. Now... let's say that silver is around $500/oz then (probably plausible)... if you had bought 10K of silver at the $50/oz... you could effectively pay off your house. In fact... if this is a realistic scenario... it makes right now a GREAT time to buy a house (since you can pick up a GREAT $200K plus valued house for around $100K). You would effect buy a house right before the collapse of the US dollar for much less than the value of the dollar at the point before the collapse.

I don't mind saying that this is the plan I'm about to pull the trigger on within the next two weeks.

The question I have though is what will happen to mortgages during a time like this? Will folks keep paying on their houses? Will foreclosures keep occurring if not?

Neal... I'd be quite interested in hearing your thoughts here...

[whatsnext]

The aurthor missed a mark trying to make stuff sound so bad.

The buses couldnot run because they could not collect money? What foolishness!

You collect the fare when boarding or departing.

Oh no how do we get the money George Duuuuuuhhhhhh There aint no room to squeeze.

Sorry, but he could do better.

[beauanderos]

The aurthor missed a mark trying to make stuff sound so bad.

The buses couldnot run because they could not collect money? What foolishness!

You collect the fare when boarding or departing.

Oh no how do we get the money George Duuuuuuhhhhhh There aint no room to squeeze.

Sorry, but he could do better.

You are naive. The author was not writing a story... "what if." He was recounting actual events that occured. An attitude such as yours, belittling a sound attempt to exhort people to a consciousness inciting a more preparatory state, is destructive and counter-productive. We have free speech in this country, but this is a prime example of "it is better to be thought a fool, than to open one's mouth and remove all doubt." Enough said. From the article "About this time there occurred a tragic incident. As usual, pensioners were waiting in line. Someone passed by the line carrying bags of groceries from the free market. Two pensioners got so upset at their situation and the sight of someone else with groceries that they had heart attacks and died right there." This gives rise to thoughts I have envisioned during such worst case scenarios... and that is: who would be foolish enough to walk down the street with full bags of groceries? They would be subject to immediate mugging. Morality departs when starvation encamps. We already have the forerunner of this tableau NOW, as multiple beggars stand on nearly every street corner with signs lamenting their (some dubious?) plight. And who hasn't been accosted in a bank parking lot by some waif with a plaintive plea? Should this happen... THEY won't be asking, they'll simply take. Pray to God this never happens, and should it occur... hide all signs of your wealth if you are out and about, so as to minimize the temptation for others to consider you a worthy target. The games the think-tanks review consider the possibility that in such scenarios some police would become a self-directed (armed) group of vigilantes out for their own ends, no longer aiming to serve the public... but aiming, instead, AT the public.

[shinnosuke]

The aurthor missed a mark trying to make stuff sound so bad.

The buses couldnot run because they could not collect money? What foolishness!

You collect the fare when boarding or departing.

Oh no how do we get the money George Duuuuuuhhhhhh There aint no room to squeeze.

Sorry, but he could do better.

You are naive. The author was not writing a story... "what if." He was recounting actual events that occured. An attitude such as yours, belittling a sound attempt to exhort people to a consciousness inciting a more preparatory state, is destructive and counter-productive. We have free speech in this country, but this is a prime example of "it is better to be thought a fool, than to open one's mouth and remove all doubt." Enough said. From the article "About this time there occurred a tragic incident. As usual, pensioners were waiting in line. Someone passed by the line carrying bags of groceries from the free market. Two pensioners got so upset at their situation and the sight of someone else with groceries that they had heart attacks and died right there." This gives rise to thoughts I have envisioned during such worst case scenarios... and that is: who would be foolish enough to walk down the street with full bags of groceries? They would be subject to immediate mugging. Morality departs when starvation encamps. We already have the forerunner of this tableau NOW, as multiple beggars stand on nearly every street corner with signs lamenting their (some dubious?) plight. And who hasn't been accosted in a bank parking lot by some waif with a plaintive plea? Should this happen... THEY won't be asking, they'll simply take. Pray to God this never happens, and should it occur... hide all signs of your wealth if you are out and about, so as to minimize the temptation for others to consider you a worthy target. The games the think-tanks review consider the possibility that in such scenarios some police would become a self-directed (armed) group of vigilantes out for their own ends, no longer aiming to serve the public... but aiming, instead, AT the public.

Remember how some police acted in New Orleans, after Katrina, looting the Wal-Mart with a "my what a fine day for a stroll" look on their face even when captured on videotape by a film crew from the local TV station? Shudder to think how things will turn out when things get really tight.

[Sheikh_yer_Bu'Tay]

The aurthor missed a mark trying to make stuff sound so bad.

The buses couldnot run because they could not collect money? What foolishness!

You collect the fare when boarding or departing.

Oh no how do we get the money George Duuuuuuhhhhhh There aint no room to squeeze.

Sorry, but he could do better.

You are naive. The author was not writing a story... "what if." He was recounting actual events that occured. An attitude such as yours, belittling a sound attempt to exhort people to a consciousness inciting a more preparatory state, is destructive and counter-productive. We have free speech in this country, but this is a prime example of "it is better to be thought a fool, than to open one's mouth and remove all doubt." Enough said. From the article "About this time there occurred a tragic incident. As usual, pensioners were waiting in line. Someone passed by the line carrying bags of groceries from the free market. Two pensioners got so upset at their situation and the sight of someone else with groceries that they had heart attacks and died right there." This gives rise to thoughts I have envisioned during such worst case scenarios... and that is: who would be foolish enough to walk down the street with full bags of groceries? They would be subject to immediate mugging. Morality departs when starvation encamps. We already have the forerunner of this tableau NOW, as multiple beggars stand on nearly every street corner with signs lamenting their (some dubious?) plight. And who hasn't been accosted in a bank parking lot by some waif with a plaintive plea? Should this happen... THEY won't be asking, they'll simply take. Pray to God this never happens, and should it occur... hide all signs of your wealth if you are out and about, so as to minimize the temptation for others to consider you a worthy target. The games the think-tanks review consider the possibility that in such scenarios some police would become a self-directed (armed) group of vigilantes out for their own ends, no longer aiming to serve the public... but aiming, instead, AT the public.

Remember how some police acted in New Orleans, after Katrina, looting the Wal-Mart with a "my what a fine day for a stroll" look on their face even when captured on videotape by a film crew from the local TV station? Shudder to think how things will turn out when things get really tight.

Ahhh! You beat me to it! Ditto!

[OneBiteAtATime]

Thanks for the link, neil, this isn't terrifying at all!



I wonder if anyone has written a book about the average middle class family experiencing this madness. Their experiences, rememberences, regrets, etc. What they would have done differently as far as preps, and how to behave, Did they lose their humanity as describer above in the new orleans example. Does anyone know of some books from this experience or others like it?

[beauanderos]

Thanks for the link, neil, this isn't terrifying at all!



I wonder if anyone has written a book about the average middle class family experiencing this madness. Their experiences, rememberences, regrets, etc. What they would have done differently as far as preps, and how to behave, Did they lose their humanity as describer above in the new orleans example. Does anyone know of some books from this experience or others like it?

Start studying hyperinflation, and check the references of the better articles.

[Sheikh_yer_Bu'Tay]

Thanks for the link, neil, this isn't terrifying at all!



I wonder if anyone has written a book about the average middle class family experiencing this madness. Their experiences, rememberences, regrets, etc. What they would have done differently as far as preps, and how to behave, Did they lose their humanity as describer above in the new orleans example. Does anyone know of some books from this experience or others like it?

There are many books about people in Europe prepping just before WW2. One that impacted me most was about a Dutch family that had a small garden plot generations old. Each generation had added organic compost to the soil and by WW2 it had an incredible amount of organic carbon compounds in it. It is that small garden plot that saved them all from starvation.

[moparal7]

Remember those that who do not learn from history are doomed to repeat it. Weimar Germany,Rhodesia. and Argentinia are a few examples of what happened.Education is the key but history is rarely taught anymore and the bulk of the American public,Realcenters excluded, are as smart as a box of rocks about our monetary system.

[njoElec]

Remember those that who do not learn from history are doomed to repeat it. Weimar Germany,Rhodesia. and Argentinia are a few examples of what happened.Education is the key but history is rarely taught anymore and the bulk of the American public,Realcenters excluded, are as smart as a box of rocks about our monetary system.

+1!

[whatsnext]

Wow I 'm a fool for not believing that [shucks]. Sure based on reality but added drama for consumption.
Zerohedge drama queen news.

Call me a fool all you like oh wise sage.

[beauanderos]

Wow I 'm a fool for not believing that s--t. Sure based on reality but added drama for consumption.
Zerohedge drama queen news.

Call me a fool all you like oh wise sage.

your words speak for themselves.

[avidbrandy]

There MAY be one REAL silver lining to this scenario for those of us who are preparing for it...

IF this were to happen... I believe that a mortgage would still be based on the old currency "value" (since it was a contractually agreed upon dollar amount). Therefore... if the US dollar became a 10:1 ratio fairly quickly, you'd be able to pay off a 100K loan effectively for 10K. Now... let's say that silver is around $500/oz then (probably plausible)... if you had bought 10K of silver at the $50/oz... you could effectively pay off your house. In fact... if this is a realistic scenario... it makes right now a GREAT time to buy a house (since you can pick up a GREAT $200K plus valued house for around $100K). You would effect buy a house right before the collapse of the US dollar for much less than the value of the dollar at the point before the collapse.

I don't mind saying that this is the plan I'm about to pull the trigger on within the next two weeks.

The question I have though is what will happen to mortgages during a time like this? Will folks keep paying on their houses? Will foreclosures keep occurring if not?

Neal... I'd be quite interested in hearing your thoughts here...

This is why I bought my house in june despite having several months left in my current lease. I got my interest rate at 4.75%, and if we have some nice inflation it'll work out really well.

[theo]

Although technically you are correct, I doubt our banks or the government will make things that easy on us. Below is something I posted in another thread and beauanderos' reply. Obviously they will try something so it may not be the best idea to wait too long to pay off your debts in the devalued currency.


"My concern is if there is a currency collapse, mortgages will be re-formed in mass to be in "new" dollars (each worth 10 old dollars). This kind of event would, of course, send just about everybody into foreclosure. However by that time the banks will want your property (with you as a serf on it) far more than a pile of worthless paper. And before you say, "They can't legally do that!" ask yourself; which line in your mortgage contract would stop them? The mortage contract vaguely states that your mortgage is to be paid in dollars. However, if the current dollar is destroyed then the banks will argue in court (successfully IMHO) that the contract would automacally switch to "the legal tender of the nation" which will be the "new" dollar. "


by beauanderos » Fri Jul 29, 2011 5:40 pm

"I have read more than a few contributions by various writers who know someone in the legal depts of some of the big banks. If there is a hyperinflationary event they plan to enforce mortgage loan modifications which would take away the "advantages" of paying strong debts with weaker dollars... so that they stay even, but you lose. They KNOW this is going to happen, you can be sure they have planned contingencies to ensure they aren't ruined by it."

[Thogey]

Agreed.

The dollar has been collapsing since the FRN was created, even before. Just look at how copper cents have diminished in weight over the past centuries. It's like watching train wreck in slow motion.

Please don't count on your debt being monetized by a currency revaluation.

Any revaluation will be coordinated to the banks favor. If this does not happen, it will portend a total collapse of economic structure. A mad max scenario that, may I be so bold to write, none of us are prepared to deal with.

I'm paying off my debt now.

[beauanderos]

Agreed.

The dollar has been collapsing since the FRN was created, even before. Just look at how copper cents have diminished in weight over the past centuries. It's like watching train wreck in slow motion.

Please don't count on your debt being monetized by a currency revaluation.

Any revaluation will be coordinated to the banks favor. If this does not happen, it will portend a total collapse of economic structure. A mad max scenario that, may I be so bold to write, none of us are prepared to deal with.

I'm paying of my debt now.

I'm dollar cost averaging into debt. When precious metals take a dive, I buy some extra... when they are high (and it seems like they aren't a bargain), I pay extra on the outstanding bills. The point will come, when... is anyone's guess... but I would speculate not that far away (within a year?) when silver either grows too scarce (or too expensive) to easily source. That would be a good time to liquidate a bit of your hoard and clear your debt.

[Thogey]

Damn Ray!

That's not dollar cost averaging. I'm not knocking your strategy, but dollar cost averaging into debt would mean you are using the same dollar cost of debt to buy your silver on a schedule, regardless of the market.

You a speculating, and thats all there is too it. I really hope you win though.

Now go back to your pie (was it Marie Calander's?).

[Sheikh_yer_Bu'Tay]

There MAY be one REAL silver lining to this scenario for those of us who are preparing for it...

IF this were to happen... I believe that a mortgage would still be based on the old currency "value" (since it was a contractually agreed upon dollar amount). Therefore... if the US dollar became a 10:1 ratio fairly quickly, you'd be able to pay off a 100K loan effectively for 10K. Now... let's say that silver is around $500/oz then (probably plausible)... if you had bought 10K of silver at the $50/oz... you could effectively pay off your house. In fact... if this is a realistic scenario... it makes right now a GREAT time to buy a house (since you can pick up a GREAT $200K plus valued house for around $100K). You would effect buy a house right before the collapse of the US dollar for much less than the value of the dollar at the point before the collapse.

I don't mind saying that this is the plan I'm about to pull the trigger on within the next two weeks.

The question I have though is what will happen to mortgages during a time like this? Will folks keep paying on their houses? Will foreclosures keep occurring if not?

Neal... I'd be quite interested in hearing your thoughts here...

Pennybug, get with someone really smart on the issues of mortgages and real estate law. As I understand it, the banks had legislation written decades ago that would allow for all mortgages to be re-valued should there ever be an economic emergency, such as an official re-evaluation of the dollar. But don't take my word for that. Go look it up yourself, or get some help, before you commit to any economic obligation counting on inflation to redeem you out of a mortgage.

[68Camaro]

Pennybug, get with someone really smart on the issues of mortgages and real estate law. As I understand it, the banks had legislation written decades ago that would allow for all mortgages to be re-valued should there ever be an economic emergency, such as an official re-evaluation of the dollar. But don't take my word for that. Go look it up yourself, or get some help, before you commit to any economic obligation counting on inflation to redeem you out of a mortgage.

I would like to see something concrete related to this. If it's true, it should be documented, referenced, made a sticky here , and spread far and wide elsewhere.

[theo]

I agree. I've done a few Google searches on the subject (mortgages + hyperinflation. . . etc) and got very little.

[neilgin1]

Although technically you are correct, I doubt our banks or the government will make things that easy on us. Below is something I posted in another thread and beauanderos' reply. Obviously they will try something so it may not be the best idea to wait too long to pay off your debts in the devalued currency.


"My concern is if there is a currency collapse, mortgages will be re-formed in mass to be in "new" dollars (each worth 10 old dollars). This kind of event would, of course, send just about everybody into foreclosure. However by that time the banks will want your property (with you as a serf on it) far more than a pile of worthless paper. And before you say, "They can't legally do that!" ask yourself; which line in your mortgage contract would stop them? The mortage contract vaguely states that your mortgage is to be paid in dollars. However, if the current dollar is destroyed then the banks will argue in court (successfully IMHO) that the contract would automacally switch to "the legal tender of the nation" which will be the "new" dollar. "


by beauanderos » Fri Jul 29, 2011 5:40 pm

"I have read more than a few contributions by various writers who know someone in the legal depts of some of the big banks. If there is a hyperinflationary event they plan to enforce mortgage loan modifications which would take away the "advantages" of paying strong debts with weaker dollars... so that they stay even, but you lose. They KNOW this is going to happen, you can be sure they have planned contingencies to ensure they aren't ruined by it."

my note is held in house, by our country credit union. my loan officers, are friends of mine. i'm not just a number to them and they are not faceless entities to me, so i trust they will use wisdom in the event of any extraordinary currency situation, meaning they would be reticent to start tossing folks around here, off their places, because the fabric of life could get very unpleasant. None of us want that.

[neilgin1]

Wow I 'm a fool for not believing that s--t. Sure based on reality but added drama for consumption.
Zerohedge drama queen news.

Call me a fool all you like oh wise sage.

was that to me, brother?......"oh so wise sage"?....did i say something to offend you, if i did, please forgive me.