This way, you would introduce a measure of diversification to your overall portfolio, and would be holding a liquid and mobile asset that in fact is a cash equivalent, which you can take anywhere, anytime, and turn it into local currency wherever you go. Nothing will beat that.

Plus, your interest payments on the house on the equivalent amount you invest in gold will become tax deductible. So, if you invest 50k or whatever in gold, the same amount becomes tax deductible for the mortgage interest you pay to the bank. Alas, you will have to pay capital gains tax when you sell your bullion, but not until then, whereas you can enjoy the interest deductions right away.

This would also have the benefit of your holdings sensitising you to the asset class’s value and movements in price, which in itself is going to assist you in developing a mental attitude, and a value measure that will provide you a solid foundation for valuing all asset classes by a reliable yardstick, instead of measuring and doing your value calculations with what effectively is a rubber band.

Finally, do not forget that gold is money, and that you can sell it any time and convert it into cash and pay it against the mortgage. You might decide to do this if rates really start going up, or if gold has a good run and you want to take some chips off the table.

These toxic papers are called “collateralized debt instrument” (CDI) or “collateralized debt obligation” (CDO). They are primarily divided in two categories, Derivatives, and Swaps. It is incorrect and confusing to lump MSB and CDO together or use them interchangeably. MBS has been around for a long time, as long as the mortgage itself. CDO and/or CDI, according to a study done a couple of months ago was used only three time prior to 2005 by the New York Time, MSM “paper of record”.

Before the Cheney-Bush regime, the real estate finance was done through MBS, which is straight forward. I buy a home, put whatever down (even $0), the bank/mortgage company. Would finance the rest based on my credit; sell the mortgage to Fannie or Freddie (or if it was solid kept it for itself). Fannie or Freddie then packaged my mortgage with yours and a thousand others and sold it to investors (or if solid kept it for themselves).
There was real, physical asset behind this package of 1000 mortgages sold, and a one or two wage earners who obligated themselves to pay the interest and principal. Because the homes and their vales were finite, this MBS was finite and known. The profits, i.e., the interest and points on the loan, were relatively small (compared to the economy and currently). In early 1990s S&L meltdown, all the banks and Wall Street could steal from the taxpayers was $300b.

Enter the Cheney-Bush Disaster.
This is the picture in 2005-2007: total residential real estate in the US = $12trillion, total commercial real estate in US = $12t; total world real estate = $50t; total amount of stocks, deposits in world = $50t. total mortgages on residential real estate in US = $5-6t. total residential mortgages held/guaranteed by Fannie/Freddie = $2.5t.

With the “old” system of MBS the “most” the regime and its cronies cold have stolen was not more than $5t (the entire amount).

The diabolical people in and connected to the regime were in for more, a lot more, to steal, and for as long as they could. Hence they concocted a scheme of Monopoly money on the side, called Derivatives. The first order of this so-called derivative market was a 32 times leverage, floated by – you guessed it – Paulson’s Goldman Sacks and other crime families. This paper was issued, held, and traded by wall street, hedge, private equity and sovereign (e.g., Chinese, German, Arabs) funds. This would give them $5t x 32 = $160t to float around.
Then they wrote other derivatives, all leveraged, using batches and mix and match of these derivatives.
In one single instance that came to light, S&P, the grate rating agency was paid $300m in bribes – as in under the table, send it to Camen Island bribe– to rank one of these packages AAA, because they knew, and S&P knew , and the buyers (e.g., Chinese) knew that they were highly inflated.
The problem was easily fixed – by Insurance Swaps. They were supposed to be insurance on these packages, so if they came down in value or the seller had inflated the vale, or Defaulted on the payment, this Default insurance would cover it. The biggest insurer was IAG, taken over by the FED for an initial $85b. what did they do? Through bribery and other similar legal acts, they got AAA ratings. So now they could insure something like $50b with an initial capital of $1b; insure $500b with $5b, and so on. So after stealing all those insurance premiums, when the reckoning, i.e., payback time, came, these insurers, like AIG, and numerous hedge funds runs by the five big crime families and smaller ones under their wings, were all penniless. For even a 1% market down-turn would wipe out their entire capital.

By some estimates, as of 4 months ago, there was some $570t outstanding of these “toxic” papers. That is 4 times more than the entire wealth on Earth created in the past 10,000 years. All of this leveraged, piggy-backed, on the miniscule (by comparison) of the residential MBS of $5t.

So the problem as we see is not MBS, but CDOs. For a 20% down in MBS creates $1t in liabilities (as in the old times of the S&L crisis).
But thanks to the ingenuity of these looters, now this liability would be $114t, a figure close to the entire wealth of the humanity.

As we see Mike,
Until Pulson’s bill, we heard about CDO and Insurance Swaps. Then since his bill, all we hear from the MSM is MBS. They seem to have been ordered to delete those terms, for they would immediately bring to mind that these papers that made this ruinous fraud possible were perfected and used during the Cheney-Bush reign. But if we fall for this bait and switch, most people might well fall for this trick and associate the situation now with those of the older times.

Unfortunately, that’s what I guess some otherwise first rate economists might have fallen for this switch and believe the problem is easily solvable by some older mechanism. As an educated guess, I don’t give our nation more than 25% chance to pull through this catastrophe, looking for some miracle. At least, no one, to my knowledge, has offered any workable, detailed solution to date, and even if per chance there were one, the current political leadership, and the similar choices we have for the future does not seem to be up to the task. And as we witness now, the end might well happen within months, not years or decades that people before had thought it might collapse. Peace to all,
CounterSkeptic
CouterSkeptic | 10.06.08 – 11:04 pm | #

I am actually almost in a position now to take the plunge (imminent redundancy payout). However, I am more inclined to knock down a decent chunk of the home loan, as that is a real benefit right now (and in years to come) with no foreseen risk.

Any thoughts?