Whenever I write articles on the state of the economy, I receive a slew of emails asking the same question: “Should I sell my house?” Most people who write asking whether the time is right to sell their property, haven’t really thought all the issues through. Most are merely considering selling their house because money has become tight. Here’s a typical example:

My wife and I bought a £246,000 house on interest only mortgage with a high street lender for 3years. This period ended last month.

Over the last 4 months I have been unemployed and we have been struggling to pay this mortgage.We now have one and half month payment arrears.

We have also have debt about £46,000 on credit cards and loans to pay. This has also put a dent on our credit rating as we struggle to pay as well.

Our house is now valued at £350,000. Should we sell it to sort ourselves out of these debt or is there any way out of this hell? I don’t want the house repossessed but it is a matter of time. At the moment our monthly income is around £2,400 after tax.

The issue is not whether to sell the house, but how to manage their finances. Sadly, I receive way too many of these types of inquiry. However, I received the first sensibly written query yesterday:

My wife and I are concerned that this may be the top of the residential real estate market in our area. We have talked this over, and we think the equity in our home may be at a peak. We are both willing to rent. In fact, we have talked about moving to a region that has a much lower cost of housing. What do you think?

Such a note reflects a joint decision – which buying and selling a house ought to be. It reflects an awareness of economic options. It reflects an understanding that things are not as they seem. Here are a few reasons to consider selling your house now. Continue reading

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I’ve received a number of questions about the significance of the US$ Index.

The US Dollar Index is an average of six foreign currencies, weighted in accordance with somebody’s perception of their relative importance in the year 1973, when the world’s major nations first let their currencies start to float “freely” against one another:

1. 1. Euro - 57.6%
2. Japanese Yen - 13.6%
3. British Pound - 11.9%
4. Canadian Dollar - 9.1%
5. Swedish Krona - 4.2%
6. Swiss Franc - 3.6%.

Continue reading

If, as I suspect, we are close to a global economic crash, it makes sense to ensure one is prepared.

When I published my first website in 2003, I included an extensive section on what can be done to prepare for any eventuality. This post takes a slightly more holistic view of how to prosper in a contractionary economy. Rest assured that economic contractions have happened many times before. Millions before us have lived through periods of depression. Almost all managed to survive and some of them really prospered. It was those with the right mindset that did particularly well.

Continue reading

The U.S. Senate today approved a bill to raise the national debt limit by 850 billion U.S. dollars to 9.815 trillion dollars.

The debt limit increase bill was passed in the Senate by a 53-42 vote, and has been sent to President George W. Bush who is expected to sign it by Oct. 1, when the new fiscal year starts and the government hits its current borrowing ceiling of 8.965 trillion dollars.

The House approved an increase in the national debt limit in May this year.

Earlier this month, U.S. Treasury Secretary Henry Paulson urged quick actions from the Democrats-controlled Congress to raise the national debt limit, saying the U.S. government will hit the current debt ceiling on Oct. 1.

The national debt is the total accumulation of annual budget deficits, which must be financed with borrowed money.

Continue reading

There are unconfirmed reports that Barclays could be in trouble, and that the much hyped purchase of ABN Amro doesn’t have a hope in hell of going ahead.

It started with the sudden resignation in late August of Edward Cahill, Barclays Capital’s Head of European Collateralised Debt Obligations.

See : Barclays’ CDO chief in Europe quits as sub-prime crisis hits funds

And another: Barclays falls to earth

Note particularly the paragraph which says:

“Barclays has not helped its own cause. Twice in just over a week it has been forced to borrow expensively a total of £1.9 billion from the Bank of England’s emergency reserves. Such loans are routine, but in the current fragile markets any hint of financial distress has prompted panic among investors. Barclays is looking distinctly accident-prone.”

Continue reading

I recently witnessed first-hand a bank run in the UK. While I’ve long believed the global economy cannot continue the way it is, I never thought I’d see a real life bank run.

A bank run is when customers withdraw their savings en masse because of fear a lender will become insolvent, which can cause it to go bankrupt.

A similar thing happened with Countrywide Bank in California on Friday 17 August. This after they were forced to draw the entire $11.5 billion line of credit available to them. Since then, Bank of America has bought $2 billion of Countrywide stock, effectively saving them. Continue reading

A web search for the 19th Century Manchester School of Economics yields very little, until I finally stumbled across a speech given by Alex Singleton, the President of the Globalisation Institute on the occasion of their launch in London on July 19, 2005. This is what he said:

We follow the Manchester School of Economics. That’s the school founded in the 19th Century by economists, businesspeople and campaigners who argued for free trade. Why would we want to dig up the ideas of some dead economists?

Continue reading

Sundays WaPost had an interesting piece in their editorial section about the experience of two African-American XM radio hosts who were cancelled after a battle over a conspiracy theory popular on African-American radio stations. I thought the other NG readers would find it interesting as well. (the following selections are not in the order they appear in the original).

A 1990 survey by the Southern Christian Leadership Conference found that one-third of black American churchgoers believed that AIDS was a form of genocide. One-third also believed that HIV was produced in a germ-warfare lab, and 40 percent of black college students in Washington, D.C., agreed. An even higher percentage of blacks polled said they thought that crack cocaine was custom-made to be planted in African American communities to keep them crime-ridden and poor and that the government deliberately targeted black elected officials to drive them from office. These beliefs keep some black Americans from having their children vaccinated, from receiving AIDS tests and early medical treatment, and from practicing safe sex or using clean needles, as Patricia A. Turner and Gary Alan Fine note in their book, "Whispers on the Color Line." They also make seeking the truth an uphill battle.

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