The concluding observation to chapter 2, "Debt Intolerance: The Genesis of Serial Default" is that, "Going forward, after the global financial crisis of the late
2000s subsides, a challenge will be to find ways to channel capital to debt-intolerant countries in nondebt form to prevent the cycle from repeating itself for another century to come." Reinhart & Rogoff's observations are spot-on for sovereign debt but, it needs to be noted, is equally applicable on a micro-economic scale.
There is no question that a prime mover of the 'global financial crisis of the 2000s' is the massive amount of unsustainable debt incurred by 'debt-intolerant' home buyers using insufficient income to purchase homes beyond their means and beyond the security of their employment.
How much more true is this of the fixed income homeowner in need of 'capital' today? The very same challenge of 'finding ways to channel capital to debt-intolerant homeowners in non-debt forms' is critical. Simply replace 'capital' with 'cash', 'debt-intolerant countries' with 'fixed income homeowners' and the use of HECS to convert existing home equity into cash becomes an obvious strategy for 'preventing the cycle from repeating itself...' Using HECS to provide cash to fixed-income homeowners relocates the 'risk equation' from continued employment to asset appreciation and in doing so, moves inflation from the 'risk enhancement' relationship it has with debt to the risk diminishment relationship of asset appreciation.
Sunday, July 18, 2010
Wednesday, July 14, 2010
Restoring Liquidity to the US Economy
Rehydration of the US Economy
We are experiencing a period of financial dehydration caused by dangerously leveraged overuse of the existing aquifers (accumulated equity) and watersheds (profitability) of liquidity; the supply is running perilously low and the economy is seriously wilted with little hope of a timely recovery.
However, there exists a tremendous untapped aquifer of liquidity heretofore unavailable to either its owners or the general economy, even if credit was more accessible; house-rich but cash poor homeowners can’t make monthly loan payments. Owned by the Great Generation and their children, the Boomers, that aquifer is stunningly large: $4.5 trillion and can now be tapped with a HECS.
By providing access to that immense pool of home-equity existing beyond the wells drilled by mortgage companies, HECS can be used to inject $751.3 billion back into the US economy by putting it into the checking accounts of Senior homeowners without mortgages. Another $317.5 billion is accessible to senior homeowners with mortgages, relieving them of the current strain of mortgage payments made from a fixed income. In addition, pre-seniors, aged 50 to 64, with a qualifying mortgage expand the ‘aquifer’ adding approximately $ 1.4 trillion more for a total of $2.5 trillion liquidity available to be injected back into the economy, one household at a time.
A careful and deliberate tapping into that aquifer with HECS wells will rehydrate the American economy as it allows the trillions of dollars of unliened home equity and redirected former mortgage payments to be liquefied and reinjected into the economy as cash without the risk and overhead expenses of further debt.
That economy-refreshing liquidity is moved from the immense pool of investor cash looking for a safe and secure investment opportunity to the homeowner providing for their unbudgeted expenses. In doing so it also provides relief to the Senior 'safety-net' provided by the government. Eventually it moves to the main street economy providing jobs and the flow of cash that follows employment.
HECS allows the swelling ranks of seniors and pre-seniors, currently seen as a burden to the American economy, to become a source of relief, a source of job creation and a re-hydration of the economy.
American retired homeowners have been filling this vast reservoir with value for more than 30 years. They have paid an even greater amount of interest on the mortgages used to put this value away; they are no longer required to borrow it a second time in order to access it!
We are experiencing a period of financial dehydration caused by dangerously leveraged overuse of the existing aquifers (accumulated equity) and watersheds (profitability) of liquidity; the supply is running perilously low and the economy is seriously wilted with little hope of a timely recovery.
However, there exists a tremendous untapped aquifer of liquidity heretofore unavailable to either its owners or the general economy, even if credit was more accessible; house-rich but cash poor homeowners can’t make monthly loan payments. Owned by the Great Generation and their children, the Boomers, that aquifer is stunningly large: $4.5 trillion and can now be tapped with a HECS.
By providing access to that immense pool of home-equity existing beyond the wells drilled by mortgage companies, HECS can be used to inject $751.3 billion back into the US economy by putting it into the checking accounts of Senior homeowners without mortgages. Another $317.5 billion is accessible to senior homeowners with mortgages, relieving them of the current strain of mortgage payments made from a fixed income. In addition, pre-seniors, aged 50 to 64, with a qualifying mortgage expand the ‘aquifer’ adding approximately $ 1.4 trillion more for a total of $2.5 trillion liquidity available to be injected back into the economy, one household at a time.
A careful and deliberate tapping into that aquifer with HECS wells will rehydrate the American economy as it allows the trillions of dollars of unliened home equity and redirected former mortgage payments to be liquefied and reinjected into the economy as cash without the risk and overhead expenses of further debt.
That economy-refreshing liquidity is moved from the immense pool of investor cash looking for a safe and secure investment opportunity to the homeowner providing for their unbudgeted expenses. In doing so it also provides relief to the Senior 'safety-net' provided by the government. Eventually it moves to the main street economy providing jobs and the flow of cash that follows employment.
HECS allows the swelling ranks of seniors and pre-seniors, currently seen as a burden to the American economy, to become a source of relief, a source of job creation and a re-hydration of the economy.
American retired homeowners have been filling this vast reservoir with value for more than 30 years. They have paid an even greater amount of interest on the mortgages used to put this value away; they are no longer required to borrow it a second time in order to access it!
Friday, July 9, 2010
HECS Definition Added
HECS investing in real estate is both a unique investment strategy and a new class of asset investment. The White Paper Library now has a definition of "HECS" for your questions and/or comments.
Thursday, July 8, 2010
Chapter 3 Added
Chapter 3 of "Financial Pressure on Boomers": 'Fractional Equities Brings Hope to Seniors and a Unique Opportunity to Real Estate Investors!' now added!
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