October 3rd, 2013 10:21 AM by Gregg Mower
OK the Federal Government is shut down, what does that mean for your home loan? Well so far, 3 days in and no effects that I have seen other than it will take longer to get verification of your taxes when we send in the form, but most investors we sell loans to have said that it will be fine to close those transactions without that form in the file (form 4506t). It is interesting that we are a business that is highly regulated by the Federal Government and we are not feeling any real ill effects of the Government being gone. In fact, other than it effecting our military men and women, I really can’t see a problem with the Government shutdown. The big influence that the News has not really reported is the debt ceiling debate. This is where the national debt reaches a point that, by law, it can’t go past. That means that, by law, the government cannot spend any more money that it does not collect. Basically, the Federal Government has the possibility of defaulting on their debt. Who do the United States Government owe you ask? Answer, everyone, yes the government owes everyone that has a dollar bill in their wallet. Take out a dollar bill out of your wallet right now and read the top of the bill, yes I said bill. You read “Federal Reserve Note” and what is a note? A note is debt. Our monetary system is based on you believing that the dollar in your wallet is worth something or backed by something which it is not other than your full faith in our Government.
The Government Shutdown is nothing compared to the debt ceiling debate, which is due to come to fruition by October 17th. This debate will be in the congress’ hands again and the politics that will be flying around will sound like 2 sides fighting over the direction of the country and essentially it is. One side will say that Government spending is too high and that they need to limit Government spending and the other side will say Government spending has nothing to do with the national debt ceiling and the Congress will need to raise the debt ceiling so the US does not go into default and they will deal with the debt later. This is the same argument that they had 6 months ago when they voted to extend the debt ceiling. This is like telling your credit card company you can’t pay them right now and that you need an increase in your credit limit to get by. How many times do you think your creditors will go for that? Well our Government believes that you will believe that forever. The problem is that, although the ignorant American people might continue to be snowed by that, but how about China who we owe a few trillion to, how long will they put up with it? This is the problem as I see it, and I don’t have a solution unless spending is cut, and Government growth is cut, or taxes are raised, or all the above. The actual Government Shutdown right now is actually good for the debt ceiling as debt growth has slowed with all the non-essential Government workers not being paid.
So what is in store for the California Real Estate Market, I believe that this sector of the economy is the safest bet for now and into the future. Real Estate is an asset, which means it can be traded, borrowed against, sold, or bundled. Real Estate as an asset verses cash that can and will increase in value over time, for no other reason than there is only so much Real Estate on earth and you can’t create more of it. Cash will decrease in value over time (inflation), or if people stop believing in the mighty dollar as a means to trade for goods and services. I don’t want to be a pessimist, but I have to be a realist, the Government has to get it’s economic house in order to show the world we can or real bad things could happen. As always give me your input as well.