PEA RIDGE — I gave some advice in a column about two months ago. Some of it was good advice and some, if you live in Pea Ridge, may not have been. It’s time to explain.
I have warned people that the dollar is going to lose value dramatically, and I advised people to live within their means. That’s always good advice. But I further said they should not save in cash, but rather buy silver, or perhaps gold.
The Federal Reserve is acting with the government to hold interest rates artificially low. That is good for debtors like the federal government, which is the biggest borrow mankind has ever known. It punishes savers though. If you keep your savings in dollars, you are going to lose purchasing power. As the Federal Reserve sends new dollars to the government and the banks, it siphons value out of the pool of existing dollars, like the ones in your bank account.
Money is supposed to be a way to store value, but our dollar “leaks” value, and interest rates are held too low to compensate for that. I suggested turning some savings into silver or gold as a solution. Specifically, I said every modest household should have 50 ounces of silver as emergency savings. When I first wrote that, spot market silver could be had for less than $18 an ounce. As I write this, it is well over $23 an ounce.
That advice was sound enough, and if you did not get any the good news is that I don’t think the appreciation in silver prices is over yet. It’s not too late.
I also advised people to try to keep their homes, even if they had to try and re-finance. Well, I just tried to practice what I preached. It turns out that Pea Ridge is a black hole of real estate right now. For almost all of us, refinancing is just not an option.
Unless you are a veteran, banks won’t loan you more than 80 percent of the appraised value of your home. Since many people don’t have a lot of equity in their home, it’s hard to get enough loan money to actually pay off your existing loan or loans. I thought I would be OK because the county assessor rated my house and land as worth more than I owed on it. In normal times, the assessor rates the land at a lower value than the appraiser does, but these are not normal times. I put up the money to have an appraiser come as one of the last hurdles in a long process to refinance. It turns out there were only nine home sales in all of Pea Ridge last year, and quite a few foreclosures. Values have plummeted faster than the assessor can keep up with.
The result of all of this is that our house and land appraised for only 88 percent of what the county assessor is taxing me for it. The appraised value was so low that we could not finance for enough to pay off the loan once bank fees were included. The deal fell through. What was meant to shore up our finances wound up being a losing proposition for all involved.
Interest rates are super low right now, but few of us can qualify for them. If we weather these tough times, it looks like we are going to have to do it without much help from the system.
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Editor’s note: Mark Moore is the lead writer for an Internet blog on matters pertaining to Arkansas culture and government, Arkansas Watch, and on Tuesday nights is the host of an Internet-based radio program, Patriots on Watch. He can be reached through The Times at [email protected].
Opinion, Pages 4 on 10/13/2010