Home Equity Loan

home equity loan vs. line of credit?? here's the stats: 611 credit score $3,400 a month income (but it's under the table and goes up or down sometimes) my banking deposits are not the same every month, but it always shows that some kind of deposits are made never paid a bill late score is lower due to high debt own my home "free and clear," and it appraised for $570,000 in california about... 3 to 4 months ago... i want to take out, like less than $160,000.. i need at least $100,000 to pay off all my student loans, car, credit cards, etc. but would like more to get one of my cars fixed and do home improvements (and have a little amount of "back-up" money).. will i qualify for anything?? and what's better in my situation, a line of credit or an equity loan?? the bank can cut the checks to my creditors and i will close my accounts too (on all of my credit cards, except maybe one or two) so they know i won't be getting back into debt.. what do you guys think?? and what's a good company to what's a good company to go with??

home equity loan vs home equity line of credit which is better? considering the possibility of rising interest rates in the near future.

Home equity loan vs line of credit loan? Does anyone know if a home equity loan is somewhat deductible on income tax?

home equity loan vs. equity line of credit? Why pay closing costs on a home equity loan if a home equity line can be obtained at a comparable fixed rate and tax deductable? Am I missing something here?

How is interest calculated on a home equity loan vs. a credit card loan? I have an offer from a credit card company for 3.99% FIXED APR until the balance is paid off. I want to borrow $10,000 to build a deck and put a new roof on my home. I know that home equity loans have variable rates and I am in the top tier as for my credit score, so I would qualify for a low rate between 5%-7% I guess. What is the smartest way to borrow that money and why? CREDIT CARD vs. HOME EQUITY or even a HOME EQUITY LINE OF CREDIT...(I'm not exactly sure how that works though?) Thanks.

Home equity loan vs. home equity line for vacant land purchase? I own a home that is half paid off but I would like to build a new one next year. It's a little early in my "new home plan" for buying property, but I just found the perfect vacant property at a really great price. I'd like to buy the property and do nothing with it until I'm ready to build next year. Unfortunately, I don't have enough cash on hand to buy the property outright so I'll need a loan of $21,000 or $22,000 (I have plenty of equity in my home to cover that). My bank has already pre-approved me for a home equity loan at 6.4% but I have yet to look at line of credit rates. Does anybody have any opinions as to whether a home equity loan or a home equity line of credit is better in this situation? By the way, the property does not have water/sewer and is not in an area where there's any zoning at all so a lot loan doesn't seem to be an option. According to http://www.bankrate.com , home equity line of credit interest rates are currently lower than home equity loan rates though obviously that could change.

Home equity vs. Home equity line of credit? I need to do some repairs on my home and I'm not sure what the advantages are to either a home equity line of credit or a home equity loan. Any advice?

Home equity loan vs loan agains retirement stocks? We owe $18,000 in credit cards and the 0% interest is about to end. We could get a home equity line of credit with a pretty low monthly payment or my husband can borrow from his stocks and the interest charged is paid back into his retirement account. The only problem with this is the payment is going to be higher at 9.25%. I know with the other loan we would be paying the interest to the bank but the payment is more affordable and I could pay extra when possible. I just don't want to be strapped for money every month. Thanks for your help.

For only 100k, what are the benefits of an SBA loan vs. a home equity loan? Why would anyone choose an SBA loan when they tie up your collateral and you could use that same collateral for a home equity line of credit?

Home Equity Line of Credit vs Refinance? I am currently in Chapter 13. I filed 10/04. I have a home with approx 100K in equity. I would like to pay my way out of BK at the 36 month mark (approx 16K) , pay off the second mortgage (which was down payment assistance, $7450) and pay off some of my student loans. Which will be better refinancing or HELOC? Will I even qualify for a HELOC while in BK? All responses will be appreciated

adjustable rate vs fixed 7.57% home equity loan? I have a fixed rate 64000 line of credit at 7.57%. With the resent rate decrease the adjustable rate I can transfer it to is at 5.8%. Tuesday they may lower it .5 - 1% more. Would it be worth transfering it to adjustable rate. I would save around 100 a month on interest that I would apply to the principle. Also how long will the lower rates remain and would they increase it slowely so a person would be able to relock in at a lower rate? right now I see a 1.77% difference. That might just up to 2.77% on Tuesday. I would save 145 a month. I would apply it to principle.

What should I do????? Credit question? I am a solvent, stable, well-employed, credit-worthy individual. I bought a house 7 years ago which has more than doubled in value due to the market I'm in and of course, location-location-location. I have about $10k of debt (credit cards, automobile). To further increase the value of my home, I want to renovate my kitchen and bathrooms to the tune of about $16,000. Here's my big question: I've applied and been approved for a $30k home equity loan to finance the renovations and pay off the auto and credit card debt. Am I turning down the wrong road? Am I asking for trouble? I really, really hate debt. My home mortgage is [was] low and now I'm adding back another $30k. I opted for the home equity loan vs. line of credit so that I got a fixed interested rate, which was important to me. I will pay off the home equity loan long before the term is up. The return on the improvements will definitely more than double my investment in upgrading. Is this the right thing to do?

The fastest way to rebuild credit after bankruptcy? Let say i filed bankruptcy, I want to rebuild my credit(720+) within 2-3 yrs. In order to do this, I need new debts which i can afford. These debts are called: Installment(auto loans, student loans or mortgages)and Revolving(credit cards or home equity lines of credit). I want to rebuild my credit while im in school, my plan is get a student loan(Installment) and 2 secured or unsecured credit cards[(Revolving)manage to spend only 30% each credit card and pay it off each month]. So, here's my question: Which one will rebuild my credit the FASTEST? Student loan + 2 CCs VS. auto loan+student loan+2 CCs? I don't want a car loan and definitely can't afford mortgage. I prefer Student loan and 2 CCs. Other than my preference what else should i do? Here's the link for rebuilding credit after BK: http://articles.moneycentral.msn.com/Banking/BankruptcyGuide/BounceBackFastAfterBankruptcy.aspx

Recession : With War or Without it ? Isrel vrs Iran// War - and US?? Recession: With War or Without It? by Gary North by Gary North DIGG THIS The world's economy has been in growth mode at least since 1991. China has been in growth mode since 1979. The American economy had a sharp recession in 1991. Asia had a financial crisis in 1998. America had a very brief, very shallow recession in 2001. The Federal Reserve System pumped in money at an accelerating rate after mid-2000 through 2004, and did not go to tight money until the month Bernanke took over: February 2006. Inflation overcame the recession of 2001, and it overcame the crisis of 9/11, but it created the housing bubble and the commodity bubble. The housing bubble has popped. This is going to take the price of housing in the United States lower than it is today. I think 20% lower is a conservative figure. We are nowhere near the end of this popped bubble. The commodity bubble is still in full force. It is a worldwide bubble. The price of energy and the price of rice and other food commodities have received most of the attention. Federal Reserve policy since early 2006 has been one of relatively stable money. There is a lot of chatter to the contrary, but if we look at the two most significant monetary indicators, the adjusted monetary base and M1, we see that there has been very little growth in either. This is why the United States is now either in a recession or is facing one in the next few months. When a period of monetary inflation ends, economies go into recession. The American economy is slowing down, and it will continue to slow down. Both China and India have expanded their money supplies dramatically for a decade. Both countries are now facing a crisis of rising prices. Price inflation is a major threat to the continued prosperity of both countries. China's government has begun to impose selective price controls. This is creating shortages and production bottlenecks. India's government is considering doing the same thing. What both governments need to do is to tell their central banks to cease buying all government debt and all assets of any kind. The central banks need to stop inflating the money supply. But if the banks do this, both countries will experience major recessions. The governments do not want to have major recessions, but they also do not want to experience the effects of monetary inflation: price inflation. So, both of them are tempted to go back to the traditional policy of imposing price controls. This always creates shortages, and it always reduces the rate of growth of the economy. China and India are trapped. AN INTERNATIONAL TRAP The United States is in the same trap. The headlines scream of the skyrocketing costs of energy and food, but the broader consumer price indexes indicate slow increases: maybe 3% a year. This is because families are readjusting their budgets. As the prices of gasoline and food rise, families are forced to cut back expenditures in other areas. So, the general price indexes are not rising dramatically, but families are struggling with their budgets. This struggle will get much worse this winter, when the price of heating oil rises. This will exacerbate the existing economic slowdown. Furthermore, the rising price of oil means a rising balance of payments deficit for the United States. Oil-exporting countries are the main beneficiaries of the rising price of oil. This means that foreign sellers of oil will get the lion's share of the increase of the price of oil. American producers will pay for the prosperity of the oil exporting countries. They will pay in the form of reduced demand for their products. The world is facing simultaneous recession. Meanwhile, the American financial system has absorbed hundreds of billions of dollars of IOUs from home buyers who cannot possibly pay off their debts. They are in the process of defaulting to the lenders. This has created a crisis for America's largest banks, and for several major European banks. We all know the story by now, but psychologically, most Americans have not adjusted to the new economic reality. Most investors have not adjusted. Yes, the American stock market is down by 20% since last October. But still they think a recovery is just around the corner. The media keep saying this. American investors still have faith that the economy is essentially healthy, that there will not be a continuing fall in the stock market, and that the economy will not go into recession and stay in the recession for two or more years. So far, I am giving you the good news. The good news is there is going to be an international recession, rising corporate bankruptcies, bank failures, and retrenchment by consumers because they can no longer pay the rising cost of energy. Why is this good news? Because this recession is going to put a cap on the rising cost of energy. Commodity prices will fall during the recession; this includes the price of oil. NO MORE FISCAL WIGGLE ROOM Americans have steadily stopped saving over the last 28 years. In 1981, they saved over 11% of their discretionary income. Today, they save nothing. They are now in full spending mode. They have borrowed money against their future income, against their home equity, and on simple promises to pay (signature loans: credit cards). They have stretched themselves thin with respect to debt. If oil goes to $400 a barrel, or $500 a barrel, and stays there for a year, American consumers will be in panic mode. They will have to cut their budgets, and they have forgotten how to cut their budgets. They have forgotten how to save. The strategy of the optimists is to tell us that the worst is over economically. This is the government's official position. Chairman Ben Bernanke does not say this. He keeps hinting of more trouble to come. He keeps telling us that the Federal Reserve System is monitoring events. He keeps implying that there is some sort of rabbit still remaining in the Federal Reserve System's hat which they can pull out if the banking system moves into paralysis mode. But he doesn't tell us what these rabbits are, or under what conditions the FED will pull them out of its hat. The good news regarding the economy in general is not backed up by anything specific. The government tells us that the worst is over, but there are almost no indications that the worst is over. The housing market is still in decline. Foreclosures are still rising rapidly. The lenders are not selling foreclosed properties at market prices. Instead, they keep buying back the properties. There is a growing inventory of unsold properties on the books of the lenders. Meanwhile the two major sources of liquidity for the housing market, Fannie Mae and Freddie Mac, are verging on bankruptcy. On Wednesday, July 9, the stock price of Freddie Mac dropped by 23%. Yet its stock price was down over 50% since January. These two stocks have continued to fall. Everywhere we look on the horizon of the domestic economy, there is bad news. There is no sector of the economy that is improving, unless it is heavily funded by the Federal government. Health care has not slumped, because health care as funded by Medicare and other state and local government programs. This means that the Federal deficit is going to get worse in any recession. Medicare and Social Security are non-discretionary spending items. The revenues will fall. So, the supposed strength sectors of the economy are in fact guarantees of a government fiscal crisis. If the general economy slumps, the Federal deficit is likely to go over $500 billion a year. When the recession hits, commodity prices will fall. If the recession does not hit, commodity prices will continue to rise. But rising commodity prices will force bankruptcies in those firms that are not in a position to pass on increased costs to their consumers. This means industries associated with discretionary spending. If your company is dependent upon discretionary spending by the public, your job is at risk. If the recession hits, your company will suffer. If the recession doesn't hit, rising commodity prices will squeeze your company. Consumers will spend their money for gasoline and heating oil, not on the products or services your company produces. The boom economy has not been based primarily on non-discretionary income. The boom has come at the margin: those areas of the economy in which consumers do have the option of spending their money rather than saving it. So far, I have been giving you the good news. The good news is there is going to be an international recession, rising corporate bankruptcies, bank failures, and retrenchment by consumers because they can no longer pay the rising cost of energy. THE BAD NEWS The bad news is that the State of Israel is increasingly likely to launch an air strike on suspected Iranian nuclear weapons production facilities. I have discussed this before. If this happens, the price of oil will skyrocket. This will force massive readjustments of family budgets in every country on a permanent basis. This is going to force producers to fire people out of fear of bankruptcy. Consumers are going to stop buying much in the area of discretionary income. That is, those items that can be cut back will be cut back. This could mean you. If the State of Israel launches an attack on Iran, the economic news will get really bad really fast all over the world. So, the most important question today is whether or not the Israeli Air Force will attack Iran. From an economic standpoint, this is the crucial question. Here, too, the mainstream media have generally promoted optimism. They suggest that the Israelis will not attack Iran. The problem is, they can't point to anything specific that officials in the State of Israel have said that indicates that there will not be an attack. On the contrary, officials there keep saying "no comment." Something else is really ominous. The political leaders in the countries over which Israeli bombers will have to fly are deadly silent. They are not telling Israel in full public view that if Israel sends planes over their airspace, they will go to war with Israel. They are not saying that they are preparing right now to shoot down every Israeli plane that flies over their airspace. They are saying nothing. Why? I think the main reason is that they will not back up their words with deeds. They will not shoot down Israeli planes. They say nothing in public because they will do nothing if the overflights take place. If they go public with bellicose threats today, their own people will turn on them if they fail to back up their words with deeds if the flights take place. "You said you would do something. You did nothing. Get out!" This could start internal revolutions in the overflown countries. Silence is golden. It's yellow, but it's golden. This tells me that the overflight countries' leaders think the attack may take place. They would prefer to be accused of having been caught flat-footed by the Israeli Air Force than unwilling to back up a threat. American officials are offering the bipartisan line: "We must settle this through diplomacy." (To which Israeli government officials can respond, Tonto-like: "Who you mean we, paleface?") They are not saying anything about what sanctions against the State of Israel that America will impose as soon as Israeli jets bomb Iran. That is because there will be no such sanctions. Admiral Mullen supposedly sent Israel a statement in early July saying that the United States has not issued a green light for an Israeli attack on Iran. This supposedly means something important in itself. It means nothing in itself. What it means is the United States has not issued a red light against an Israeli attack on Iran. This means that there is no stop sign. There is no red light, so the absence of a green light means nothing. Of course no one has said that the United States will help Israel in such an attack. So what? Israeli officials are not asking for a public offer of American help. If the United States and those governments over which the Israeli Air Force must fly are not issuing public statements at this time warning that there will be significant negative sanctions imposed on the State of Israel as soon as the attack is launched, then this is an implied green light. Do we imagine that senior decision-makers in the Israeli government care a whit about the lack of an official American green light to their attack on Iran? They are as unconcerned about the lack of a green light as Iran is unconcerned about President Bush's threat of sanctions if Iran does not comply with all requirements announced by the Bush administration. Iran knows what Israel knows: the Bush administration is terminal. It will end on January 20, 2009. It has no teeth. Lame ducks don't bite. They merely squawk. Why should we think that either Iran or Israel gives a fig about the red light/green light debate? American pundits may think this debate is important, but why should anyone with common sense think it's important? TIMETABLES Iraq has announced that the United States must pull out its troops. It is demanding dates for this withdrawal. The Bush administration is pooh-poohing all this, and will not under any circumstances announce such a timetable, but so what? There is a timetable for the Bush administration's withdrawal: January 20, 2009. This means that the United States is going to be pressured by Iraq's government to leave Iraq from now on. Most of the troops will be forced to leave Iraq unless things change dramatically. Then what will be done with the 14 major military bases that have been built? As the pressure increases to force us to leave Iraq, and as the pressure from the Taliban increases in Afghanistan, and as the pressure from voters increases to get our troops out of both countries, and as the likelihood of the election of Obama increases, decision-makers in the State of Israel are caught between the proverbial rock and a hard place. If the United States pulls out of the region, the State of Israel will be left high and dry. But there is another possible scenario. If Iran's surrogate Shia forces in the region take on the United States troops in reaction to an Israeli attack on Iran, American public opinion will swing in favor of keeping the troops there, no matter what. "Who do those Iranians think they are? We issued no green light to the Israelis. It's not our fault." If Iran begins to supply weapons to Shia forces in Iraq and Afghanistan, and the American death rate goes up, then American voters will switch back to a pro-war position. At least, this is a possibility. Americans do not like to be pushed around. Any escalation of war in the region will create havoc for the supply of oil. The world economy is moving into recession already; it may go into a true depression if oil goes to $500 and stays there. So, the stakes are enormous. The outcome is no longer in the hands of the United States, Europe, Asia, or any of the other outsiders to the Middle East. The outcome, or at least the trigger, is completely in the hands of the decision-makers in the State of Israel. They hold the gun. Unless the United States and Western Europe tell the decision-makers in the State of Israel that Europe and the United States will impose significant negative sanctions after an attack on Iran, then decision-makers there are going to make a decision based on the self-interest of the ruling party, not the self-interest of American or European voters. They are going to take care of their perceived problem, exactly as we would expect any other national political leaders would take care of their problem. That's why all talk about war being a threat to the self-interest of the whole makes sense only if the Israelis conclude that the economic crisis will be so severe that it will take them down in the whirlpool of economic collapse. They are not afraid of military retaliation from Iran. They are also not afraid of the United States, Europe, Asia, or any other coalition that does not have the backbone to say in advance that there will be major sanctions placed on the State of Israel if there is an attack on Iran. This is why I am concerned about the threat of an Israeli attack on Iran. I am in no way calmed by statements attributed to Admiral Mullen. When Admiral Mullen holds a press conference and says publicly that there is no green light for an attack by the Israeli Air Force on Iran, and that any flyover of Iraq by Israeli planes will lead to shoot downs of Israeli planes by American planes, then I will stop worrying about the threat of an attack on Iran by the Israeli Air Force. How likely do you think such a press conference is? We must face reality: the decision to go to war with Iran is 100% in the hands of Israeli decision-makers. It is not in the hands of the United States, Europe, or Asia. In other words, the economic fate of the West over the next decade is now in the hands of decision-makers who are concerned about the long-term survival of their own country. They are concerned because they do not want to have Iran in the possession of nuclear weapons. Both candidates for President have said the same thing. We have seen saber-rattling by the Iranians with the film-doctored test of the missiles this week. These missiles are militarily useless as weapons against the Israelis. They are as irrelevant militarily as Germany's V-2 missiles were in 1945. They cannot inflict enough damage to make a difference, unless they are used against Saudi Arabian oil fields. But, if they had a nuclear warhead, that would make all the difference. The Israelis know this. So, they are going to make their decision in terms of this long-term threat. The main inhibition against an attack is the possible collapse of the Western economy, which buys Israeli-produced goods. This threat may be sufficient to keep them from attacking. I dearly hope that it is. But it is naïve to believe that they are going to make their decision because of worries about whether Admiral Mullen has issued a green light or not. CONCLUSION When you invest your money, do not ignore the worst-case scenario. Set aside some of your money on the assumption that the worst-case will come true. This is what any military strategist does. He makes his decisions in terms of what the enemy can do, not what it would be convenient for the enemy to do. I suggest that you be aware of this threat. I suggest that you sit down with the family budget and outline what your response would be if the price of gasoline were $10 a gallon or $15 a gallon or $20 a gallon. What would you do? I know what you would do. You would drive less. Ignore the happy-face assessments of the geopolitical strategists. Ignore the happy-face assessment of the Secretary of the Treasury, Henry "Goldman Sachs" Paulson. These assessments are being issued to keep panic from spreading. I am doing my best to encourage people to take rational steps with some of their liquid assets: to hedge themselves against the possibility that there will be an attack on Iran before January 20, 2009. This doesn't mean that I think such an attack is a sure thing. Decision-makers in the State of Israel are going to have to live with $400 oil, just like all the rest of us. They may decide that this risk is too great. They may decide to put up with the threat of a future nuclear-armed Iran. I won't bet all of my money on this. I don't think you should either. July 12, 2008 Gary North [send him mail] is the author of Mises on Money. Visit http://www.garynorth.com.

Recession : With War or Without it ? Isrel vrs Iran// War - and US?? Recession: With War or Without It? by Gary North by Gary North DIGG THIS The world's economy has been in growth mode at least since 1991. China has been in growth mode since 1979. The American economy had a sharp recession in 1991. Asia had a financial crisis in 1998. America had a very brief, very shallow recession in 2001. The Federal Reserve System pumped in money at an accelerating rate after mid-2000 through 2004, and did not go to tight money until the month Bernanke took over: February 2006. Inflation overcame the recession of 2001, and it overcame the crisis of 9/11, but it created the housing bubble and the commodity bubble. The housing bubble has popped. This is going to take the price of housing in the United States lower than it is today. I think 20% lower is a conservative figure. We are nowhere near the end of this popped bubble. The commodity bubble is still in full force. It is a worldwide bubble. The price of energy and the price of rice and other food commodities have received most of the attention. Federal Reserve policy since early 2006 has been one of relatively stable money. There is a lot of chatter to the contrary, but if we look at the two most significant monetary indicators, the adjusted monetary base and M1, we see that there has been very little growth in either. This is why the United States is now either in a recession or is facing one in the next few months. When a period of monetary inflation ends, economies go into recession. The American economy is slowing down, and it will continue to slow down. Both China and India have expanded their money supplies dramatically for a decade. Both countries are now facing a crisis of rising prices. Price inflation is a major threat to the continued prosperity of both countries. China's government has begun to impose selective price controls. This is creating shortages and production bottlenecks. India's government is considering doing the same thing. What both governments need to do is to tell their central banks to cease buying all government debt and all assets of any kind. The central banks need to stop inflating the money supply. But if the banks do this, both countries will experience major recessions. The governments do not want to have major recessions, but they also do not want to experience the effects of monetary inflation: price inflation. So, both of them are tempted to go back to the traditional policy of imposing price controls. This always creates shortages, and it always reduces the rate of growth of the economy. China and India are trapped. AN INTERNATIONAL TRAP The United States is in the same trap. The headlines scream of the skyrocketing costs of energy and food, but the broader consumer price indexes indicate slow increases: maybe 3% a year. This is because families are readjusting their budgets. As the prices of gasoline and food rise, families are forced to cut back expenditures in other areas. So, the general price indexes are not rising dramatically, but families are struggling with their budgets. This struggle will get much worse this winter, when the price of heating oil rises. This will exacerbate the existing economic slowdown. Furthermore, the rising price of oil means a rising balance of payments deficit for the United States. Oil-exporting countries are the main beneficiaries of the rising price of oil. This means that foreign sellers of oil will get the lion's share of the increase of the price of oil. American producers will pay for the prosperity of the oil exporting countries. They will pay in the form of reduced demand for their products. The world is facing simultaneous recession. Meanwhile, the American financial system has absorbed hundreds of billions of dollars of IOUs from home buyers who cannot possibly pay off their debts. They are in the process of defaulting to the lenders. This has created a crisis for America's largest banks, and for several major European banks. We all know the story by now, but psychologically, most Americans have not adjusted to the new economic reality. Most investors have not adjusted. Yes, the American stock market is down by 20% since last October. But still they think a recovery is just around the corner. The media keep saying this. American investors still have faith that the economy is essentially healthy, that there will not be a continuing fall in the stock market, and that the economy will not go into recession and stay in the recession for two or more years. So far, I am giving you the good news. The good news is there is going to be an international recession, rising corporate bankruptcies, bank failures, and retrenchment by consumers because they can no longer pay the rising cost of energy. Why is this good news? Because this recession is going to put a cap on the rising cost of energy. Commodity prices will fall during the recession; this includes the price of oil. NO MORE FISCAL WIGGLE ROOM Americans have steadily stopped saving over the last 28 years. In 1981, they saved over 11% of their discretionary income. Today, they save nothing. They are now in full spending mode. They have borrowed money against their future income, against their home equity, and on simple promises to pay (signature loans: credit cards). They have stretched themselves thin with respect to debt. If oil goes to $400 a barrel, or $500 a barrel, and stays there for a year, American consumers will be in panic mode. They will have to cut their budgets, and they have forgotten how to cut their budgets. They have forgotten how to save. The strategy of the optimists is to tell us that the worst is over economically. This is the government's official position. Chairman Ben Bernanke does not say this. He keeps hinting of more trouble to come. He keeps telling us that the Federal Reserve System is monitoring events. He keeps implying that there is some sort of rabbit still remaining in the Federal Reserve System's hat which they can pull out if the banking system moves into paralysis mode. But he doesn't tell us what these rabbits are, or under what conditions the FED will pull them out of its hat. The good news regarding the economy in general is not backed up by anything specific. The government tells us that the worst is over, but there are almost no indications that the worst is over. The housing market is still in decline. Foreclosures are still rising rapidly. The lenders are not selling foreclosed properties at market prices. Instead, they keep buying back the properties. There is a growing inventory of unsold properties on the books of the lenders. Meanwhile the two major sources of liquidity for the housing market, Fannie Mae and Freddie Mac, are verging on bankruptcy. On Wednesday, July 9, the stock price of Freddie Mac dropped by 23%. Yet its stock price was down over 50% since January. These two stocks have continued to fall. Everywhere we look on the horizon of the domestic economy, there is bad news. There is no sector of the economy that is improving, unless it is heavily funded by the Federal government. Health care has not slumped, because health care as funded by Medicare and other state and local government programs. This means that the Federal deficit is going to get worse in any recession. Medicare and Social Security are non-discretionary spending items. The revenues will fall. So, the supposed strength sectors of the economy are in fact guarantees of a government fiscal crisis. If the general economy slumps, the Federal deficit is likely to go over $500 billion a year. When the recession hits, commodity prices will fall. If the recession does not hit, commodity prices will continue to rise. But rising commodity prices will force bankruptcies in those firms that are not in a position to pass on increased costs to their consumers. This means industries associated with discretionary spending. If your company is dependent upon discretionary spending by the public, your job is at risk. If the recession hits, your company will suffer. If the recession doesn't hit, rising commodity prices will squeeze your company. Consumers will spend their money for gasoline and heating oil, not on the products or services your company produces. The boom economy has not been based primarily on non-discretionary income. The boom has come at the margin: those areas of the economy in which consumers do have the option of spending their money rather than saving it. So far, I have been giving you the good news. The good news is there is going to be an international recession, rising corporate bankruptcies, bank failures, and retrenchment by consumers because they can no longer pay the rising cost of energy. THE BAD NEWS The bad news is that the State of Israel is increasingly likely to launch an air strike on suspected Iranian nuclear weapons production facilities. I have discussed this before. If this happens, the price of oil will skyrocket. This will force massive readjustments of family budgets in every country on a permanent basis. This is going to force producers to fire people out of fear of bankruptcy. Consumers are going to stop buying much in the area of discretionary income. That is, those items that can be cut back will be cut back. This could mean you. If the State of Israel launches an attack on Iran, the economic news will get really bad really fast all over the world. So, the most important question today is whether or not the Israeli Air Force will attack Iran. From an economic standpoint, this is the crucial question. Here, too, the mainstream media have generally promoted optimism. They suggest that the Israelis will not attack Iran. The problem is, they can't point to anything specific that officials in the State of Israel have said that indicates that there will not be an attack. On the contrary, officials there keep saying "no comment." Something else is really ominous. The political leaders in the countries over which Israeli bombers will have to fly are deadly silent. They are not telling Israel in full public view that if Israel sends planes over their airspace, they will go to war with Israel. They are not saying that they are preparing right now to shoot down every Israeli plane that flies over their airspace. They are saying nothing. Why? I think the main reason is that they will not back up their words with deeds. They will not shoot down Israeli planes. They say nothing in public because they will do nothing if the overflights take place. If they go public with bellicose threats today, their own people will turn on them if they fail to back up their words with deeds if the flights take place. "You said you would do something. You did nothing. Get out!" This could start internal revolutions in the overflown countries. Silence is golden. It's yellow, but it's golden. This tells me that the overflight countries' leaders think the attack may take place. They would prefer to be accused of having been caught flat-footed by the Israeli Air Force than unwilling to back up a threat. American officials are offering the bipartisan line: "We must settle this through diplomacy." (To which Israeli government officials can respond, Tonto-like: "Who you mean we, paleface?") They are not saying anything about what sanctions against the State of Israel that America will impose as soon as Israeli jets bomb Iran. That is because there will be no such sanctions. Admiral Mullen supposedly sent Israel a statement in early July saying that the United States has not issued a green light for an Israeli attack on Iran. This supposedly means something important in itself. It means nothing in itself. What it means is the United States has not issued a red light against an Israeli attack on Iran. This means that there is no stop sign. There is no red light, so the absence of a green light means nothing. Of course no one has said that the United States will help Israel in such an attack. So what? Israeli officials are not asking for a public offer of American help. If the United States and those governments over which the Israeli Air Force must fly are not issuing public statements at this time warning that there will be significant negative sanctions imposed on the State of Israel as soon as the attack is launched, then this is an implied green light. Do we imagine that senior decision-makers in the Israeli government care a whit about the lack of an official American green light to their attack on Iran? They are as unconcerned about the lack of a green light as Iran is unconcerned about President Bush's threat of sanctions if Iran does not comply with all requirements announced by the Bush administration. Iran knows what Israel knows: the Bush administration is terminal. It will end on January 20, 2009. It has no teeth. Lame ducks don't bite. They merely squawk. Why should we think that either Iran or Israel gives a fig about the red light/green light debate? American pundits may think this debate is important, but why should anyone with common sense think it's important? TIMETABLES Iraq has announced that the United States must pull out its troops. It is demanding dates for this withdrawal. The Bush administration is pooh-poohing all this, and will not under any circumstances announce such a timetable, but so what? There is a timetable for the Bush administration's withdrawal: January 20, 2009. This means that the United States is going to be pressured by Iraq's government to leave Iraq from now on. Most of the troops will be forced to leave Iraq unless things change dramatically. Then what will be done with the 14 major military bases that have been built? As the pressure increases to force us to leave Iraq, and as the pressure from the Taliban increases in Afghanistan, and as the pressure from voters increases to get our troops out of both countries, and as the likelihood of the election of Obama increases, decision-makers in the State of Israel are caught between the proverbial rock and a hard place. If the United States pulls out of the region, the State of Israel will be left high and dry. But there is another possible scenario. If Iran's surrogate Shia forces in the region take on the United States troops in reaction to an Israeli attack on Iran, American public opinion will swing in favor of keeping the troops there, no matter what. "Who do those Iranians think they are? We issued no green light to the Israelis. It's not our fault." If Iran begins to supply weapons to Shia forces in Iraq and Afghanistan, and the American death rate goes up, then American voters will switch back to a pro-war position. At least, this is a possibility. Americans do not like to be pushed around. Any escalation of war in the region will create havoc for the supply of oil. The world economy is moving into recession already; it may go into a true depression if oil goes to $500 and stays there. So, the stakes are enormous. The outcome is no longer in the hands of the United States, Europe, Asia, or any of the other outsiders to the Middle East. The outcome, or at least the trigger, is completely in the hands of the decision-makers in the State of Israel. They hold the gun. Unless the United States and Western Europe tell the decision-makers in the State of Israel that Europe and the United States will impose significant negative sanctions after an attack on Iran, then decision-makers there are going to make a decision based on the self-interest of the ruling party, not the self-interest of American or European voters. They are going to take care of their perceived problem, exactly as we would expect any other national political leaders would take care of their problem. That's why all talk about war being a threat to the self-interest of the whole makes sense only if the Israelis conclude that the economic crisis will be so severe that it will take them down in the whirlpool of economic collapse. They are not afraid of military retaliation from Iran. They are also not afraid of the United States, Europe, Asia, or any other coalition that does not have the backbone to say in advance that there will be major sanctions placed on the State of Israel if there is an attack on Iran. This is why I am concerned about the threat of an Israeli attack on Iran. I am in no way calmed by statements attributed to Admiral Mullen. When Admiral Mullen holds a press conference and says publicly that there is no green light for an attack by the Israeli Air Force on Iran, and that any flyover of Iraq by Israeli planes will lead to shoot downs of Israeli planes by American planes, then I will stop worrying about the threat of an attack on Iran by the Israeli Air Force. How likely do you think such a press conference is? We must face reality: the decision to go to war with Iran is 100% in the hands of Israeli decision-makers. It is not in the hands of the United States, Europe, or Asia. In other words, the economic fate of the West over the next decade is now in the hands of decision-makers who are concerned about the long-term survival of their own country. They are concerned because they do not want to have Iran in the possession of nuclear weapons. Both candidates for President have said the same thing. We have seen saber-rattling by the Iranians with the film-doctored test of the missiles this week. These missiles are militarily useless as weapons against the Israelis. They are as irrelevant militarily as Germany's V-2 missiles were in 1945. They cannot inflict enough damage to make a difference, unless they are used against Saudi Arabian oil fields. But, if they had a nuclear warhead, that would make all the difference. The Israelis know this. So, they are going to make their decision in terms of this long-term threat. The main inhibition against an attack is the possible collapse of the Western economy, which buys Israeli-produced goods. This threat may be sufficient to keep them from attacking. I dearly hope that it is. But it is naïve to believe that they are going to make their decision because of worries about whether Admiral Mullen has issued a green light or not. CONCLUSION When you invest your money, do not ignore the worst-case scenario. Set aside some of your money on the assumption that the worst-case will come true. This is what any military strategist does. He makes his decisions in terms of what the enemy can do, not what it would be convenient for the enemy to do. I suggest that you be aware of this threat. I suggest that you sit down with the family budget and outline what your response would be if the price of gasoline were $10 a gallon or $15 a gallon or $20 a gallon. What would you do? I know what you would do. You would drive less. Ignore the happy-face assessments of the geopolitical strategists. Ignore the happy-face assessment of the Secretary of the Treasury, Henry "Goldman Sachs" Paulson. These assessments are being issued to keep panic from spreading. I am doing my best to encourage people to take rational steps with some of their liquid assets: to hedge themselves against the possibility that there will be an attack on Iran before January 20, 2009. This doesn't mean that I think such an attack is a sure thing. Decision-makers in the State of Israel are going to have to live with $400 oil, just like all the rest of us. They may decide that this risk is too great. They may decide to put up with the threat of a future nuclear-armed Iran. I won't bet all of my money on this. I don't think you should either. July 12, 2008 Gary North [send him mail] is the author of Mises on Money. Visit http://www.garynorth.com.