I’m not married and have no plans to buy a house to raise a family in any time in the near future.  I live in a tiny, ancient and practically underground garden apartment that occupies about 400 square feet of space, and I have plenty of room left to add more clutter and junk if I wanted to (I don’t, I actually want to get rid of MORE clutter and junk).  If I have an overnight guest, my queen size bed that occupies all of my bedroom is plenty of room for both of us and my cat.  My 2 person loveseat is all I need for entertaining company — if I want to invite more friends over, I can rent the large bar down the street for a few hundred bucks a night.

I make a solid 6 figures annually including all my revenue streams, so I could easily afford a great home at 2.5X to 3X my income, but I fear the reality of home prices today: they’re still too high.  It has always been my “reality” that home buying requires a few necessary requirements to be fulfilled before taking the plunge:

1. A 20% down-payment calculated from the actual full purchase price of the home (add in everything including inspection and any moving costs),
2. A restricted 12% interest rate on a mortgage (I’ll explain that below),
3. No more than 2.5X income for the actual full purchase price of the home,
4. A 10-15 year mortgage, maximum, payable in bi-weekly payments (that’s 26 payments a year),
5. A full understanding of energy costs, insurance costs, property tax costs and any community association dues (which I would never be a member of or pay),
6. An understanding of loss of time due to extra driving, dealing with road issues (traffic, trains, snow removal, speed limits, etc).

For me to move from my perfectly-located apartment to a home would require a lot of research for a full year: how well does the city or private contractors plow snow in the winter?  How often do commuter and commercial trains block off the main streets?  How long would it take to get to a major highway and airport at the maximum, average and minimum times?  It’s not something I could do just because I love the crown molding and 4 car garage.  It’s a lot of work.

But even if I could afford a mortgage (I can), it doesn’t mean I trust home prices at all in the 15 years I would likely occupy such a home.  For people who may likely spend the rest of their lives in their homes (like my business associate), buying a home now can make sense — Federal tax credits and desperate sellers are huge incentive, if you don’t plan on selling the home.

The biggest reality to me is that the Federal government is past the point of no return in terms of monetary policy.  Greenspan and Bernanke, Federal Reserve chairmen, have destroyed the value of the dollar just like their predecessors did.  The dollar will not get stronger, not against anything, because of the burden of current and future Federal debt.  The only way to save the dollar will be to raise interest rates significantly, from 0.5% to 12%.  This will happen in my lifetime, and it may happen sooner rather than later.  I would be surprised if interest rates didn’t hit at least 6% by 2020, just a decade away.

Mortgage rates aren’t completely tied to the Federal Funds Rate or other Federal Reserve inspired interest rates, but they do have correlation.  If the Federal Reserve realizes that the dollar is on the brink of collapse, it will have to raise rates to at least 6%, and it would not shock me if it hit even 12% in the next decade based on the frustration of younger voters who no longer want to bail out mom-and-dad for screwing everyone’s future with decades of supporting political candidates who just love pork and spending and war and welfare and power.

A high interest rate would encourage a high savings rate (meaning a savings account at the bank, not an investment account in stocks).  When I was a child, regular bank savings accounts paid interest rates of up to 6% — an amazing return on money just sitting in the bank.  These deposit accounts used to also finance mortgages, but today’s process of mortgage financing comes more from Federal Reserve inflationary policies that banks can take advantage of, as well as investor-related funds putting up the collateral for 30 year mortgages.

When the interest rates rise, mortgage rates will rise as well.  The 5% loans you can easily get today will be 12% or even 15% loans, causing mortgages to be expensive unless home prices fall.  When my father bought his first home in the early 70s, his interest rate with great credit was almost 18% and he only had a 20 year mortgage instead of the more common (and psychotic) 30 year term.  The home price was 90% cheaper than the identical home today.  The difference between a $40,000 home in 1973 and a $400,000 home in 2010 is all the responsibility of the Federal Reserve: over those nearly 40 years, they’ve destroyed the value of the dollar, causing prices to rise.  It’s all their fault, and the day will come when the average 20-something realizes this.

Houses that cost $300,000 today at a 5% mortgage interest rate would cost about $1600 a month, not including property taxes and other costs.  If the mortgage interest rate was at 12%, the same $1600 a month would get you a home that costs $155,000 — a 48% drop in the maximum purchase price of the home (and much more reasonable at 2.5X income as you’d only need $62,000 a year to buy it).  But if the loan terms fell to 20 years (likely if the banks had to finance their own loans rather than sell them to investors who have been burned often in the past 5 years), that same $1600 a month loan would only buy a home worth $145,000 — very reasonable at 2.5X an income of $58,000 per year and a down payment of only $29,000.

If bank savings accounts paid 6% instead of 0.1%, young new workers at 21 could and would easily save that $29,000 in just 5 years, buying their first homes by 26 with 20% down and an easy payment over 15 years instead of 30.  It isn’t just likely to happen, it will happen.  As interest rates rise, home prices will fall.  They’ve already fallen 50% in some community in just 4 years, and I have no doubt that we’ll see another collapse in prices over the next 10-15 years.

For those who truly know they will stay in their recently purchased homes for the rest of their lives (until empty nesting comes around), the difference over 30-40 years is not that consequential.  The use of the home for that time frame may cost them an extra $300-$500 a month, which isn’t a big deal.  But if you plan on selling in 5 or 10 or 15 years, it’s a huge risk to take.  You’re looking at a significant loss ($1000 a month+) when it comes time to sell a home that you still owe 60% of the original purchase price on and current prices are below what you owe.  No, thanks.

If you do buy a home, no matter what your interest rate is, you can protect yourself by re-calculating it at 10% or 12%.  Take that payment and see if you can afford it.  If so, make your usual bi-weekly payment, and take the rest of the “probably mortgage cost” and deposit it into the highest yield savings structure you can (money market, savings, CD, whatever).  Don’t touch it, ever, unless you sell.  That’s the pain of buying a home at an unrealistically low interest rate.  It’s also reasonable as it will protect you when it comes time to sell your anchor and bring a 6-figure check with to the closing.

For me, my tiny apartment makes sense.  If I need a bigger space, I’ll happily rent and not worry about the meager mortgage interest deduction on my taxes, maintenance on the house that always falls apart, and risk of being stuck in a 30 year anchor if my business market moves an hour or 10 hours away.  For me, the stability of living in a $500 a month apartment is greater than the “amazing feeling” (like using crack cocaine) of owning a home that honestly will fall in value.

Whatever Obama or the next President does, the same jokers who run the Federal Reserve will still be stealing your savings and your future.  The time to pay the piper will come, and it will come not just in your lifetime but in the next decade or so.  If you don’t think you’re going to stay in your next home for at least 3 decades, buying now is a horrible idea.  I’ll take a pass, but maybe I’ll rent that anchor you buy from you at a later date — and at 50% the cost you pay to “own” it.

But is it because colleges are raising prices to meet the demand for more education, or is there a more sinister reason for the skyrocketing price of continued education past high school?

In a relatively free market, prices reflect the meeting of supply and demand. Sadly, what was once a market of competition among universities for student attention is now a market of inflationary attack by the one player in the game that the mainstream media ignores: the governments.

One area of the education that is ignored by almost every article you’ll read is the amount of actual dollars focused on higher education. When you have independent families and students coming up with their own money to put towards colleges, competitive factors such as cost, degree-strength and overall quality of education allows the buyer of the service (the student) to play the sellers of the service against each other (the colleges). But now we have a third party involved in throwing off realistic supply and demand figures: state and federal funds that increase the amount of money available to purchase an education.

In all situations where a third party involves itself in the payment for services rendered, prices go up. We have this problem in the health care sector, where Federal laws mandating health insurance coverage have caused prices in health care to skyrocket in 30 years. We also have this problem with Federal and state grants, loans and work-study programs throwing more and more money at education: that additional money in the market causes education institutions to raise their costs based on the new supply of dollars in the market.

It’s a losing battle, too: as college costs accelerate due to more and more government money entering the market, more and more government agencies cry for additional grants and loans due to high costs. As the new dollars comes into the market, prices rise to accept them. This trend will repeat itself, over and over, in future years.

In 2008-2009, $180 billion was spent in student aid alone. Of this huge amount, 65% of it was covered by federal government programs. 2007-2008 had 58% of the student aid dollars covered by federal government programs. Is it any wonder that the price of tuition went up almost 7% year over year?

When government subsidizes something, we get more demand for it. Medicare and social security subsidies make health care more expensive; federal tax benefits and direct grants for solar power create more demand for solar panels which means the retailers raise their prices to match demand. Federal loans and grants for education make the price for education go up.

The proper solution isn’t to worry about the educators (the universities and colleges) over-charging, but to withdraw federal and state aid for students. It might sound harsh, but the proper role of education is to provide the service for those who actively want it enough and save for that education, not to give everyone a right to go to school. If we can withdraw these grants and government-backed loans, schools would lower their prices significantly and return the entire higher education market to a competitive playing field.

Poor and middle class students would immediately see huge tuition price drops, and private colleges would be challenged to offer their own financial aid.

$180 billion a year for aid in education in a country of 300 million residents total means that each adult and child in the country is paying $600 per year to send someone else to college. Does anyone see a flaw in this thinking?

The Cook County Board resolved to reduce the county portion of the sales tax to 1.25%. Most major media organizations call it a “half-penny” decrease to make it sound minor, but in the overall financial outlook, it’s huge.

Todd Stroger, the Cook County Board President, vetoed the rollback on Saturday. Stroger says “”We cannot hold our budget process hostage to revenue reports that we won’t have in hand until after January of next year.”

Cook County and Chicago’s ridiculously high tax rate hurts poor people the most: they may not have the access to drive to Lake County (where sales tax is over 2% lower) for their large purchases, and small purchases made weekly can add up to a huge burden for households with minimal income.

Cook County, like most government bodies, has a big problem: it spends too much money on bureaucracy and unneeded services, passing on those costs through a variety of fees and taxes including the sales tax.

There’s something fishy about the expansion of government during supposed economic booms: if people are making more money, why do they need more government? Doesn’t it make sense that times of economic progress should mean less reliance on the State?

It’s a problem we’re seeing all over the country with states, counties and cities fearing bankruptcy due to their splurging in recent decades. Yet the real problem isn’t that consumers are spending less or earning less, causing governments to take in less in taxes or fees (they are), and it isn’t even that the governments are overspending (they are). The biggest problem with local and state governments is that they don’t have the power to do what the Federal government does to raise money: print more of it.

Since 1913, the U.S. government put the power of the dollar in the hands of the secretive and elusive Federal Reserve, a non-government private bank that is in charge of setting interest rates. When you hear that the Federal Reserve lowered interest rates, it means one thing: they printed new money.

When new money is printed, it hurts everyone who has money in the bank or in their wallet. New money causes old money to be worth less as prices go up due to monetary inflation. This is the policy of the Federal Reserve: print new money, destroy the value of old money, and call it a day.

State and local governments can’t print money, so they have to raise taxes and fees, or cut services. I’d prefer to see Cook County cut services significantly, passing on the savings to the taxpayers who will seek out those same services in the free market. But the grossly belligerent and powerful county never wants to reduce its power or financial-greed appetite. They won’t cut services, not in booms, not in busts.

There’s a solution that has existed since the dawn of this Union of States, right in the Constitution: demand a return to real money backed by gold or silver, rather than “fiat” money backed by promises and force.

In Article I, Section. 10 of the U.S. Constitution, it says: “No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.”

How is it that our states (and cities, and counties) have ignored this? When the states use real money, such as gold or silver, there is no ability of the Federal government to destroy its value. They can stick to a wise budget, within their power and privilege, and not have to worry that their budgets will need to keep rising to offset the purchasing power lost when the Federal Reserve prints new money, daily.

Yet they won’t do it, even though it is the law of the land. Many governments rely on Federal Reserve-created economic “booms” which allow the local governments to increase their incomes and increase their budget, thereby increasing their power. When the inevitable busts happen, and they always do (thank you, Federal Reserve), the local governments can cry to the taxpayer and threaten to reduce services if taxes aren’t raised. It’s win-win for the local governments, who don’t really care about the taxpayer, they care about keeping their power solid, expanding it as much as possible during times of crisis.

If you waste your time voting, at the very least ask your local politicians why they don’t stand by the Constitution and require the states to address payments in gold or silver. It makes little sense to do otherwise, and it will keep the states in excellent financial health regardless of what the Federal government does to the power of their paper dollars.