How can you protect yourself from the impact of the House Price Crash?

If you own a property, how do you protect yourself from falling house prices? And if you are looking to buy your first home, how do you protect the value of your savings as the financial markets collapse? I have chosen to protect my wealth by buying gold. Here is Which Way Home's guide to buying gold safely and easily...

Background

The years ahead will be extremely challenging and quite frankly, frightening. Until the early 70’s our currencies were backed by a store of value – gold. In 1971 the U.S. suspended the convertibility of dollars into gold and by 1973 all of the major trading countries had agreed to follow suit, letting their currencies float freely against one another.
From that point onwards the world’s major currencies have not been backed by gold, or any other
store of value for that matter. The correction mechanism put in place to prevent economic excess
disappeared.

Imapct

So, nowadays money is just a piece of paper. Its value depends on how many of those pieces of paper are in circulation. Oh dear! The world’s governments and central banks own printing presses and for the last 30 years these
have been running at full speed. The global money supply has increased exponentially, reducing the
value of our hard earned salaries and savings. No wonder oil is so expensive these days – its value
has remained relatively unchanged, but the money used to buy it has fallen significantly in value.

The other impact of the exponential increase in money supply can be seen in the prices of assets
like stocks and the homes we live in. As the ever increasing money supply entered the world’s
banking system the amount of credit which banks could create by re-lending that money increased
at an even faster rate. This easy credit/easy money has fed into house prices and stock markets
around the world, leading to huge price rises and hysteria. Since the economy is cyclical however,
the spectacular prices rises will give way to spectacular price crashes.

The stability of a gold-backed system is gone. House prices were pumped up by a global credit bubble
which has now started to deflate. As soon as American homeowners started defaulting on their huge
mortgage debt, banks and other financial institutions began taking their money off the table for fear
of losing it. The pipeline which flooded the world with credit was suddenly turned off. As the last
few drops of credit dried up and people found that they could no longer borrow or refinance
their existing debts, the rate of defaults increased and yet more credit was taken off the table.

The credit bubble which took years to build will collapse very quickly as the race to withdraw
credit and to lower exposure to bad debt permeates through the banking system.
House prices will crash as the number of homes entering foreclosure rises and
rises and buyers find they cannot borrow enough money to purchase a property.

Protection

So, if you own a property, how do you protect yourself? And if you are looking to buy your first home,
how do you protect the value of your savings? My answer to both questions is the same – you buy gold.
For thousands of years gold has been accepted as the ultimate store of value, protecting its holders from
the impact of falling currencies and credit collapse.

Placing some of your savings into gold can help protect you against the impact of the house price
crash by maintaining the value of that investment as house prices, cash, stocks, bonds, pensions
and other investments fall in value. We will see the cash cost of oil, sugar, wheat, rice, of all of our
daily basics appear to rise dramatically in the years ahead as the value of our currencies fall. But
the accompanying rise in the gold price will ensure that your investment in gold protects you from
the chaos of a paper money system.

Once the economy bottoms, you will be in a much stronger position than those who held property,
stocks, bonds or cash during the market fallout.

Buying Gold

It is important when investing in gold to make sure you buy the physical metal itelf. There are a couple of
providers I use which allow you to buy gold safely and easily online: BullionVault and GoldMoney.
The gold you buy is 100% owned by you. Your gold can be stored in one or more bullion market vaults
around the world (Switzerland, London or New York) and is fully insured. Both companies have easy to
use online interfaces which give you instant access to your gold, allowing you to buy or sell gold
at the touch of a button.

GoldMoney also enables you to buy silver and for a small fee, allows you to switch between gold
and silver at any time.

Owing the physical metal itself is important because in an environment where major banking giants
are going bankrupt and paper intruments like gold futures or certificates of deposit are losing their
credibility, you need to make sure that no one is going to take your gold away from you. If a
bank fails, its assets, including your gold, will be confiscated and used to pay off that failed
bank's debts. The failures of numerous financial institutions is also calling into question the
safetly of having a paper claim to gold. A paper claim like a future or certificate of deposit is
just a promise to give you that gold at a certain time. But promises can be broken.

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