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Date: October 27, 2009
Subject: Phantom Economy Still on the Prowl ... Don't Be a Sucker!

This is
G&G Associates
Tax and Financial Consulting Services

Imhotep (Wisdom To You) All,

If you want to know about the “Phantom Economy,” look no further than Murrieta, a city in Southern California.

Murrieta is located in Riverside County, one of many epicenters of the real estate boom. The latest in a long line of bad decisions; the city just enacted a law that will distort real estate prices for years to come. Watch this spread across the US like the supposed swine flu -aka- H1N1...we wouldn't want folks to stop eating that swine now would we.

This law, Ordinance 404-08, requires any bank foreclosing on a property to keep and maintain that property according to city standards.

But suppose an owner can’t afford their house and just walks away. So long as the bank doesn’t officially foreclose, it doesn’t have to provide upkeep.

DO you see what they’re doing here? No...well let me tell you then. They’re giving banks an incentive to NOT to foreclose on otherwise delinquent mortgages. That not only skews the foreclosure data, but it makes potential buyers believe the real estate market is improving, when it’s not.

This is another piece of what I call the “Phantom Economy.” Ironically, that’s what is really happening out there in the markets. We’re seeing fictitious data, government interference, unrealistic expectations, and outright denial about the real health of the market.

Laws like these keep markets from flushing out toxic loans. And when the Phantom Economy comes to light, real estate prices will continue to fall. Especially in areas where supply greatly exceeds demand.

And it’s not just real estate — it’s other areas of the economy as well.

Take deflation for instance. Before we had central banks, we didn’t always
have inflation.

But in the past 96 years since the Federal Reserve was created, inflation has always reigned, with only three notable exceptions: immediately after WWI, the Great Depression, and now 2008/2009.

Before central bankers were pulling the strings, periods of rampant inflation clustered around times of massive government spending. This includes the Revolutionary War, the War of 1812, and the Civil War. But as governments paid off their debts (a zany historical concept), prices that went up, eventually came back down.

Overall, price levels mostly just fluctuated. A dollar’s worth of goods in 1775 bought about the same amount in 1900.

Then the government started intruding to control the money supply (which culminated with creating the Federal Reserve). This governmentintervention has created the myth that deflation is destructive to our monetary system.

All this government meddling will only end up like the Cash-For-Clunkers program. When the government, for whatever reason, has to scale back, the Phantom Economy will be revealed.

How bad will things be when the truth comes out? That law in Murrieta, CA requires registering “abandoned” homes with the Chief of Police. Apparently vacant McMansions are a health and safety risk.

In many ways, we’re a nation of Murrieta’s. And the absurdity isn’t contained to local governments.

In our G&G Invesment Society October issue, I gave our describers some place to stash your money as this deflation bubble continues to expand. Learn where and how to profit from this bubble by becoming a paid subscriber if you aren't already.

Cash and Precious Metals are Finally the King of the Pyramid! So, prepae yourself for Part II of the Great American Real Estate Crash.

So, what are you waiting on? The Dollar isn’t going to get any better, but surely your portfolio can if you take my advice. Should I say it more Gold and Silver!

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Until next time...protect your wealth.

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Narmer (Think With A Unified Brain and Mind)

Gary Gray
Tax & Financial Consultant, RFC
G&G Associates
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"A Prudent man foresees the difficulties ahead and prepares for them; the simpleton goes on blindly and suffers the consequences."

Proverbs 22:3 -- Living Proverbs

LEGAL NOTICE: This work is based on SEC filings, current events, interviews, corporate press releases and what I've learned as a financial consultant. It may contain errors and you shouldn't make any investment decision based solely on what you read here. It's your money and your responsibility. G&G Associates gets paid a commission from a membership purchase at


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