Will I be able to keep my home?

The number of foreclosure signs in my neighborhood is a constant reminder of the suffering of a great number of families during the last two years. The President has stated our economy has turned the corner and is showing signs of improvement.
Because of this improvement in the economy some radio and television personalities recently have been talking about the prospects of extreme inflation in our country. Author Dick Morris has stated our economy may have to battle hyper-inflation. Mr. Morris compares our possible future to the country of Zimbabwe whose inflation is so extreme the government has to print one trillion dollar bills.
The housing bubble of 2008 was the single greatest factor causing the recent economic crisis our economy has struggled with. The national foreclosure rate on family homes averaged only three percent (1) in 2008 and 2009 but that was enough to cause the near collapse of some of the largest financial institutions in the country. In an effort to avoid the total collapse of our economy congress passed the $700 billion TARP bailout plan for the major banks. A $29 billion program was authorized to modify home mortgages to stem the flood of foreclosures (2).
One result of this governmental spending is the infusion of cash into our economy. In the past 18 months the Federal Reserve has increased the money supply by 23% (3). I am not an economist but my common sense tells me an increase in the amount of cash circulating through the economy leads to inflation. Anyone old enough to remember the Carter Presidency will never forget the tough economic times our country struggled through.
During the last year of Carter’s term the increase of cash in the economy was only 8% (4) which was enough to create an inflation rate of 10% (5). Fed chairman Paul Volcker had to ratchet interest rates up to 20% (6) to lower inflation back to historic levels. What effect would an interest rate of 20% have on home owners with an Adjustable Rate Mortgage? Consider a family that has a $150,000 loan with an interest rate of 5%. That family’s monthly payment is around $800 per month. If their loan jumped to 20% interest their monthly payment would balloon to over $2,500.
I would assume that most Americans, like me, obtained the highest mortgage amount they qualified for. What will happen if their monthly payment triples? There is the real possibility the foreclosure rate will skyrocket and our financial institutions will be severely strained and could collapse.
Will our President then try to borrow more money from China and Japan to inject into the economy and delay the problem until he is out of office? Will he let the free market system settle the issue causing great pain for a large number of American families? Neither choice is particularly appealing but this President will always be remembered for the decision he makes.
I just hope that my yard does not become another in my neighborhood with a foreclosure sign in the yard.
Carl Goodson lives in Clute TX, a suburb of Houston. He can be contacted at conservativeCarl@gmail.com OR conservativeCarl.blogspot.com.

(1) articles.latimes.com/2008/sep/06/businessfi-mortgage6
(2) www.thomas.gov/cgi-bin/query/D?c110:43:./temp/~mdbs0GWrbG:.
(3) www.federalreserve.gov/releases/H6/hist/hrhist1.txt
(4) ibid
(5) www.inflationdata.com/inflation/Inflation_rate/HistoricalInflation.aspx?dsInflation_currentpage+2