Here’s what the 50-year low in mortgages means to your wallet – and your sanity.

Many of you will travel great distances this long summer weekend, to visit hot sandy beaches and cool summer cabins in the mountains

I will not, but do not mourn for me.

I am quite pleased to spend the holiday on Seven Oaks Farm. It is my intention to tend to an outbuilding in dire need of scraping and painting. We have just had several old trees that fell over the winter ground to mulch, and I look forward to carting it up to the gardens.

Come Monday, we will head into the old village to drink lemonade, watch the parade in the morning and the local fire department’s fireworks come nightfall. With any luck, the chief will not ignite his overalls again this year.

But even if he does launch a rocket across the high school’s field (or perhaps especially then), it is all pure gold.

True Confessions

I didn’t always live on an old soybean farm in rural Maryland. I used to be… a New Yorker!

When I was a youngster back in the middle of the last century, we had a flat in New York City’s Greenwich Village. It was a fifth-floor walk-up, living room and two small bedrooms with a tin shower stall crammed into the galley kitchen, and a common loo (with an overhead cistern and brass pull chain!) shared with the other two renters on the floor.

The front room was sunny in the winter and the stoop cool in the summer. When Mom wasn’t watching, we played stickball in the street. And it was a short walk to Washington Square Park, where I could play half naked in the fountain, eat ice cream pops and listen to those nice men play guitar and bongo drums while smoking quaint hand-rolled cigarettes.

A friend wrote the other day that an apartment in my old building had come available, should I wish to acquire a pied-à-terre for when I find myself in “The City” on business or visiting family. However, they warned, prices are now a tad higher then they were in those halcyon days. Whereas we paid some $1,800 for a year’s rent, lights and occasional heat, the going rate for Barrow Street flats is now some $4,000 a month.

I might hope that for that much money, they now come with private toilets.

It’s Different in New York

In the rest of the country, real estate appears to be relatively worthless. The temporary pause to Washington’s $8,000 tax credit appears to have completely unwound the mini bubble in housing.

Mortgage rates are now roughly par to the rate when I lived in the Village some five decades ago. But even magnificently cheap loans and prices that are still 30% off their highs cannot seem to stimulate the market. Sales of new houses have declined 33% almost overnight. Overall demand is down to a 13-year low.

But New York City is enjoying a veritable renaissance: Manhattan apartment sales are up 80% year over year, this despite prices climbing almost 10% over the same stretch.

What makes New York City so different? It sure ain’t the stoned buskers playing James Taylor tunes in the park, my friends.

The Fatal Flaw in New York’s Formula

While the rest of the country is “enjoying” intransigent double-digit unemployment, Wall Street has hired some 6,800 new workers in the past three months to staff its lower Manhattan hives. While those who live across the Hudson River worry whether buying a home with a yard for the kids is really such a good idea right now, the securities industry has raised its king bees’ bonuses by some 17%.

I did not set out today to scrawl some populist rant calling for punitive claw-backs or socialist “playing field leveling.” Frankly, I don’t really believe that such things are proper, practical or even truly possible, so long as the wise guys can employ gunmen and lawyers to protect their wealth or bagmen to simply move it offshore.

What I do want to point out is the delusional flaw in Wall Street calculations, the perfectly natural fashion in which these high-flying gentlemen of high finance are almost inevitably brought down.

Lying – Or Just Blind to the Truth?

It is the island of Manhattan’s social isolation, the very segregation of these “Masters of the Universe” from the rest of the world that always brings them up short.

When you hear Wall Street’s mouthpieces in the media and in Washington tell you that things look fine, that the bottom is in and the economy is recovering, that sales are improving, businesses are hiring and houses are selling just fine, it may be that they are fibbing, trying to foist propaganda on the rest of us so as to maintain their dreamworld a week or two longer.

Or they may simply be describing the view out their own cloistered window.

The Dollar Dives

Regardless, their steadfast divorce from the facts on the ground inevitably cause them to retain faith in entire asset classes that most anyone with horse sense know to be doomed.

As I sit to write to you today, the stock market is putting in its 14th red candle day in a row, as it launches into the next leg of the down-cycle I warned of over a month ago.

The only thing that seems to have slowed the bleeding in the least is a sudden drop in the value of the U.S. dollar compared to most other salient currencies.

Some credit this drop to sudden simultaneous rises in value of those other currencies. I posit the exact opposite: Wall Street has already made the call, and we can now anticipate that Washington will respond by cranking up the printing press and pumping out more free dollars.

Washington Cranks Up the Printing Press

The president and all his various mannequins have chided Congress for even suggesting any fiscal tightening, describing the instinct to curtail record-breaking deficits as “exactly what brought on the Great Depression.” Already I have one wire report speaking to Congressional approval for an extension of the $8,000 homebuyer tax credit through September at least.

I suspect that there is already far too much damage done to slow our decline into the second leg of the “Great Recession.” In fact, I spent much of my previous Taipan Daily column, “What Recovery“, detailing as to how we may already be at zero growth.

Now I am going to give you a rather odd piece of advice. It is addressed to all, but especially to my friends who are still clinging to that granite pebble in the Hudson. Some have called gold the ultimate sanctuary in times like these, the perfect defense against the Axis of Error’s malfeasance.

The Best Defense

There is gold out there to be had, pure gold that can indeed offer you a genuine sanctuary from the chaos that is coming.

Mortgage rates are at a 50-year low. For half of what you are shelling out for your cell in the New York City hive, you could buy a farm somewhere.

Plant tomatoes and corn. Build a shed. Listen to the kids yell as loud as they please. Set your boots on fire with illegal fireworks. Invite the neighbors over for some homebrewed beer.

Is it truly an investment?

Perhaps the best kind.

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