Hyper Inflation

[tommytebco]

The story of bushels of money depreciating to the point of only being able to buy a pair of shoes or a loaf of bread has really happened a number of times in history.

Reference Germany in the 30's, the USA in revolutionary war era, The confederate States during the Civil War and several South American Countries right now.

All the dollars we "saver"s hold in IRAs could become relatively valueless nearly overnight. The fed keeps printing money and sooner or later, the Axe is going to fall. What are some common sense actions to take today to protect our stash?

I searched the archives and couldn't find any mention of the subject using a simple search "Inflation". Have I missed this discussion?

[IlliniDave]

Establish financial accounts and purchase real estate in another country that won't be adversely effected if the USA implodes. Some people think gold/commodities are good hedges, but they're hard to spend in some environments (especially if you don't have physical possession of them). You could also try searching for 'preppers' and 'doomsday preppers' for ideas on how to store and guard your commodities.

[jennypenny]

There have been some discussions on the Alpha Strategy (related) ...
viewtopic.php?f=13&t=6618&p=97094
viewtopic.php?f=7&t=6636&p=97345
viewtopic.php?f=3&t=5263&p=84262
viewtopic.php?f=4&t=2389
viewtopic.php?f=3&t=119

I thought there was another thread about keeping debt if you anticipated high inflation, but I can't find it now.

I go back and forth on how how to prepare for high inflation. Needing very little [money] seems to be the best hedge against it.

[JL13]

Most investments that produce something are relatively immune. If you own a house that can rent for $1,000 now, after inflation it will rent for $10,000 per month, no change in real value. Ditto stocks, if Coke sells a 2L of coke for $3 now and keeps $.30 then after hyperinflation it will sell for $30 and it will keep $3.

THe real risk is investments that don't produce anything tangible. Rental property and businesses produce things of value to people that they will work and trade for whatever the currency. On the other hand, Gold for example, while ostensibly an inflation hedge, can't actually grow. 300 years ago an ounce of gold would buy you a well tailored suit. Today it will also. 100 years in the future after hyperinflation destroys the dollar, a well tailored suit will cost you $30,000 or 1 ounce of gold. Your actual gain in real net worth over those 100 years will be 0.

[chenda]

The hyperinflation in Germany happened in the early 1920s, not the 1930s. Our present situation closely resembles the latter. For obvious reasons, this is very important...

[George the original one]

From a USA perspective, if you have residence, food, water, and transportation covered, then hyperinflation will hit you in the "soft" categories of insurance (mandated health insurance rather than actual healthcare) and taxes and the "hard" area of maintaining stuff.

Residence = own your home, whether mobile or fixed
Food = grow/harvest your own as much as possible
Water = don't rely on municipal
Transportation = human powered

Maintenance = DIY, but supplies are vulnerable

[7Wannabe5]

Meat rabbits in the basement, or just relax and do the work in front of you.

[vexed87]

If wealth preservation is your main concern, gold does well in inflationary environments as the 'flight to safety' pushes up the price, the permanent portfolio is worth looking into.

Otherwise as others have said, become as independent of the financial system as possible.

[tommytebco]

I tried the "gold solution" in the eighties. Didn't work out well. I bought high during the big inflation scare. Price fell almost immediately. Luckily I just tested the waters. Finally gave each child a Krugerrand for college graduation with the admonition that "All that glitters is not gold" and my related experience. I kept one as a reminder to myself.

So I'm not a big fan of gold.

I am concentrating on moving my portfolio into real assets like REIT's and out of financial things. Dividend stocks have been kind to me. I own my home outright. I am debt free.


7wb5, but rabbits stink so much. Maybe chickens?

[George the original one]

If you want meal-sized meat with minimum work, rabbits. Stink is due to not cleaning cages. If you want eggs, then chickens are a natural, but plucking is more work than skinning IMHO.

And if you want real stink, try breeding goats. Goats are nice if you're trying to feed a family, but not so good for couples unless you have freezer space.

[Did]

Does anyone actually breed rabbits for meat?

Seems a little extreme, dare I say, rearing them in a dank basement.

Guess free range is a little harder.

[workathome]

+1 Permanent Portfolio or "Golden Butterfly"

[7Wannabe5]

tommytebco said: 7wb5, but rabbits stink so much. Maybe chickens?

Well, I must admit I have only ever kept a rabbit as a pet, but Dolly Freed, the author of "Possum Living" and her father raised meat rabbits in the basement of their suburban home as their primary meat source. Aquaculture is another possibility, but harder to hide from the marauding hordes or civil authorities. I would like to think that if Barbara Kingsolver can kill a turkey ("Animal, Vegetable, Mineral: A Year of Food Life") then I could kill a rabbit, but ...might take a few weeks of nothing but dandelion greens to steel my resolve.

[Ego]

It also happened in Zaire (Republic of the Congo) while I was there in the early nineties. When you acquired money, you immediately spent it on something because the next day it would be worth less. People stopped using coins entirely because it took so many to buy something.

Owning tangible things that allow you to create, work, house yourself, and feed yourself seems like a reasonable hedge to me. Along with the skill to use said items.

On the other hand, we met people who stayed in Zimbabwe because they had accumulated tangible things in case of SHTF. Loss aversion is strong and makes otherwise ration people cling irrationally to possessions, even if it is likely to cost them their lives.

https://www.youtube.com/watch?v=7WshhNHkggM

[tonyedgecombe]

I would like to think that if Barbara Kingsolver can kill a turkey ("Animal, Vegetable, Mineral: A Year of Food Life") then I could kill a rabbit, but ...might take a few weeks of nothing but dandelion greens to steel my resolve.

There is a tool available to make it easier.

[bryan]

What are some alternatives to gold? Silver, jewels, something like Bitcoin... Any out of the box alternatives that aren't whim to being fads?

[vexed87]

@bryan, you can try other precious metals, but nothing else behaves like gold, it has a a unique pedigree because of its 5000 year history of being a store of wealth. If you are adverse to getting your hands on physical, holding some commodities (like crude oil) might hedge against inflation, but commodities respond to the whims of their own markets so they can be risky. I personally wouldn't take the risk with other commodities, as we have seen what has happened to oil prices recently, commodities can still crash even as the price is adjusted for inflation.

Stronger foreign currencies are also an option if the US$ starts to be inflated away, but again not without risk. We see a lot of Chinese money feeling their own devaluations, propping up foreign RE markets.

There are also gold ETFs or gold mining stocks you could hold too, but these have their own issues/limitations and may not respond in the same way as gold to a hyper-inflationary environment.

I tried the "gold solution" in the eighties. Didn't work out well. I bought high during the big inflation scare. Price fell almost immediately. Luckily I just tested the waters.

@tommytebc, gold is arguably the best asset to hold during an inflationary period, buying gold well into the rally is no different from buying stocks well into a 20% rally, sounds like you got badly burned and a result have an understandable mistrust of an asset class. This is exactly the reaction most novice investors in stocks would have buying their first stocks prior to 2008 meltdown. You should have already owned gold in advance of the inflationary period and began selling into the rally (rebalancing) and in turn started buying what was cheap back then, bonds and/or stocks depending on the year, buying into the rally was literally the was the worst time dip your toes into gold

Read this:
http://www.crawlingroad.com/blog/2013/0 ... periences/

[Ego]

The situation spelled out was hyper-inflation. If that were the case, I would much rather have a loaf of bread in hand on my terms than a promissory note that may purchase one or it may not.

Hyperinflation. Exactly. That's why I used Zimbabwe as the example since they experienced an inflation rate of 79,600,000,000% in 2008 and had this note in circulation before removing 10 zeros from the currency.



Imagine a person with ERE levels of wealth in Zim in the mid 1980s.... or 1990s.... or 2000s. Now fast forward to today. Who fared better, the person with liquid wealth who moved early or the person with stockpiles of stuff in Zim and a Rhodesian pension who stayed too long? As you know, Zaire experienced something similar. In South Africa it is not unusual to meet old white Belgian Congolese with incredible stories.

What is the likelihood of that happening here on a national level? Pretty low. Consider, though, that there are some places in the U.S. where similar changes have occurred locally. These are places where property values experienced devaluations near equivalent to those experienced in Zim.

Owning tangible things that allow you to create, work, house yourself, and feed yourself seems like a reasonable hedge to me.

In those places the currency didn't devalue. The tangible things did.

[Dragline]

A good book to read about this is "When Money Dies", which you can find for free here: http://thirdparadigm.org/doc/45060880-W ... y-Dies.pdf

The book chronicles the German hyperinflation episode of the early 1920s. Ego is correct that pensions and anything fixed were completely wiped out.

Besides gold, food, hard goods, and stable foreign currencies, the other thing to buy was shares in industrial companies that had hard assets. In such circumstances, the stock market returns tend to match inflation but are wildly volatile. You don't want to get holding the bag on any financial concerns, though.

[Ego]

I don't want to be the guy wrestling someone for the last loaf of bread at the store......

My counter-argument though would be that the person having a working, fueled vehicle with the means to protect it and its occupants has a much better chance of getting out of a shit-hole than the person who calls for a ride from Uber.

Understood. The question is, who would be most likely to stay in a crisis area to the point of wrestling for the last loaf or fleeing with guns-a-blazing? I look to (recent) history for examples. Africa shows that those who stayed were those most affixed to the earth.

Very few people would question my insurance choices however.

That's precisely why I challenge the notion whenever it comes up... because so few people question this rationale. It is the conventional wisdom.

When ones majority or entire wealth is represented in digital numerations in financial accounts or the health of the financial markets than I would argue that one is exposed to external threat.

Agreed. That's why skills, social intelligence and options are so important. Also, Africa and Latin America have shown that the person most at the mercy of the whims of one particular financial market is the person most affixed to one particular place.

The world is changing fast and the rate of change is accelerating. Each incremental increase in the rate of change makes the freedom to exercise options that much more valuable.

We can argue to what extent, but like the chance that our homes will burn to the ground, the chance is there, and to ignore the possibility is not being prudent in my opinion.

When you are not heavily invested in the home then its burning is an inconvenience rather than a life damaging event. One of my tenants had her car stolen a few weeks ago and vowed, after running the numbers, to use Uber, Car2Go and her feet from now on.

The whole point of Jabob"s book was to be a Renaissance Man, right?

I think the crux of our difference comes down to the ways we each define Renaissance Man.