Posted on 03/31/2021 2:17:48 PM PDT by E. Pluribus Unum
Historically, hyperinflation is often associated with wars, their aftermath, sociopolitical upheavals, or other crises that make it difficult for the government to tax and govern the population. But those are just the symptoms.
Hyperinflation is a man-made disaster arising out of the collapse of the currency, and preparing for it is no different than preparing for a hurricane or tsunami. You may get a little bit of a warning, but you need to act quickly. This article covers the financial preparations that, if made before the disaster strikes, will provide you with additional layers of protection.
Leading up to the adjustments you need to make in your investment portfolio, there are a number of personal finance and resource allocation measures that should be considered as a way to “hunker down” during the worst part of the storm. Some of these measures are just as appropriate for preparing for any natural disaster, so they will serve you well in any event.
A hyper-inflationary environment will be chaotic at best and disastrous at worst. You can expect the walls of society and even the rule of law to come crumbling down. The good news is that, historically, hyper-inflationary episodes only last a few years and as society rebuilds and a new currency is introduced, a new, but more stable normal will emerge. The better prepared you are before the onset of hyperinflation, the better off you will be during and following the calamity.
Simplify your finances: Coming off of the financial crisis and Great Recession, many people have already made severe adjustments to their lifestyle and their finances. In your preparation for hyperinflation, you may want to go more extreme by cutting your expenses to the bone by reducing your debt and lessening your reliance on utilities and fuel. Your objective is to use your excess cash flow to invest in hyper-inflationary hedges, such as gold and foreign currencies.
Eliminate adjustable rate debt: During hyperinflation, interest rates will skyrocket, and along with it the rates on any variable loans or credit cards. Get rid of it now.
Increase your self-sufficiency: You can expect severe food and energy shortages during hyperinflation, so now is the time to increase your self-sufficiency. Stock pile food, water, fuel, medical, and home supplies. Reduce your reliance on electricity by investing in solar powered appliances, manual washers, solar lighting and solar cookers.
Fortify your defenses: With a house full of food and supplies, you will become a target for hungry crowds, maybe even your neighbors. If you plan on staying in place, you will need to batten down the hatches and arm yourselves.
Map out an investment strategy now: By the time the hyper-inflationary storm can be seen on the horizon, it may be too late to make some of the critical investment decisions needed to protect your wealth.
Now is the time to map out your investment strategy that should include specific hedges against hyperinflation, such as gold and silver accumulation, investments in agriculture such as farmland or agricultural companies, and reduce your exposure to US dollar denominated assets. The good news is that there isn’t any reason why these investments shouldn’t perform well leading up to a hyper-inflationary episode.
In normal, growing economies, most people invest for asset growth or income. As the economy ebbs and flows, investors will adjust their portfolios as necessary to counter the changing risks.
For instance, with the recent advance of inflation, the adjustments have included increasing weightings in hard assets and reducing them in bonds, but the investment strategy still remains linked to a long-term objective.
Based on previous episodes of hyperinflation, investors may have no choice but to switch their primary objective altogether to that of wealth preservation consisting of less conventional strategies and methods. Expectations for asset growth or investment income may be unrealistic in the face of a massive and volatile shift in asset values; at least until the hyperinflation cycle has run its course.
Diversification has always been the primary way to mitigate risk over a long-term time horizon. Achieving a proper balance of different asset classes prevents the risks associated with any one class from adversely impacting the overall portfolio.
Normally, various asset classes perform differently than one another during changes in the business cycle, so it is important to choose a variety of asset classes that don’t correlate with one another. For instance, when stocks increase in price, bonds tend to decrease. But because it’s nearly impossible to predict price movements, it is always advisable to have your money invested in both.
Although gold can be expected to perform well in inflationary cycles, it could become very volatile in a hyper-inflationary spiral, especially in the heat of speculation which will drive price movements for awhile. By diversifying into other commodities and foreign currencies, a portfolio could achieve a greater level of stability.
As I eat popcorn watching all the new mcmansions going up here. Just watched a decent house be bulldozed this morning to make way for a bigger one. Covid didn’t slow down construction. The price of lumber isn’t slowing it down. It didn’t slow down during the last housing bust.
Bkmk’ed for disaster.
And it’s coming...
A return to the Carter years. I wonder if disco will make a comeback.
i
Drove thru same small town Arizona several times last fall and couldn’t believe the housing boom. The speed that those new houses are slapped together. Never seen anything like it.
In hyperinflation, money loose all its value. So you may need to hoard on stuff. Houses with nonadjustable mortgages, gold, silver, foodstuff, collectibles, etc. Just stuff! Company shares should also follow the inflation, if the company delivers real product.
Cash under mattress will became worthless.
Remember - the German postwar hyperinflation lasted not too much than two years. By that time the Mark added 12 zeroes. So what you could buy for a mark, you will need a trillion marks at the end. When they stopped it, they issued new marks, which exchanged with the “old” marks 1 to 1 trillion. Your lifesavings, million dollars under the mattress will not buy you even the lollipop!
And, there were worse hyperinflations in other countries.
No...but Stagflation will be here again.
Yeah when I go to Lowes, the construction lumber racks look like the Costco buttwipe shelves a year ago...
I’ve seen braceros putting on shingles faster than any robot could. One guy up on the peak dishing them down like playing cards, and the other with a staple gun working his way up.
Don’t worry folks, we won’t run out of money, they will print more if we need it,...
Ahhh.. Common sense.
I can hold off a small army and be self sufficient, not to mention my close friends said they’re heading my way when the shxt hits the fan.
If they do, holding off the small army will be the entertainment.
Invest in precious metals.
Lead and brass, and be sure it is of the right caliber for your home defense.
If it’s in your neighborhood, just hope they get the exterior finished before the go bankrupt. That way you won’t have to look at the outside rot when rates go up.
Kamalamadingdong will have the defaulted deals finished up and ready to go for the incoming migrants being distributed around the country.
Feds take in 3.7trillion spend 8 I with no end in sight. I wish someone could explain how this does not lead to disaster.
I believe this train wreck is unstoppable and the only thing possible is to try and tap the gravy before it happens.
[Don’t worry folks, we won’t run out of money, they will print more if we need it,...]
That’s what Alan Greenspan once said. (figured you were quoting him)
Greenspan: US “Can Pay Any Debt It Has Because We Can Always Print Money” (video)
http://www.freerepublic.com/focus/f-news/2760087/posts
[I believe this train wreck is unstoppable]
Same here.
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