Hyper-inflation is not your friend Warning! Long post

I know some very smart folks that think they will pay off all debts with Hyper-inflationary dollars.  Heck many people in Zimbabwe became millionaires and billionaires in a day due to Hyper inflation and they went down to the local creek/river to pan for a few flakes of gold to buy grains or rice to eat for the day.  Billions of  Zimbabwe dollars had no value to buy what a person needed to live daily. While being debt free was easy for those with a fixed rate contract. I’m guessing have food, safe water, sanitation, acceptable medical care and security could not be bought by even “billionaires”  unless they had already bought and stored those things or they had something “real” to trade.

WE are already in a depression of course it may make the USA go all Weimar Republic Hyperinflation but both parties will get what they want! The Obama phone and EBT recipients won’t see a cut in cash on the cards but those moneys  $137.00 per person won’t go very far when bread jumps from a dollar a loaf to $10.00 per loaf. COLA adjustments happen once a year by law. When the calculated inflation rate runs over 3% per month instead of 3% a year we could have riot in the Urban areas. Inflation just like interest compounds so a 3% monthly inflation is over 100% inflation for the year. As it builds and doubles at least every 7 months.

We pay 40 cents on interest for every dollar taken in on taxes today and the Government can borrow at 1%. Let’s say interest rates go to 4% to entice others to buy T-bills. The interest alone will eat all taxes in less than3 years and that’s not counting paying any bills of SS, medicare, medicaid, the Military, wars, bank bailouts or Government investments in science, tech or even food subsidies. This will happen at 4% on T-bills. It’s not politics it’s just math. This is a optimistic scenario with interest it could happen in less than a year.

Oh sure your benefits might stay the same at $1200-$2000.00 per month but if it costs over $500.00 to just buy 10 pounds of beans and rice another $500.00 for the rising cost of gasoline for the month. That doesn’t leave a lot leftover for power, rent, a mortgage, water sewer or trash payments. If you are on a fixed income you better be ready and have as much as you can afford to store already on hand or you will be completely screwed. If you have just 50 pounds  each of flour, Beans and rice, basic staples that you can buy and store today for under $200.00 You could easily payoff debt contracts with Hyper-inflated dollars as long as you don’t need to pay the rising inflation cost for items you need to live.Your benefits and or paycheck will not keep pace with inflation.  The Banksters and Crony Capitalist will get first use of the money and while I think they are evil they ain’t stupid. They will buy up/speculate on the commodities the rest of need to survive and raise the wholesale costs or corner the market with those cheap dollars. By the time you get a chance to buy just your groceries or gas the price has gone up so quickly your check will never keep pace with inflation and the speculation in hard assets.  Those oligarchs have acess to the Fed “discount window” you don’t and never will have access.

How to play to stay even against the Fed, the banksters and the PTBs.  I don’t know if you will be allowed to win but you may frustrate them and not lose as much!

  1. Get out of all paper assets. Cash out or take out a loan on your 401 k. Put all your money into a value added hard asset. It might be a sewing machine and good fabric you can make something that adds value to that 2-3 yards of cloth you got on sale.  Silver, gold or an out door BBQ that lets you can smoke and preserve meat.  No, your LCD TV is not a value added asset unless you have it for business presentations.  I don’t know your skill set or what you like to do that adds value to things that are tangible and of use to you or someone else.  But get real stuff you can use daily or commodities you can use in the future.
  2. Get as debt free as possible and get rid of any credit cards and any payments as quickly as possible.  If your house payment is lower than the local rent, underwater or not you need a place to live so your home would be the last thing to pay off.  But cars, boats,  toys payoff or sell as quickly as you are able if you owe a payment each month. Build a cash emergency fund and not a credit card cash limit as your emergency fund.  I believed the crap about how you had to have a Credit card in case you needed to buy a major appliance if your current appliance died over the weekend. You can buy any major appliance for about $500.00 new or for less than $200.00 used.  You can save up a few hundred dollars over the next 12 months, pay cash if you washer or fridge dies and not pay 18%-22% interest rates for using a credit card.  I have not had a credit card for almost 4 years now and while there have been a few times I really wanted to get something right away. I can tell you I love never getting a bill in the mail box for something I “bought” 6 months ago.
  3. Bread is often used as an example of rising costs in western economies.  It is  considered a basic item for most of us in the USA somewhat cheap and probably on most peoples shopping list every week.  So this month you can get bread at the store for $1.00 per 1.5 pound loaf and the PTBs do nothing about the fiscal cliff. The USA books are worse than Greece as far as debt goes and suppose we piss off OPEC and they will renounce the Petro-dollar. China wants to be paid for all exports in gold and sells off all reserve dollars and T-bills.  By the way the “bread basket” of the USA is suffering a multi- year drought. Plus the EPA and congress are beholden too big agriculture and they will not kill the Ethanol mandate.  So every 50 pounds of flour will give you about thirty three home made 1.5 pound loaves of bread and that 50 pounds of flour can be bought for under $15.00 per 50 pounds  add a little sugar, salt and yeast and you could make your own loaves for about 30-40 cent’s a loaf. It won’t matter if a loaf of bread goes up to $10.00 each in the store because you already have all the ingredients on hand and stored to make your own bread for several months to several years. In a sense you have already paid for your bread. Instead of using credit and debt to make you a  slave to the future. You have already paid to have those things you know you will need out of the cash from your past and you are free!
  4. Preppers often talk about what they store as insurance against disasters.  There is an economic disaster coming and it will be world wide. The closest historical analogy I can come up with is the fall of the Roman empire and even that is not fully accurate as we have never had all of the worlds economic powers all on FIAT currency. But just like the Roman Empire the USA is now debasing it’s coinage so it’s time to get to your local bank and or credit Union and buy up some rolls of nickles before they sell out.
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7 Responses to Hyper-inflation is not your friend Warning! Long post

  1. riverrider says:

    darn it, i was happy with my wheat storage level. now you have me doubting. thanks alot! just funnin'(sorta), but i will be ordering more wheat come first of the year. take care.

  2. Jamie says:

    river, didn’t mean to cost you money, LOL Good news is most hyper-inflation doesn’t last more than 2-3 years before it burns out.

  3. A friend cashed out his 401K, lost $40,000, but said he felt relieved once done.

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