Hyper-inflation is not your friend Warning! Long post

December 2, 2012

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.

The end is near….er!

June 3, 2012

No,  I don’t see the world being blown up but I do see most of the major economic powers going through an economic collapse.  Perhaps a huge reset in how we approach our lives and priorities.  Things can move awful fast for example Greece was the basket case but now Spain is catching up very fast and we are seeing folks pulling money or transferring money from the PIIGS to more “stable” banks in the EU Core, Swiss banks or the USA.  I think moving it will not help except for the short term as all the TBTF banks and Government debt are so entwined and incestuous that once a couple of them go they will all go.  The problem is simply to much debt! and you don’t fix to much debt by adding more debt.

It’s like what a lot of Americans did during the housing bubble. They were told house prices would always go up. So they leveraged their home to payoff the debt of student, car loans, Lines of credit and credit cards. If they had stopped there and cut up the cards and did not take on more debt they might/ could have made it. But, then in 4-5 years they would run up all debt again and re-fi the Home loan again. The debt and interest rates just start eating you alive and if you listen to the talking heads in the media that kept saying crap about “Recovery Summer” 2010 and 2011 and housing prices have bottomed out, the Stock market is booming!  So you need to take more risk and more debt. Obviously I don’t believe the MSM talking heads, just look how well the Face book IPO did and a week before the  IPO it was going to save California and make everyone rich.  Last Friday it was being called a “Black Swan” event and may take down the market.

I will want to eat in the future, having safe drinkable water is also high on my priority list.  I know the police are not required to protect me and are incapable of it as in the statement “When seconds count the police are minutes away”.  I want to be somewhat comfortable and not die of heat stroke in the summer nor freeze to death in the winter.  They way I take care of those little issues is to PREPARE the best I can and always keep adding new skills because none of those items are going to spoil or go to waste no matter what happens in the future.

It’s odd I’m starting to see some of the fresh meat and dairy prices coming down here in Idaho of course our gas prices are some of the highest in the country. But Idaho always lags a bit both going up and coming down with respect to gas prices.  Gas prices are coming down in several parts of the country, but the mid west and east will get hit hard with rising electrical costs starting this winter I believe it will start up, so if you heat with oil try and fill your tanks this summer and get some propane backups. Camping equipment may start showing up either in yard sales or on sale at your local mega-mart so if you can get a propane heater and little camp stove it can make a huge difference even if you just use it occasionally it may help out on the power bill.

Keep working on it as no one can see what will happen in the future. Better to be ready 10 years early than 1 day late!