Hyperinflation as a likely outcome

[Singlestack]

http://www.shadowstats.com/article/n...al-report-2012

This was written exactly one year ago today. Trying to find out if the 3013 report is available. If you have the economic attention span, slog through the whole thing if you can. However, if (like me) you don't, then read the opening paragraphs and the end.

This is what I think the next SHTF scenario is - economic collapse. It seems inevitable to me since the politicians and the Fed don't have the stones to head it off. They simply enact policies to make it more likely and perhaps make it worse when it does eventually happen. When, not if.

[ChunkyMonkey]

http://www.shadowstats.com/article/n...al-report-2012

This was written exactly one year ago today. Trying to find out if the 3013 report is available.

Thanks for the post.. I dont know if we last til 3013 though.

[Singlestack]

oops, 2013!

[Jamnanc]

Ummm if hyperinflation occurred, wouldn't you be paying off your house with readily available cash that was worth only pennies on the dollar after the crash as the loan would still be in usd?

[ChunkyMonkey]

on the topic, but off topic slightly.

if you had the cash to pay off a home and hyperinflation was coming, would you pay it off? or just live in the house, knowing if the government and banks fail, nobody will be coming to foreclose?

yes, mine is paid for, but I am looking at a larger ranch. And I will probably need a mortgage to buy it.

If the govt fails, the banks will fail. is there any way realisticly someone is going to come throw you out?

Nope... before the Dollars start devaluing.. take out as much loan as possible. In 2008, while others crashed and burned, we got lucky and bought a bunch of rental units and took out bundle loans on them. Pre 08 $ is about 30% more valuable than currently. Heck, price of milk tells everything. Rent, gold, gas, etc etc

For ever $1 I spend to pay the monthly payment, I receive $4 in rental income.

[hollohas]

HBAR, that depends on if your income will increase as inflation does. You might be able to afford the ranch mortgage now, but if your income stays the same after a hyper-inflationary event, then you'd be spending more of it on food, etc. and might not have enough left over to pay the mortgage. If the banks will bother foreclosing on properties after a hyper-inflationary collapse, I don't know. To the best of my knowledge, people were foreclosed on during the great depression but maybe they wouldn't be in a bigger economic collapse.

Ummm if hyperinflation occurred, wouldn't you be paying off your house with readily available cash that was worth only pennies on the dollar after the crash as the loan would still be in usd?

I don't suspect cash wouldn't be readily available. Any of your cash would be coming from your job if you still had one, however, I don't think most employers would be giving raises to keep up with the inflation. So if hyperinflation were to hit, you're income would still be the same amount of dollars as before but gas/bread/milk would cost a lot more. If you're employer paid you more to keep up with inflation, you'd be able to pay your mortgage off in no time. That'd be great.

However, I think the more likely scenario would be most people would be spending a much larger percentage of their income on food/gas such that they wouldn't have enough left to pay their mortgage or especially rent. Mortgage's payments would stay fixed. But imagine a person who's rental contract expires the month after hyperinflation. One month they were paying $1200/month and the next the new market rate of $5000 or more...but their income was the same? That person would be kicked to the curb. And this is where Chunky's comment above comes in. His income would go up with inflation because he would be able to charge his rental customers more (assuming there were renters who could pay more...a fairly big assumption). He's protected himself in that way. He'd be fine. But many people's income wouldn't go up and they'd be screwed. We live in a largely service based society...in other words, a society that doesn't produce goods. If you or your employer sells services and not goods, it's a safe bet your paychecks won't increase as inflation does. However, if you are in the business of selling an actual product (bread, gas, shelter) then your income will likely increase as inflation does.

What about folks on a fixed income (SS or other retirement)? Checks wouldn't keep up with hyperinflation. So an elderly individual who makes $750/month in SS would still be making about the same even if bread hit $100/loaf. Think that person could then pay their fixed mortgage or rent after it was adjusted to the new market rate? Nope.

[hollohas]

Hollohas, what if instead of paying the mortgage down (as in maybe a third in cash now) would it be better to invest that cash in precious metals? then if hyperinflation came, you might be able to pay off the mortgage with the increased value of the precious metals?

I am by no means an expert, but I do think precious metals are a great way to protect your savings from inflation. 1 oz of gold now is somewhere around $1600. Maybe today that could pay a month or two of mortgage.

If you keep your 1600 dollars in the bank it will still be just $1600 after inflation and therefore wouldn't help you payoff your fixed mortgage any faster. In fact, if it was two months of mortgage before, it might only be one month after because you might need to spend the other part to cover the increases in food, etc.

But 1 oz of gold would very likely increase at the same or similar inflationary rate as the dollar so after a major inflationary event 1oz of gold could very well payoff many more months of that fixed mortgage and cover the increased food cost too.

However, gold/silver are somewhat volatile so most economists suggest you don't dump all your savings into them.

But that's simply my opinion so if you take this as advice it's worth exactly what you paid for it.

[Busta Prima]

All money is fake. If most countries around the world are in debt, there is someone should be equally ahead but there isn't. Debt is just as fake as the money because the moment you print it, there is debt. There does not exist enough currency to pay back the debt that exists. Now the BIG problem will come when other countries stop taking our fake money and demand something else as payment for the things we depend on, namely oil. Worry about oil, don't worry about fake money.