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Classic Videos: Hyperinflation Nation 3/3

by John Rubino on April 9, 2010 · 5 comments

In the third and final part of this series, the National Inflation Association takes us through the hyperinflations, price controls and societal breakdowns of Weimar Germany and Yugoslavia, and makes the case that the U.S. is heading for something similar. “This all but guarantees a dramatic decline in the quality of life in the U.S….Most Americans don’t realize how the facade of civilization could quickly evaporate.” Buy gold, silver, and agriculture stocks.

  • Gargamel

    I can’t believe they have ETFS as a recommendation. There is no guarantee that the ETFS have anything at all. I would bet that many of them will default in the case of an actual hyperinflation.

  • Bruce C.

    The game is certainly on to understand what is the best way to invest or preserve one’s savings going forward. There is no shortage of predictions and analyses and, unfortunately, a surprisingly diverse number of conclusions and recommendations. Just listen to Jim Rogers for a few if you doubt that.

    This video series predicts hyperinflation in the near future and recommends that one buy gold and silver and to invest in agriculture. To me that is a curious recommendation, unless it is meant to be a hedge against being wrong about significant currency devaluation.

    I understand that owning gold or silver should, at the very least, preserve one’s buying power in any environment (inflationary or deflationary), but I don’t understand how an investment in agriculture with today’s currency would even preserve one’s wealth, let alone increase it during hyper-inflation. I say that is especially true for something as fundamentally necessary as food. Examples of the proverbial loaf of bread costing absurdly high amounts of currency are apocryphal. That can only exist in small, localized hyper-inflationary environments, and for very short periods of time. I don’t even remember, or was much aware of, the hyper-inflations in Zimbabwe and Argentina, and I didn’t even know that Yugoslavia ever experienced it. Furthermore, I’m not aware of any spikes in agricultural commodity prices being due to those countries’ plights.

    If hyper-inflation ever exists in a large economy, or most of the world, people will simply starve in a matter of weeks unless they are somehow able to get food. Think about it, how many loaves of bread could you buy at, say, $1,000 each, and then what? How is anyone going to be able to buy anything under those circumstances? ‘That’s why so much currency had to be printed in those countries,’ you say, ‘so that people could buy necessities.’? For all of these dollars that have been “printed” so far, how much of it has found it’s way into your pockets? Even if helicopters constantly dropped currency from the skies so people could pick it up and then go buy food at the grocery store … it’s such an absurd chaos to even contemplate, and on so many levels!

    Okay, so then food is simply and literally given out. People will then be forever standing in lines to get their daily rations, and probably end up eating it while standing in line for their next day’s portion. I may be off on one detail here or another, but the bottom line is that life – and that includes agricultural business – would cease to function in any way close to what we know during a large-scale hyper-inflationary situation. I highly doubt that stocks or ETFs of agricultural anything would benefit under those circumstances.

    Now, historically they would do well in a more ordinary inflationary environment, but so should most stocks. If we have deflation – a scenario I admittedly don’t really understand or expect – then an investment in commodities themselves ( not stocks in just any company) would probably do well because the industry would contract (barring more government involvement) even though demand would remain fixed, or increase.

    I think owning gold and silver, and tradable practical things like food, etc. – are your best chances to survive financially in crazy times, but I don’t expect we’ll see hyper-inflation, even though John Williams of Shadowstats does, and he has a lot of experience and data to back that up.

  • Brad Thrasher

    On the bright side, hyperinflation would probably end the obesity epidemic.

  • ExistentialSkeptic

    I agree with you Gargamel — essentially the ETFs idea is patently ridiculous. Actual precious metals IN YOUR OWN POSSESSION is the only kind to contemplate — the “metals” in the ETFs are a paper fantasy created by the bullion banks to suppress the price.

  • Duane B.

    Re: On the bright side, hyperinflation would probably end the obesity epidemic.

    Brad – That kind of goes along with “fat people are harder to kidnap”, because “fat people will live longer during hyper-inflation”.

    Fat is good high octane (which means slower burning) fuel!

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