How to Survive Hyperinflation
What is Hyperinflation?
Hyperinflation refers to a sudden and rapid increase in the price of goods and services within a country. It typically occurs when inflation rises by more than 50%. When this monetary inflation happens, you might find yourself spending buckets of cash to buy a simple product such as poutine.
Hyperinflation Can Occur When:
Monetary inflation can occur as a result of several factors. It can happen when there’s:
1. An Uncontrolled Money Supply
The Reserve Bank can increase the money supply within the economy to encourage people and banks to invest and spend more. This process can help promote economic growth and boost a country’s Gross Domestic Product (GDP).
However, suppose this increase in money supply doesn’t result in economic (GDP) growth, businesses will hike prices to ensure they make a profit. When this occurs for extended periods and on a national scale, hyperinflation can occur.
2. An Increase in the Uncertainty of a Country’s Economy or Currency
When a nation fails to manage its economy properly, its citizens and foreign governments can lose confidence in its currency. As a result, the country’s currency can begin losing its value which may result in people hoarding essential goods.
Prices can start skyrocketing, and items such as fuel and food become extremely rare leading to hyperinflation. Economic turmoil and war can lead to uncertainty within a country and can significantly contribute to hyperinflation.
Examples of Real-Life Hyperinflation
Prices in Venezuela increased by 41% in 2013, and by 2017 inflation had hit the country so hard that the government decided to make a 14% money supply increase. Venezuela’s currency started losing its value significantly and its citizens began converting eggs into a local currency. As a result, the price of eggs rose by 3609% and other goods followed suit.
From 2004 to 2009, Zimbabwe printed excessive amounts of money and circulated it in its economy. This process was a tactic to raise funds to pay for war expenses in Congo. However, drought, famine, and land confiscation significantly affected the supply of essential goods such as food items. Hyperinflation started to occur and prices began rising by 100% daily.
Hyperinflation rarely occurs in countries that have reputable and responsible government and economic systems. If this monetary inflation occurs, some hypothetical ideas to survive it are by:
1. Investing in Precious Metals
Precious metals tend to have stable global pricing. Investing in gold, copper, silver, palladium, and platinum before hyperinflation intensifies can help you safeguard wealth. It is always best to choose precious metals that you can trade quickly and those with high demand, such as silver.
2. Owning Properties
Owning properties such as a family home is essential during hyperinflation. During this time, landlords may raise the rent or even request payment in goods or different currencies. Having land will also allow you to cultivate and grow food that can become scarce during hyperinflation.
3. Having a Stockpile of Essential Goods
You can have a stash of important items such as food, water, medicine, first aid kits, tools, clothing, batteries, and fuel. Not only will this stockpile safeguard you from harsh price increments, but you can also sell some of it to earn money.
This is not investment advice and is hypothetical thinking. If you are concerned about any of these topics you should consult a financial advisor.
By: Robert | December 16, 2021 |