What happens to debts during hyperinflation?
🗣️ DISCUSSION 💬
Just trying to wrap my head around hyper-inflation. If the US Dollar goes the way of the German Mark from 1923 and the USD is worthless what does that do to existing debts? If I could walk out onto the street and scoop up $500,000 from the gutter could I pay off my house? I'm sure the banks that hold the mortgages have safe guards in place to protect them. What am I not understanding?
Hyperinflation rewards debtors and punishes savers.
That's why my "savings" is done through stacking and stocking up.
Stacking? as in silver and gold? Stocking up? as in food?
Food will definitely serve as a great currency should we get there.
Yes, yes, and yes.
Also, preparedness in other areas, such as solar power, propane, canning, tools, garden, seeds, books, etc.
Where do I buy silver? I 2ant to get my hands on some physical metal.
I have used Apmex.com in the past. There are also coin shops in most towns, but their prices might be high.
I lean toward junk silver, that is used American silver coins that anyone can recognize. They are in smaller sizes that are useful for buying smaller items. One-ounce silver rounds are only good when the other party knows what they are, and they're only good for larger purchases.
Gold is good for even larger purchases. I would stick with the small 1/10 ounce coins.
Thanks so much, this gives me something to go off of.
I'll check my area for coin shops and visit them.
How do you store/protect silver coins? Silver tarnishes, right? If they are used or pre-owned, are they usually still in a protective minting case?
My coins are in a box. They are anywhere between 60 and 100 years old. They have never had any special protection, so I'm not doing any special for them now.
On the other hand, brand new silver rounds are bright and shiny. If you want to keep them that way, keep them covered. Tarnishing doesn't really hurt the coins, and you can always polish them later if you want them to be shiny again. The few that I own are not enclosed in plastic and have tarnished. I probably won't be polishing them.
Awesome thanks for the extra info. I’ve been thinking I should be grabbing some metal since I realized we are going to win this fight. Hitting the stores this weekend
https://findbullionprices.com/closest-to-spot/
This is where I always go to find the best silver/gold prices. They compare every bullion dealer and show you the cheapest in a very simple breakdown.
Wish I had found this site years ago LOL
Awesome thanks for the link!
The debt would lose its value (which would be beneficial to the Debtor). Think if you took on a debt in 1950 but could pay it off with today's inflated money supply. You could buy a lot with, say, $10,000 in 1950 but it would be relatively much easier to pay off with today's money.
This sounds interesting and familiar. But could you respond again like I'm in 8th grade? In a different analogy? Thank you.
Let's say you somehow know for a fact that an inflationary event is about to happen and the dollar is going to lose half of its value. That means that whatever used to cost $1 will now cost $2. Food, houses, education...it will all cost twice as much. BUT your labor will also cost twice as much. If you were charging $50,000/yr for your services before, you'll be charging $100,000 after. Unfortunately it won't do you any good to be making that extra money because everything will cost twice as much. You will be living the exact same lifestyle except all the numbers will be double.
BUT let's say you took out a loan for $10,000 right before the inflationary event. When you took out the loan you were making $50,000 so the total value of the loan would equal 20% of your earnings. It will probably take a number of years to pay off. But after the inflationary event you will be earning double and paying double...that is, you'll be paying double on everything EXCEPT for on the loan. The loan is still for $10,000. That won't change and your payments won't change. So after the inflationary event you'll be earning $100,000 and the $10,000 loan will represent only 10% of your total earnings and will become much more manageable.
Of course, the above is all theoretical and a big inflationary event isn't going to be smooth. It will probably be very disruptive to the economy. Maybe you'll lose your job. Maybe the rise in wages will lag behind the rise in prices. Lots of things could happen that might make a loan much harder to pay off. But if you didn't have to worry about those things (because you were already super rich), you could do something like take out a loan for $10,000, use the money to buy something (like silver at $23/ounce), wait for inflation to strike (which would raise the price of silver to, say, $46/ounce), then sell the silver, pay off the loan and pocket the difference in cash.
Thank you.
Really great explanation. I appreciate the time and energy to put in to help me (us).
Let's hope the plan doesn't involve repeating 1923 Germany. Thanks fren!
or 1933
Unfortunately it's been 1933 since about 2008
Well, at least we know we'll own nothing and we'll be happy ;)
If I own nothing, I'm going to be angry...
Hyper inflation will make other elements of living(Gas, Food, Taxes, clothing etc...) so expensive that making a mortgage payment is irrelevant. Great, you own a home but you're starving or you can't make the house payments because a cheese burger cost $1800.00.....
Imagine an inflation rate of 400% annually, Hyper inflation....
Most houses are made of wood. Termites eat wood. A vaccine can be made to alter our DNA to include termite genes --> Humans can eat their homes.
Application of 21st century tech to 21st century problems.
Modern problems require modern solutions. Kek.
I read that as: Moderna problems require Moderna solutions. Ha!
kek
I hadn't thought of that! That's what I love about this community. Always thinking outside the box.
It is much more complicated than what people are portraying here. Hyperinflation can and will lead to a great depression. So the people saying that everything doubles including your paycheck are way off.
My boss looked dumbfounded when my reaction to my most recent raise was "that barely even keeps up with inflation this year, is the company even trying to retain employees anymore?"
My company gave all the executives a 25% pay raise, and the Directors 20%, the Managers 15% and everyone else a 10% raise out of the blue last month as a thank you and a "please don't quit" raise.
A bunch of the low level workers created a petition and had a ton of signatures that asked the CEO to take the 25% raises away from the executives and distribute it to everyone below Manager level.
About 40 people got fired and none of the raises were changed.
Yeah even if your loan isn't fixed rate, the inflation rate will increase much faster than the bank (or the IRS) can raise interest rates.
In general its the middle class that gets hit the hardest. People with hard assets are ok because their assets don't disappear and rise in notional value, and people who live paycheck to paycheck end up seeing wage increases due to the inflation (still at a lower quality of life). But anybody who saves all their money in government paper will soon have almost nothing. Of course there's deep economic issues with supply chains that arise, so it's not fun for anyone on ground zero when this happens.
Probably the best strategy, if you know hyperinflation is coming, is to take out a ton of debt and buy hard assets, like a farm or gold or even crypto, altho that's a bit riskier.
yeah, trying to convince my wife to liquidate our savings is near impossible. Feels like it's getting close, but how would you know. I would imagine by the time you know everyone knows.
There's a reason prophet and profit sound so similar...
Hyperinflation and debts equal a war. One that makes the debts go away. The owner of the money has to recoup their losses somehow.
To answer your question what occurred to rectify it? A war? Enslavement to a central bank or the International monetary Fund?[
This is not the first time hyperinflation has occurred. I believe in US it was in 1970-1990. It resulted in extreme gasoline prices and consumer goods including if I recall 18% introductory mortgage rate. Proudly offered by banks.
Zimbabwe and their hyperinflation created civil unrest and a parallel economy, ie black market.
DeutscheMark hyperinflation is to me not the greatest of what occurred, other than the bankers got their money back by funding WWII on both sides, Allied and Axis.
No real answer to your question. I look forward to others that chime in.
In theory, the benefit of hyper inflation is that you’ll be able to pay off your mortgage and debts with nearly worthless paper money. In reality, you’ll get the worst of both worlds. As hyper inflation kicks in, your wages will remain stagnant for the immediate future as you struggle to keep your job and your company struggles to stay afloat. Immediately the cost of your interest payments will skyrocket. This will cause a great number of people to default if they haven’t locked in a rate. It will probably take a couple years of this before the printing press money reaches the average person. By this point they’d have lost ownership of everything they (thought they) owned.
Not financial advice, but If you think rates will skyrocket, then consider locking in rates on everything you can right now. Buy some gold/silver as a hedge to currency (physical metal, not paper certificates). Be stocked on food and other key supplies.
And by rates that means utilities as well if you can, I've already locked in my natural gas and electricity rates for the next three years when I saw how quickly they were rising at the start of this autumn.
Keep in mind any debt you still have will have really high interest. And even if you pay off your house, what will the taxes be?
It's criminal that you can spend your whole life paying on something to own but you will never own. Property taxes are criminal.
Taxation is theft.
It's the fee of using their paper money 'service.'
Lawful money redemption is the only way I have heard, not to pay tax. I've never done it, however.
Lawful money redemption?
My neighbor built his house in 1972 and paid it off in 2002. He was living mortgage free for 20 years. Then he and his wife retired. A month after his retirement he found out he had brain cancer. His insurance lapsed for some reason and he basically spent his entire savings trying to treat his cancer.
Then he died and left his wife basically penniless, but she still had the paid off house. She got sick and was having a hard time selling the place because it needed some repairs and out of the blue she got hit with a huge property tax bill she had no idea was coming. I ended up paying it for her so she could sell the house and move into a retirement home.
Her house was up for sale and two kids broke in and were stealing shit from her, she went to go downstairs to see what happened and fell down the stairs and broke her hip and fractured her spine. The kids didn't even call an ambulance, they just ran for it. I found her the next morning when I went to make her breakfast like I always did.
She went to the hospital where she tested positive for Covid and she died two days later. The bank took the house and sold it to some Chinese company that flipped it for 100k more than she had it for sale for. It was bought by an Israeli company that rents it out for big bucks to some young couple that just moved here from California and do nothing but talk about how much they miss California and don't blow their leaves.
holy sh*t
I totally agree. There are so many f*cked up things about our country it's difficult to prioritize which ones need fixed first.