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?
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...