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What do you think you’d do in a hyperinflation?

I hesitate to ask this question because I’ve found that when speaking from voice of experience, you guys are brilliant. But when we’re talking hypotheticals … well, we’re talking hypotheticals and sometimes all of us merely repeat freedomista cliches.

But here’s the question: What do you think you’d do in a hyperinflation?

I’m not talking about some post-apocalyptic George Romero scenario where starving urbanites are crawling through your windows in search of your stash of freeze-dried potato dices and fruit galaxy. I’m talking about getting along — as people did in Weimar Germany, Zimbabwe, and most other places when their currency went to toilet paper on them.

I’m talking about getting a paycheck. Paying the bills. Buying or bartering for the everyday things you need. How would you keep the lights and heat on in the house? What would you give up first as things began to become too expensive to bear? Do you have the sort of income that might rise as prices do, or would you be stuck with a fixed income? What would you sell? Do you anticipate being able to pay off long-term debt with useless dollars? That sort of thing. How do you think a currency collapse would affect relationships between you and your neighbors, your family, your employer?

I’ve been thinking about this lately not just because of what John Williams and Silver wrote recently. But because … well, you know this economic mess isn’t going to end gracefully, and hyperinflation is one of only a handful of ways out — perhaps the easiest way for a government with lots of printing presses, computers, and “helicopters.”

Personally, I’ve prepped for it about as well as I’m able. But I wonder about many things. For instance, most of my income is from magazines whose subscription prices and ad rates are not at all flexible in the short term. If inflation started running away, they wouldn’t be in any position to generate fast extra revenue to pay their writers and printers and the post office more. But surely a lot of people and businesses are in that fix; they’d develop ways to cope and go on. But what ways?

Another thing I wonder about is the morality of paying the mortgage with “cheap” money. I make a fixed payment at a fixed rate. If the mortgage holder was a megabank — the sort that would happily suck its customers dry then turn to the taxpayers for more suckitude — it could be a gleeful thing to pay it back using dollars that wouldn’t even buy a stick of gum. But my mortgage is owed to the former owners of the house — ordinary people like you and me just getting by. Paying them in worthless dollars seems immoral.

From all I’ve read about hyperinflations (especially Erich Maria Remarque’s been-there-done-that novel of Weimar, The Black Obelisk), morality utterly goes out the window, anyhow. Zombies may not come in the window during a hyperinflation, but cynicism reigns and it becomes every person for himself.

13 Comments

  1. -S
    -S June 1, 2011 4:42 am

    A key question for preparing is how long a hyperinflation will last. I expect the US hyperinflation to be rapid and over fairly quickly, because few Americans have access to an alternative currency and there is not a well-functioning black market. Zimbabwe could use the US dollar, and did in their black markets. Their hyperinflation ended when the local currency was officially abandoned and trade in dollars and other currencies legalized.

    I plan for 6 months to 2 years, but of course that’s just my opinion. If the government manages to prolong the agony, in 2 years there will be functional black markets.

    Prices in the worst part of a hyperinflation will double every month, every week, or even every day. It doesn’t matter if you have a job or business that can raise prices – you won’t keep up. It’s nearly certain that the government will attempt to cap wages and prices.
    I don’t plan to try to keep up. I plan to hunker down and trade when I can. I’ll trade labor, silver, food, whatever.

    I don’t spend much time worrying about how to pay debt – I don’t have any. Part of my preps was getting free of debt.

    I expect the authorities will make it illegal for power companies to cut service, at least without some drawn-out process. I’m not counting on that, but I anticipate it.

    There will be wage and price controls, rationing, and a black market. I plan to eat from my stores sparingly and lose a lot of weight.

    I expect at least some of my family to come to me for aid. I’ll take them in and put them to work. We’ll have to see about feeding them; maybe their job will be standing in lines with ration cards.

    Your last sentence hits the nail on the head. Hyperinflation produces a profound re-ordering of economic life, but the worst part is the debasement of civil society and morality. I’ve found a place to stay where there aren’t a lot of people. Those who live in this area are polite and well armed, and I expect they will stay that way.

  2. Woody
    Woody June 1, 2011 6:08 am

    I am already poor, mostly by choice. I have lived on a very small pension and a few investments since I retired. I own a home in the woods and I don’t have any debt. I have learned many of the skills necessary to keep my home and equipment running and I can barter for most of the rest. I live on the grid but I’m capable of doing without it (although I won’t be at all happy about it). My biggest fear is dealing with the property tax collector when the dollar is worthless. Barter is not likely an option there and I’d rather not swap lead. 🙂

    I think one problem people have is not being able to distinguish needs from wants. If you don’t understand the difference and you don’t know how (or aren’t willing) to live simply, life will be unpleasant. Better to learn how beforehand.

    When money is worthless only skills will have value.

  3. MIke R
    MIke R June 1, 2011 6:51 am

    Hey Claire,

    Working on the assumption that we up here in Canada will not be hit as hard as you guys I think that the hard times will not be that long (1 or 2 years). To that end essentially I will be doing what I am doing now.

    I started back around 1998 when I got out of the city and purchased some land, built a house and moved. As time (and money) have let me, I have all but paid off the mortgage, stocked up on food, seeds and various items that I can barter or use. Oh, I have also put away a couple of bucks (250.00) in silver coins (dimes and quarters). Note, I have never been a fan of hording precious metals for the simple reason that you can’t eat an ounce of gold. As for using precious as tender well with my luck it would be like this… “Hi can I buy some bread? What have you got to trade? I have a gold maple leaf coin. Great, one loaf of bread is one maple leaf gold coin.”

    My only worries now are water supply without power and heat without natural gas. Mind you by the end of this year those problem will be a thing of the past. For the heat, I am looking at a wood stove for the basement. For the water I am looking at a deep well pump.

    http://www.simplepump.com/OUR-PUMPS/Hand-Operated.html

  4. jinmo
    jinmo June 1, 2011 7:01 am

    As a small business owner I have spent the last 2-3 years getting slammed by the recession. Getting lean is something I am pretty familiar with, and by living in the rural midwest I feel lucky. I am lucky that barter is a language that is familiar to those around me. Those that will be hurt the worst will be those that depend the most on the constant flow of money.

    To answer the question “What would you do?”. I would start with hunting and stockpiling food. If my job isn’t going to put food on the table, then I will focus my energy in that area. By quickly dropping the unnecessary “necessities”, I think I will be in a better place long term.

    I would also work to create a structured “barter” system of sorts. A safe place where people can bring items to trade.

    In every economy there are ways to stay above the water, and keep your family feed. By being prepared I hope to see the water coming.

  5. DrillSgtK
    DrillSgtK June 1, 2011 7:28 am

    I would expect that we would see more along the lines of Argentinean style of hyper-inflation. Some of my friends are from there and have talked about it. You would buy stuff as soon as you got paid. You did with out as things got expensive. You bartered with neighbors.

    If you had debt, you suffered. Every short term debt (credit cards) has an automatic interest hiker clause. It went up faster than your worth-now-less dollars* from employment so you didn’t get ahead of the curve. Long term debt (houses, land, etc) had laws changed to allow banks and debt holders to “adjust” for inflation. So the more debt you had, still cost you more of the now worth-not-as-much dollars.

    The people with debt were hurt bad by inflation. People with out debt did much better.

    Using that real world experience we have been paying off our debts, buying things that reduce our dependence on other systems, and saving money. (because under hyper inflation and inflation in general, you need more cash)

    The garden is in, the pantry is getting slowly stocked by copy-canning, the debt is going down, savings are going up, water filtration is on hand now, next up is a small generator followed by a hand cranked flour mill. (The spouse calls the list “our preper netflix que”) We know what we want to get and what it cost and are saving up to get it one thing at a time.

  6. Jake MacGregor
    Jake MacGregor June 1, 2011 11:34 am

    i have already begun to rethink everything based on rule of 3’s … security, air, water, food, shelter, etc … i ask ‘how will i do these when currency no longer works’

    that is why we moved two years ago from ex-urbs of CO Springs to inland N’West very very remote … no debt save small mortgage and that we have 3 year payoff plan

    when shelves empty, pumps run dry crime and violence will soar

    i talk to neighbors and local friends now, do my best to figure who will be there in a pinch, and yes … i know who the likely trouble makers are and who is likely to try and bull-rush us, steal from us

    i believe this fellow on youtube has some insight on perhaps the most important element: people you can trust (ie, a group)
    http://youtu.be/pLkP-tzAZXU

    i have tried twice to start a ‘group’ … very very difficult especially if you are the landowner and most resource rich …. many are interested, few willing to really do the necessary work and investment in resources, skills and time

    every teenager of ours has been through Appleseed – we need to practice more

    i re-oriented every income stream to be counter-recession/depression … examples: starting a CSA (community supported agriculture), and raise poultry and beef (highlands)

    I expect worse than Weimar … and I expect what followed Weimar (global war)

    as re mortgage holders your mortgage is their investment … urge them to sell it (i know a small bank that buys them and could advise how) and invest in tangibles, metals, etc … that way you are dealing with an impersonal and will not be conflicted when it comes time to bail as 98% mortgage holders will when the choice is food v. mortgage … your mortgage holders will be better off, as will you with your ‘sleep at night’ quotient

    final thought: every day i wake and wonder ‘is this the last day of the golden age?’ every movie i see, every baseball game i watch on tv, every day i can surf the web i try to enjoy as if it were the last waltz played on the Titanic

  7. Milt
    Milt June 1, 2011 1:41 pm

    I do not believe that any period of U.S. hyperinflation will be very long. Since the U. S. dollar is still the world’s reserve currency, hyperinflation will trigger a crisis of confidence that will collapse the U. S. and global economic infrastructure rather quickly and things will not be ‘normal except for the money problem’. The only lengthy period will be the rebuilding phase – something like a (hopefully) abbreviated Dark Age.

    It might not be ‘zombies’, but things will be rather rough for a while. If the monetary collapse goes to completion, humanity could be left for a short time with a subsistence agrarian/barter economy. Such an economic system has never supported more than about a half-billion people on this planet. With about seven billion people competing for a pie that only feeds a half-billion, at least thirteen out of every fourteen people alive today would be dead by the end of the first year after a collapse. The recovery will require the ‘re-invention’ of money.

    That is an optimistic forecast, since I am not aware of any negative carrying-capacity change causing a die-off that only brings the population down to the new carrying-capacity – usually there is an overshoot of large proportions.

    By the way, as a grandfather, I really hope I am wrong about this.

  8. bumperwack
    bumperwack June 1, 2011 7:07 pm

    What will swat teams do during hyperinflation?

  9. Mary Lou
    Mary Lou June 1, 2011 7:41 pm

    Mike, how do you run the deep well pump without power? Windmill? I’m asking cause, thats the one thing that really concerns me about no power … no water (I live in the country, have a well, not consistent winds here …).

  10. Ron Johnson
    Ron Johnson June 1, 2011 8:28 pm

    I haven’t given it much thought, outside of a little hard currency. Too many day-to-day issues to deal with to keep body and soul together. I figure that tens of millions of Germans survived the Weimar hyperinflation by learning to trade stuff instead of using money, so I expect we’ll all learn to do the same.

    When I read about the horrible civilization-destroying events of the past…and then I realize that almost everyone survived those events…I relax a little. Humans learn, adapt, and survive. Wars. Plagues. Inflations. Invasions. Civil unrest. They’re almost impossible to plan for. Some mental agility would be useful, and a determination to survive and make the best of it. That’s no guarantee of survival, but it is at least a realization that detailed preparation is probably wrongheaded. Spend your wad on electric generators, supplies of fuel, and canned food and you may find out that the electricity never went off, the gas went bad from lack of use, and food wasn’t really much of a problem (government distribution of large stockpiles of MRE’s?). Maybe what you really needed was a place to get away, and a means of getting away, but you invested thinking one disaster was going to hit, when you actually got hit by a totally different one. I’m not saying all preparation is wasted, but it is the height of hubris to think we can prepare for whatever may happen.

    I’m honing my woodworking skills. Keeping my hand-tools in good order. Putting aside a little precious metal when I can. Learning about container gardens and farmer’s markets. Looking for other sources of income besides retailing shoes. And I am paying attention, daily, to what is happening around the world so I can figure out which way to jump if the crap starts coming down.

    The scariest part of the whole crash thing is our government’s response to it. More repression? Confiscation? Regimentation? Conscription? Haven’t got a clue. As unsettled as I may feel about the economy and my future in it, I am positively terrified of what the government will do. They are so unpredictable.

  11. Anonymous
    Anonymous June 1, 2011 8:52 pm

    The more government plans, the more efficient a free economy is by comparison. How small of a free economy is able to militarily outcompete (permanently maintain defenses against encroachment from) all current attempts at central planning?

    Suppose some libertarians decided to gulch. To earn a living with maximum efficiency, they choose to BREAK ALL THE SLAVE CODES AND BLACK CODES AT ONCE.

    They build a factory to produce infra-red night vision cameras and full auto remote controlled machine gun turrets. These turrets can pop up out of front lawns like sprinklers when home invaders assemble. They set up their factory machines inside shipping containers, bolted down to the floor so the containers can be moved without a lot of packing effort. The containers sit on top of semi trailers. The open rear ends of the containers are backed up to both sides of another semi flatbed trailer used as a common walkway. The walkway is tended from the end with a forklift. It is all parked inside a leased warehouse. In one night, semi-tractors can come and move the whole thing.

    How many workers, for how long, producing how many gun turrets, distributed how, would it take before the existence of the gulch could be made public, yet nobody could squash it? Could 200 workers do it in a year?

  12. Desertrat
    Desertrat June 2, 2011 6:27 am

    We already have stagflation, similar to the Carter era. Consumer prices are rising, and are likely to increase toward the hyper stage.

    Got a job that’s apparently secure? As said above, go buy stuff you need immediately as you get paid.

    Anything with a long shelf life, buy now. If it’s a consumable, rotate in a use-and-immediately-replace fashion.

    “You can’t eat gold”. Nonsense. You trade gold for fiat currency at the going exchange rate and then buy with the fiat currency. I bought gold at an average of $400/oz. It now costs some $519/oz to get it out of the ground. I could sell an ounce now for a profit or wait a while for even more profit.

    Back when we had the gold standard, all that a “dollar” was, was 1/20th of an ounce of gold. That’s it. Freely convertible. Hey, paper money is easier to carry than a bunch of double eagles, right? Back when we had more economic freedom, you could take that paper to a bank and get gold. Whatever floated your boat. Silver was for nickel-and-dime purchasing; a pocketful of silver dollars isn’t a fun thing. Heavy, and wears the cloth.

    Mortgage payments? You entered into a contract, as did the lender. The only difference between hyper-inflation and past inflation is the rate of change. You’ve already been paying with cheaper dollars, ever since you signed the papers. Year by year by year, the dollars have been getting cheaper.

    Off-grid water pumping from a well? The cost of a solar-powered system is a function of the depth. Living in a desert, my deal is low flow to a very large storage capacity. I pump against 260 feet of head, so a half-horse pump is adequate. My needs are met by about $4 to $5 of on-grid electricity per month. Call it ten hours of pump time, and I have a generator if need be. Three, maybe four gallons of gasoline per month?

  13. Jason Calley
    Jason Calley June 3, 2011 9:18 am

    Speaking of off-grid well pumps, if you can afford it, these people make a nice pump designed for use with solar panels.
    http://www.solarpumps.com/

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