Respected economist John Williams has been tracking the real fundamentals of the economy for many years at his website Shadow Stats.
Williams believes that the printing of trillions of dollars to fight the depression will lead to a "hyperinflationary depression".
Williams is advising people to stock up on gold and booze to bargain with once the hyperinflation makes dollars worthless:
“Three or four years into the future I think we could be in a hyperinflation, within the current year you’re going to see much higher inflation than most people are looking at,” Williams told MarketWatch.
Williams said that his definition of hyperinflation would be a situation in which a $100 dollar bill would become more functional as a piece of toilet paper than a store of value.
“This is a time when you want to preserve your wealth and assets because inflation will knock the value out of it,” he added, advising that people buy physical gold and assets other than the U.S. dollar.
“Then when the hyperinflation hits you’ll see disruption of normal commerce, you won’t have enough $100 dollar bills to buy what you want,” said Williams, adding that items to barter with, such as a bottle of scotch, would be more valuable than actual cash, even in large quantities.
Glad I bought some wine. The trick will be not drinking it!
ReplyDeleteRidiculous about the booze. You get drunks running around the country during hyperinflation...not good. Gold, and precious metals yes...but it's irresponsible to name booze, wine etc..as a bargaining tool. Drunken anarchy?....naaahhh!
ReplyDeleteAnonymous, You may have missed the point. Suppose hyperinflation or even 15% inflation hit, and you had 5 cases of decent single-malt Scotch. The idea isn't to drink it, but rather to use it for barter, since it has it's own intrinsic value.
ReplyDeleteSuppose that you bought the Scotch for $90/bottle, which is almost exactly what your local mechanic charges for an oil change, lube and fluid refill. As inflation forces him to raise the price of his service, so will inflation increase the dollar price of the Scotch.
Neither has become more valuable, but the dollar has become worth less. Even if the dollar declines severely, like to 10% or 1% of its current value, the car servicing should remain about the same value of a bottle of your Scotch.
Hint: The same holds true for precious metals and other assets that store value.
Best regards, Jack P.
Also, your mechanic probably will not drink the Scotch, either. Perhaps he will add it to his other two bottles of good Scotch and his two cases of dried beans and trade them with a contractor for repair of his leaking porch roof.
ReplyDeleteThe value of all of those things remain relatively constant through periods of high inflation, even as the value of the dollar sinks. Best, Jack P.