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[heydude6]

Frankly, I'd urge everyone here to at least consider the upcoming crisis. You may not end up being affected, but a lot of people will be and you should at least do some research to see if you'll be one of them. Otherwise, you may have to live in times even more unprecedented than the current one.

What kind of research can help one find out if one will be subject to hyperinflation?

Well the thing is, economic disasters like this tend to be quite hard to predict. There are usually a lot of scattered data points that don't say much on their own, and only create a picture when they are aggregated together. Even when you go through this kind of effort the picture tends to be fuzzy and it only becomes crystal clear after the disaster has happened and you have the benefit of hindsight.

The real kicker though is the fact that you're looking at economic data. Economists track hundreds of things, and often name them with confusing acronyms. Without training, it's incredibly difficult to figure what is you're looking for, let alone how to interpret it!

At the end of day, there's only so much you can do on your own. Some things you can only learn by listening to an economic guru and hoping you can trust them. Good luck finding one that isn't exclusively focused on the USA.


If you really want to get started, I would first try to figure out how much local currency your government has printed. Here is a link to a chart for the USA. The Y-axis is measured billions btw.

Spoiler: Some math (click to show/hide)

If you click on the 5 year tab, you will see that there is a spike at the start of 2020. As of April, America has around 2154.87 Billion USD in circulation. I will be rounding up to 2200 BILL for the sake of future calculations. Before the pandemic, we had around 1800 BILL.

2200 - 1800 = 400

In other words America printed around 400 Billion dollars since the start of the pandemic. When you compare this to the total amount of currency in circulation (that is 2200) you get this interesting ratio over here:

 400                2
-----     =       ---    or around 0.18 in decimal.
2200               11


0.18 is pretty close to 0.20 or 1 in 5, which where you get the headlines saying that America has printed almost 20% of it's entire currency within this year. I don't know the full implications of this kind of number, but can you list any countries that got away with printing this much?

I don't have other numbers to compare it to (1980's Brazil, Wiemar Republic Germany, Venezuela, and Zimbabwe are ones I am particularly interested in) and I will explain why outside of this spoiler.

Thing is, printing money is not the only factor in inflation. If inflation was directly proportional to currency supply, we would expect prices to rise by %20 which though unpleasant, is ultimately bearable. Hyperinflation tends to happen in the hundreds of percentages though, and unfortunately I'm not an economist who can explain why.

Speaking of not being an economist, I tried to do a similar calculation for the Euro, but the only graph I could find omits 2020 for some reason. I get the feeling that even less scrupulous countries hide/fabricate this kind of data completely so good luck with that! 


Currency printed is not the only data point worth looking at though. Another things is that the prices of raw materials have increased by quite a fair amount. Regardless of the value of the currency, this should increase the costs of everything all around the globe. I don't know what else I can say about this.

...

The thing that scares me the most though is my local real estate market. As I mentioned in my previous post, the optimal strategy to weather the effects of hyperinflation is to invest in assets, particularly real estate. My local house Prices have increased massively in direct response to this pandemic and more importantly, lots of buildings are actually being sold at these prices. This isn't like new York where many overpriced properties are just vacant.

Now the thing is, the wealthy individuals buying these properties can actually afford to pay someone who understands economics to give them advice. As a result, when I see the wealthy prepare for a financial apocalypse, I start shitting myself. And before you ask, no this isn't just average real estate trading. I'm currently residing in the countryside and few people buy houses here for their own use. Many of these buildings were unsold for years, up until the start of this one. One year after the pandemic started.

It's this last reason that is convincing me to take this issue seriously. At the end of the day, nothing I have is definitive, but it's enough to make me consider taking drastic precautions in spite of the risk of being wrong.


Ninjaed

I see. OK, likely no hyperinflation in the good old U S of A (just the regular kind), but should give money when I can.

Don't count yourself safe just yet. Hyperinflation takes some time to kick in. It usually starts a couple years after the offending bills are printed.

[MrRoboto75]

I see. OK, likely no hyperinflation in the good old U S of A (just the regular kind), but should give money when I can.

Considering wages never rise, there's probably still some sort of economic crisis coming to the states.  Money machine can't go brrr forever.

There's actually been a very distinct uptick in wages at the lower end of the marketplace. A lot of people are simply refusing to work for their old pay even when they lose the unemployment boosts.

I've more seen this as a lot of min. wage jobs going unfilled, while those same employers shrugging and going "why won't people apply?" and avoiding the wage question as much as possible.  To them, it's the job seekers who are wrong.

Like my parents always complain about not finding people to hire (for an engineering firm) and I always half jokingly ask, "Have you tried paying more?"  They always reply their wage is already competitive, whatever they think that means.

[Uthimienure]

If a person "owns" a home (in quotes because the mortgage is not paid off), but is struggling to make ends meet, is it better for them to have kept the home or to have sold it when hyper-inflation strikes?

[martinuzz]

In case of hyperinflation, it's better to keep the home. If you sell it, it could be that a few months later, the money you got for your house is barely enough to buy a single brick.
Your mortgage can probably be paid off at that time with, I dunno, an egg? An apple? It will have devaluated along with the rest of the crashing economy.

Hyperinflation doesn't stop at hundreds of percents. Devaluation in Zimbabwe reached 7.96×10^10% (79600000000%) in 2008

[WealthyRadish]

If a person "owns" a home (in quotes because the mortgage is not paid off), but is struggling to make ends meet, is it better for them to have kept the home or to have sold it when hyper-inflation strikes?

Hyperinflation effectively erases all prior debt; the mortgage would suddenly cost next to nothing in real terms to pay off.

[MrRoboto75]

Really you want as little liquid cash as possible, you want assets whose real value has as little to do with cash as possible.  Because in such a scenario cash won't be worth the paper and ink it's made out of.  That's why people tell you real estate, land is land, outside of florida going underwater land always has real value.

[McTraveller]

If a person "owns" a home (in quotes because the mortgage is not paid off), but is struggling to make ends meet, is it better for them to have kept the home or to have sold it when hyper-inflation strikes?

Inflation is great for borrowers, terrible for lenders. I wouldn't try to time that market though.  There are reasons there are proverbs about "best to neither be a borrower or lender!"  (As it is, I feel like I'm stealing with my mortgage at only 2.25%.)

Also, even with a "marked uptick" in wage growth in the lower tiers, I wouldn't worry unless median wage growth starts exceeding 3-4% per year.  Hyperinflation is not sustainable if people don't have enough money to buy anything.

Note that hyperinflation historically occurs only when countries start printing money to pay external debt.  This causes a spiral because foreign countries notice.  Hyperinflation is less likely if a country is printing money for internal stimulus that doesn't make it across borders.  Also since almost every country has printed trillions of stimulus in the past year, there's little "relative" imbalance across national borders, so again this is an unlikely scenario.

(Partially ninja'd... I took too long to type this...)

[MrRoboto75]

To elaborate, if you borrowed X to say, buy a car, no matter the inflation you still owe X+i. (i is the interest rate.)  Your debt is essentially tied to the actual amount of dollars you owe, not the real value of the car.  Even if in a year 10,000 bucks only buys a single apple, you still basically agreed to pay 10,000 for the car.

The interest rate should partly reflect this, but either way most debt has a fixed interest rate based on when you took on the debt.

[bloop_bleep]

People like to talk about how low wages are fine because they are decided by "the free market," but when the free market lowers labor supply they turn around and decide "oh no the free market made a mistake, better get to interfering in the economy now to help out the poor employers"? Libertarianism is all just hypocrisy and snake oil. There's no actual principles or earnest philosophy for these people. It's just cover for their engulfing greed and narcissism.

[heydude6]

Note that hyperinflation historically occurs only when countries start printing money to pay external debt.  This causes a spiral because foreign countries notice.  Hyperinflation is less likely if a country is printing money for internal stimulus that doesn't make it across borders.

Are you sure that was the case with Venezuela? Sure, the economy was shit before then, but I don’t remember any external debts being mentioned in the admittedly complex Venezuela narrative.

People like to talk about how low wages are fine because they are decided by "the free market," but when the free market lowers labor supply they turn around and decide "oh no the free market made a mistake, better get to interfering in the economy now to help out the poor employers"? Libertarianism is all just hypocrisy and snake oil. There's no actual principles or earnest philosophy for these people. It's just cover for their engulfing greed and narcissism.

Yup!

[MrRoboto75]

I've heard libertarianism summed up as "Conservatives that like weed"

[McTraveller]

Are you sure that was the case with Venezuela? Sure, the economy was shit before then, but I don’t remember any external debts being mentioned in the admittedly complex Venezuela narrative.

Yeah, foreign debt includes trade imbalance.  When Maduro started printing money to start buying goods, all the other nations were like...uh...no, we want equivalent goods, not Bolivars... basically their money printing messed up their foreign exchange.   That is, Maduro tried to print money to buy stuff on the global market, and that doesn't work because the global market "knows" you're just making up money, not producing goods and services for which the global market wants to trade.

I'd love to hear more from our resident Venezuelan, but I understand he's been suffering from geopolitics... because it's just baffling to me that if you do some job in Venezuela, your wage is only enough to basically pay for 1/10000 of that same job in another country.  I don't even know, aside from use of military force, how such an imbalance can be established.  (E.g., if you produce a dozen cookies in Venezuela, how is that not worth the same amount as a dozen cookies in Brazil? How is it  that you'd have to make 10000 dozen cookies in Venezuela to get "paid" the same amount as making a dozen cookies in Brazil? Who is pocketing the other 9999 dozen cookies' value?)

[heydude6]

In Economics, value is not an innate quality, but instead one determined by the amount a buyer is willing to pay for it.

A Venezuellan pastry chef is likely only going to be selling his goods to other Venezuellans, who are dirt poor. Thus, the maximum payment he can receive for his treat is dirt. He does have the option of refusing to sell his cookies until someone gives it a fair price, but in practice this means not being able to sell it anyone and as a result simply refusing to bake the cookies in the first place (or eating them himself).

If the Venezuellan can somehow sell his goods to a wealthier client (Maybe he's a Runescape gold farmer and thus is able to sell accounts to international clients), then suddenly he can ask for more compensation for his labour and thus be financially better off than his peers. Even if that client only payed him an American dollar, that is still much more money than the average Venezuelan sees, despite it just being pocket change to the American.

This is why outsourcing and free trade are both so popular.

[EuchreJack]

...and this is when the WTF thread became the thing that made me say WTF today.

[scriver]

People like to talk about how low wages are fine because they are decided by "the free market," but when the free market lowers labor supply they turn around and decide "oh no the free market made a mistake, better get to interfering in the economy now to help out the poor employers"? Libertarianism is all just hypocrisy and snake oil. There's no actual principles or earnest philosophy for these people. It's just cover for their engulfing greed and narcissism.

*liberalism

In Economics, value is not an innate quality, but instead one determined by the amount a buyer is willing to pay for it.

A Venezuellan pastry chef is likely only going to be selling his goods to other Venezuellans, who are dirt poor. Thus, the maximum payment he can receive for his treat is dirt. He does have the option of refusing to sell his cookies until someone gives it a fair price, but in practice this means not being able to sell it anyone and as a result simply refusing to bake the cookies in the first place (or eating them himself).

If the Venezuellan can somehow sell his goods to a wealthier client (Maybe he's a Runescape gold farmer and thus is able to sell accounts to international clients), then suddenly he can ask for more compensation for his labour and thus be financially better off than his peers. Even if that client only payed him an American dollar, that is still much more money than the average Venezuelan sees, despite it just being pocket change to the American.

This is why outsourcing and free trade are both so popular.

I hear Maduro likes cake though