Hyper Inflation

[BCA2009]

I don't recommend incurring debt. But if you want to maintain or increase wealth and you know that inflation is around the corner, you would borrow money to buy assets.

If you borrow 100K at 4.5% today and next year we have high inflation, you would pay back the loan with inflated dollars.

Inflation benefits borrowers and penalizes lenders, assuming the rate is locked in.

Now deciding what assets to buy with the borrowed dollars is a different subject.

[WhatMoney]

... when prisoners in prison are collecting SSI, as they are we have big problems in this country.

If you really know of any prisoners in prison collecting SSI, you should turn them in to SSA for fraud, since that is illegal.

What happens to my benefits when I am in prison?

If you are receiving Social Security, your benefits will be suspended if you are admitted for more than 30 continuous days to a jail or prison because you were convicted of a criminal offense. Your benefits can be reinstated starting with the month following the month you are released.

Although you cannot receive monthly Social Security benefits while you are confined, benefits to your spouse or children will continue as long as they remain eligible.

If you are receiving SSI, your payments are suspended while you are in prison. Your payments can be reinstated in the month you are released. However, if your confinement lasts for 12 consecutive months or longer, your eligibility for SSI benefits will terminate and you must file a new application for benefits.

http://www.ssa.gov/pubs/10133.html

[catleg]

I think the best way to prepare is to hold cash and be ready to buy when others are forced to sell.

There will be more panics and flash crashes in the stock market and commodities markets, and for more patient money real estate that you can buy to rent out probably makes sense.

Precious metals look kind of toppy right now, you could accumulate some of them but I'd try and wait for some kind of weakness.

I think the gov't will try to manipulate the stock market higher for the elections and the GM IPO in early November. And maybe to sell off some more Citigroup.

[backtoschool]

Maybe ultra-expensive imports because will stimulate production here.





But if taxes go up, presumably on the middle class (what's left of), won't that just have the effect of taking money out of one of his pockets (through taxation) and putting it back in his other pocket through entitlements? Minus, of course, the expense of the bureaucracy needed for sending his money around in circles like that.



So, in your opinion, what's the best way a person can position himself to preserve wealth and make money through that? Short the dollar? Buy precious metals? What industries, occupations or businesses are going to thrive in such a decline?

Raising taxes to pay entitlements will definitely be about sending money in circles. But that is what has been going on in Europe for decades, and is going to be what happens here.

Precious metals are way too overpriced now to be of use to the average person as a place to park money, and the prices on them are speculative. When speculation happens the average individual investor doesn't stand a chance of getting fair prices for what is bought or sold. I would stay away from gold.

Shorting the dollar and longing another currency can be a good hedge, but there are no currencies that are completely safe hedges. As catleg said the Euro is just as risky as the dollar. The Yen is probably ok but needs to recover more before its a good long. It is unwise to long a currency that's value is determined by military fiat, so the rmb/yuan is not stable either. Besides, China's economy is very dependent on ours and Europe's still and cannot sustain it's growth without our growth, at least for the near term.

This is not what anyone wants to hear, but I don't think there is a safe haven to park dollars right now. All currencies' value are based on fiat, not any true worth of the currency, and they are all tied to the global economy, so all of them are risky. America is a very large boat, and if it goes down, it will create ripples in the water that affect everyone.

Believe it or not i think real estate is a solid investment still, if bought at low enough prices. I agree with catleg on this. I think the bond market is a bubble right now, and the stock market is also overvalued.

As for those that will succeed in this environment, well I think small local businesses, will band together and barter with each other to create local economies that are stable. Local organic farmers, restaurants, stores that sell practical things, coffee shops, etc can all survive if they are willing to use each other as suppliers, etc. I also think that people who sell other people's possessions such as auction holders, estate sale holders, foreclosure management firms, etc will thrive for obvious reasons. Venture firms and firms that can lend small amounts of money to local businesses will also do well. Those that can provide inexpensive entertainment will have a place in the new economy because people need escape and will pay for it no matter what financial state they are in. So sellers of drugs and alcohol will also do well.

Certain types of lawyers will do well as well such as bankruptcy lawyers and lawyers that help people collect SSI disability.

[catleg]

I read this book about the experiences of a lawyer in Ohio during the Great Depression (got it from the library). Very interesting. Seems that the courts ran out of money to operate! He wished having cash set aside to scoop up certain assets at bargain prices. I think that is the key, being patient and holding onto some cash to make buys when others have to sell.

[blockhead]