Best Preparation for Hyper Inflation?

In the last 10 weeks, Bernanake has increased the monetary base (the second step in the money creation process) by 69%. Federal Reserve Credit, the first step, has increased by 145% over the same period. So there is a lot more money in the pipeline coming through. The money supply proper will increase more slowly, over the next 6-12 months. But if they stop here, then we will have more than a doubling of the U.S. money supply and a corresponding increase in prices.

Keep in mind the debt is 11 trillion with possibly another 5-6 trillion added on. In comparison, GDP is 13.8 trillion

-->With the above mentioned, I have thought about Yen, Gold, and Oil.

Yen seems like a more stable currency, however Japan is small and correlated to the US.

Gold is known to be a good hedge, but what does it really do? I mean you can't live with gold. A

Oil on the other hand is a vital resource for the economy. Even if things go bad, oil will be needed eventually. As the $ go down, it will go up. The only downside I see are potentially more gas taxes decreasing demand or it going down to $30/barrel which is still not that far down

Im buying these...

The problem with buying gold or oil ETFs to hedge against inflation is that you could easily lose a lot of money if the inflation doesn't materialize. Not a very smart hedge.

I don't have any answers, and I agree that it's a good idea to prepare for inflation, but here's a few random points.

The trillions of dollars that Ben is spending can be disappear into our incredibly messed up financial system, which is currently deleveraging. I don't think it's as simple as increased money supply = increased inflation. more info

If you think our debt to GDP ratio is bad, you might want to check what it is for Japan before you invest in Yen (195% according to Wikipedia). I actually think Yen is a decent investment, but buying Yen because you think the US debt is too high seems silly.

I think a lot of gold's current value is because many people think the fiat money system will collapse. They may be right, but if they are not, it seems unreasonable for gold to cost almost as much as platinum.

welookgoodcom said: Stocks are risky too...

any serious ideas on how to prepare for what's coming?H&B

Metric said: smackfu said: The problem with buying gold or oil ETFs to hedge against inflation is that you could easily lose a lot of money if the inflation doesn't materialize. Not a very smart hedge.Also what if our new president decides one infrastructure project is to convert homes from oil to hydro electric. Oils risky.We're about tapped out in terms of hydroelectric capacity. Plus, environmentalists are promoting the idea of getting rid of dams, not building more of them. Maybe you mean nuclear power?

buy food. nitro-pak.com and clothes when you see garage sales

buy real estate

tolamapS said: Buy a house, get as long a mortgage as you can. That way, you benefit doubly. First, high inflation => higher rates. Second, high inflation => R/E prices go up.

If you have a fully-paid house, get a mortgage.

exactly, i forgot to add finance the hell out of your properties

welookgoodcom said: Best Preparation for Hyper Inflation?The answer is obvious!

"Preparation Hyperinflation" aka "Preparation H."

tolamapS said: Buy a house, get as long a mortgage as you can. That way, you benefit doubly. First, high inflation => higher rates. Second, high inflation => R/E prices go up.

If you have a fully-paid house, get a mortgage.

Probably much more than doubly, home buyers are highly leveraged so it's more like 5 to 10 times the benefit when the real value of your mortgage goes down (paid back in hyperinflated dollars). And if the we have deflation and dropping house values, you walk away and stick the government with the bill.

this topic has been brought up two months ago in this post I made; very few seemed concerned about hyperinflation then.

Anakin

Right now there is deflation combined with a stregthening of the dollar (many did a flight to safety)

However doubling the money supply plus the flight away will cause a severe weakening of the dollar. I want to figure out strategy of shielding from this.

If I told you a year ago, Merrill, AIG, Bear, Fannie, and Freddie, along with Citi & Lehman would be where they ere you would of told me I was crazy.

Getting a LT Mortgage at depressed real estate prices is an interesting idea.

ptiemann said: Real estate. It never goes down, they don't make any more land.

Tell that to my REIT fund that is down 50% in the last 2 months since I decided it was a good time to buy in.

Become self employed. And work hard.
Hyperinflation will kill large companies.
You can try to protect your existing assets all you want, if you lose your ability to bring in lots of inflated money in the future, you are screwed.

psychtobe said: Personally I think it's critical to have the hard assets themselves in other countries. Having $100,000 in gold pieces in safe deposit boxes in other countries is a hedge against most of the unthinkable. World War III is something I can't worry about. Everything else on this list I take seriously.So you have a scenario where society is so broken down that you can't get to your local safe deposit box, but you can easily jet off to another country to get your gold?

Spill it!

smackfu said: psychtobe said: Personally I think it's critical to have the hard assets themselves in other countries. Having $100,000 in gold pieces in safe deposit boxes in other countries is a hedge against most of the unthinkable. World War III is something I can't worry about. Everything else on this list I take seriously.So you have a scenario where society is so broken down that you can't get to your local safe deposit box, but you can easily jet off to another country to get your gold?

He's worried about another full-scale seizure of private gold holdings. Holding gold outside the US averts this problem, assuming you hold it in a country that:

A) doesn't enact similar legislation
B) doesn't seize assets belonging to Americans

Those of us who have lived in Eastern Europe in the nineties, with inflation > 200% per year, know that buying hard assets is a very good way to protect yourself from inflation. Yes, that includes buying a house. Of course, that's a big bet and you can also lose big if the reverse (deflation) is true and prices continue the free fall.

ILikeDollars said: smackfu said: psychtobe said: Personally I think it's critical to have the hard assets themselves in other countries. Having $100,000 in gold pieces in safe deposit boxes in other countries is a hedge against most of the unthinkable. World War III is something I can't worry about. Everything else on this list I take seriously.So you have a scenario where society is so broken down that you can't get to your local safe deposit box, but you can easily jet off to another country to get your gold?

He's worried about another full-scale seizure of private gold holdings. Holding gold outside the US averts this problem, assuming you hold it in a country that:

A) doesn't enact similar legislation
B) doesn't seize assets belonging to Americans

thank you for the link. Indeed, knowing a bit or two about history gives one a whole new sense of what is possible in the world. I for one am partial to reading about revolutions. It is shocking how utterly common they are. Fatwalleter types tend not to do well during revolutions. Just ask the Chinese landlords how they turned out in 1949...

Is Britain Going Bankrupt?
Daily Telegraph (UK) ^ | Nov 24, 2008 | Ambrose Evans-Pritchard

There is now a palpable fear that global investors may start to shun British debt as the budget deficit rockets to £118bn -- 8pc GDP -- or charge a much higher price for to cover default risk.

The cost of insuring against the bankruptcy of the British state has broken out -- upwards -- over the last month. Yes, credit default swaps (CDS) are dodgy instruments, but they are the best stress barometer that we have.

Today they reached 86 basis points, near Portuguese debt in the league table. For good reason. Alistair Darling has had to admit that the British economy faces the most sudden economic collapse since World War Two, and the worst budget deficit of any major country in the world.

Ok, this is a lot lower than Iceland, Ukraine, Hungary, and other clients of the IMF, but is significantly higher than Germany (35), USA (43), and France (49).

If your concern is really *hyper inflation* as was seen in Zimbabwe or the Weimar republic in the early 20's your best bet is to use cash to buy physical gold (in an untraceable way) and secretly bury it in your backyard. Inflation bonds are just going to be paying you in dollars, which will be useless in a world of hyperinflation.

That being said, I think it is far more likely that we'll either see deflation or high levels of inflation and not hyperinflation. I'd be balanced in assets that provide inflation and deflation protection (lots of regular bonds, inflation bonds, and gold).