Paying for Worldwide Failures|
Many of you have written asking what you should do in these frightening, perilous times. Several readers note that many stores and banks are failing. Our government keeps bailing out institutions not only here in the United States, but overseas as well.
You ask: "How can we keep bailing out corporations, states, counties, and cities without failing ourselves? How can the U.S. government stay solvent?"
The truth is we cannot. We can't remain solvent and bail-out everyone. It is as if our government already decided that trillion dollar deficits are impossible to repay so we will just destroy our currency by printing money to pay it back.
That's how we will pay for social security, Medicare, failed banks, failed corporations, states, counties, cities and overseas concerns. Our government will attempt to maintain the "illusion" of fiscal responsibility while robbing its citizens and devaluing its currency.
Courting Weimar Germany
In a sense, this is exactly what happened in Weimar, Germany after World War I. The war reparations required of the German government were so high that they threw up their hands and gave up. They just printed money to pay back other countries for the damages they had caused in the war. In the process they abandoned and destroyed their own currency.
It seems we, too, are courting Weimar Germany, doesn't it?
German Hyperinflation Damages
This printing of money caused havoc to German citizens and led to the rise of Adolph Hitler. What kind of destruction of currency causes this? Well, let's take a look at what happened.
In 1921 a one ounce silver coin cost 12 marks (similar to the $12 cost of one-ounce silver coins in the U.S. today). By 1923 that same silver coin cost over 543,750,000,000 in German marks - that isn't a typo. (McAlvany, Sept. 2005, 8).
Chuck Missler, the beloved K-house teacher, notes that his parents sold a restaurant expecting to have enough to retire in post war Germany. But, by the time escrow was completed their savings wouldn't buy even a loaf of bread!
At first things like milk doubled in price and people complained about the high cost of living. Nervous Germans were pulling their money out of their banks and currency and began buying diamonds, works of art, real estate and gold coins - anything of value. Even families with no musical talent bought pianos as a store of value.
Then, prices began to escalate to the point that people bought two cups of coffee at a time in a restaurant so they wouldn't have to pay double by the time they wanted a second cup. Sirens went off at noon so that workers could hand over paychecks to relatives who could get to the store before prices doubled at night.
Soon a sub culture developed where people bartered for necessary goods and services. Doctors and dentists asked to be paid with milk or eggs instead of marks which lost value by the hour. Hyperinflation had set in and citizens just tried to survive.
This is what we are going to cause to happen in the United States if we continue on this path of bailing out everyone by debasing our currency.
What would it look like in America if we enter a period of hyperinflation?
Although the question seems odd it isn't a bad idea to consider what would happen if we, too, had a hyperinflationary crisis.
3 TO 10 Day Hyperinflationary Tornado
For example, in a hyperinflationary crisis, "If your savings are in dollars, a million dollars saved is reduced to $850 in true purchasing power in 10 days. For a middle class American family…$60 thousand in life-savings is reduced in purchasing power to $57.00 in 10 days" (McAlvany, June 2008, 4).
Hyperinflationary events may take a few years to build up to crisis level. But, once it hits a country the destructive speed is incredible! People are reduced to poverty in 3 to 10 days. A lifetime of savings is wiped out in just days!
In case you think these are extremely rare events it happened to Hungary after WWII. It happened to Yugoslavia in the 1990s. It is occurring in Zimbabwe today. It has happened recently to Russia, Israel and Argentina.
Not Worth a Continental
These are just a few nations among many destroyed by hyperinflationary spirals. We haven't seen this in America since the years following the Revolutionary war. That was when the expression, "not worth a continental" became standard. At that time the American currency, the "Continental," became worthless. The government just printed paper notes hoping people would accept them. But, they didn't.
What to Do?
We have talked and written about potential hyperinflation or another depression in America many times before. Please review the articles in our Economic Trends&Forecasts section if you haven't read these. As far as financial advice we really aren't set up to give these kinds of recommendations. But, there are some general principles that may be helpful to you:
- Start buying necessary goods on sale - aspirin, canned goods, powdered milk, soup mixes, feminine hygiene products, soaps, shampoo, and so on. Every family has a unique list of necessary goods used in their own clan. Ordinary items can become hyper-inflated where prices double every 24 hours or so. So it may be wise to begin to buy extras now as they go on sale.
- Save change and cash. You can collect around $300 to $500 yearly by keeping change in a jar. It comes in handy. As you can you might want to go to a coin store and buy old silver dollars or pre 1967 silver dimes with your spare change. Those 90% silver coins become extremely valuable in a currency crisis.
- Begin to pay off your credit card debts systematically. Start with the lowest balances and work through to higher amounts later. Credit card interest rates can soar as high as 1600% or higher in a hyperinflationary country.
- Buy a wood stove to burn wood if allowed in your area. Heating costs can become unmanageable in out-of-control currency crises.
- Rid yourself of any greed or envy. Christians should work hard to be free of the "works of the flesh" (Galatians 5:19). Quit competing with your neighbors for fancy houses, granite counter tops, cars and entertainment centers. This is a dangerous time to do that. Instead, renew your minds (Romans 12:2) and memorize scripture passages such as:
You shall not desire your neighbor's house, his field, or his male servant, or his female servant, his ox, or his donkey, or anything that is your neighbor's (Deuteronomy 4:21. This is one of the Ten Commandments).
If we have food and covering, with these we shall be content (1 Timothy 6:8).
We must get back to sound living and spending habits and learn what is truly necessary to survive.
- Remember to give food and money to your local rescue mission and a 10% tithe to your church. Bring all the tithes into the storehouse, that there may be food in My house. And try Me now in this, says the Lord of hosts, if I will not open for you the windows of heaven and pour out for you such blessing that there will not be room enough to receive it (Malachi 3:10, NKJV).
- If you own too much house and can't pay your debts, pray about the situation and take steps necessary to get back to sane finances. For some of you this may mean giving up your home and renting a small apartment or a trailer for awhile. Many middle-class Americans really blew it! There's no use endlessly blaming each other for our failures. We need to accept our circumstances as they are now and do what we can to get back on a sure footing. Learn to live and spend frugally. Simplify your life.
- Plant a vegetable garden and see what you can grow for yourselves. Some of you are talented at canning fruits and vegetables and baking homemade cakes and muffins. These skills could become highly treasured in hard times. Even now good loaves of bread cost $5.00 at Wal-Mart. If you can bake them we'll buy them!
- Learn to sew patches on clothing and make clothing last. During the Great Depression skilled seamstresses made garments out of potato bags. Seriously. They weren't bad looking, either.
- Teach your children to shop at thrift stores and garage sales. I'll never forget the determination of my grandmother who shopped for certain materials and buttons at flea marts. She rarely bought anything new. Instead, she scouted for goods at auctions and garage sales. This is becoming a "trendy" fad once again - a good one.
- You might want to "beef up" home security. People become desperate and robberies increase during difficult times. Own a "yappy" little dog. Ladies, keep your car keys by your bedside. You can press the emergency button if someone breaks into your home. Neighbors dislike honking cars and your house will quickly become the focus should the car horn begin honking.
- Let's focus our priorities upon things that really matter. Worship God. Go to church. Attend home bible studies. Strengthen church and family relationships as much as possible. Study your bible. Memorize relevant verses.
The wisest man on earth said, The conclusion, when all has been heard, is: fear God and keep His commandments, because this applies to every person. For God will bring every act to judgment, everything which is hidden, whether it is good or evil (Ecclesiastes 12:13-4).
Honestly, very few people will remember us after we die - no more than a handful. But, God will never forget us. In the end, it is God who matters and He loves each one of us. This is what we need to remember.
We had everything but money: Priceless memories of the Great Depression. 1992. Country Books, Greendale WI: Reiman Publications.
McAlvany, Donald. 2005. Pondering the unthinkable: An American hyperinflation. The McAlvany Intelligence Advisor. September issue. p. 8.
—- Are we there yet? Hyperinflation Report. 2008. The McAlvany Intelligence Advisor. June issue, p. 4.