Hyperinflation Coming? Very Very Concerning...

Today is a very concerning day although it might not seem like it.

As I write this, the Dow is down 68 pts. Big deal huh?

That's not the issue; it's what is happening everywhere ... as leading indicators to my worse economic fears, this isn't good.

1) Oil spiked back over $50
2) Gold spiked higher and all other commodities
3) The Dollar continues its plunge ... lost 7% of it's value in the last 2 days.
4) Combined with the dollar losses and the commodity spikes, our money just lost a lot of its value.
5) China expressing concerns over Treasuries
6) FOMC decides to buy LT Treasuries (Causing dollar to collapse)
7) US Government continues to spend money unfettered.

The economic scenario, which I have my antennae tuned-in for, is a dollar collapse and hyperinflation. The aforementioned are some concerning leading indicators.

At B&P, we had a nice little round table on the economy and I mentioned that the dollar collapse wouldn't happen overnight -- it would be akin to boiling a frog one degree at a time -- and that it would start in China with them losing faith in US Treasuries.

Yet, I don't see anyone in the MSM (even financial sites) talking about this.

It might be time for some serious defensive moves.

My thoughts were along the same lines yesterday. Hearing about China's trillion dollars in treasuries.

So what are the defensive moves in a hyperinflationary economy with a collapsed dollar.

Seems like the least amount of cash possible (in dollars) and hard assets such as real estate. Any other ideas?

Commodities, hard assets, non-dollar denominated assets, and yes, I think even real estate might be somewhat defensive, although not entirely. I think a pure defense would be commodities like Gold, Silver, Wheat ... if the world decouples from the dollar, or even minimally our credit rating is lowered, we're screwed. China has us by the balls.

I am no economy experts, but I do see some warning signs.

1. The way GOV handle AIG case.
2. Retail raise the price in order to cover their cost to import goods from China
3. Less people buying at small local shops.
4. Big chain stores are expending slowly while they are still borrowing money from bank.
5. Don't really heard anything about Big 3 auto makers and their spending on tax payer's money.
6. More small business are closing down.
7. Too many 2008 new cars at dealers
8. More unfinished houses are out there that drop the properties values
9. My parents keep asking me when to buy US Dollar.

True, but those are all signs of a deep recession. Considering the globalization of our current society, the impact of this recession is compounded. The spike in oil could be attributed to an increased demand as long as this price jump proves to remain mostly stable. When we see an increase in demand we see and increase in production. An increase in the price of oil, if it does not jump enormously, could presage a sign of a beginning recovery. This also proves to hold true in the increase in commodities. Yet, I would say that gold has seen an artificial increase in price because we are seeing increased reporting about its resiliency in tough economic times. So more people are viewing it as the "safe-haven" to invest in to ride through this storm. Couple that with the fact the Fed has bought 300 billion in longer-term Treasurys, and has pumped more than 1.2 trillion into the economy, the after affects of decrease in value of the dollar and the like, are inevitable.

I would not necessarily agree that spending money is a bad thing. The reason being that is does ultimately help an economy to recovery. The problem actually seems to lie within the MSM itself. Turning to any 24/7 news station all you hear is about the gloom and the doom. Just consider how that could impact a nation's psyche? A lot of what we are seeing currently, is based in the psychology of doom and gloom and how this impacts consumer confidence and spending. The truth is, there are a lot of sectors out there that are doing well. Psychology plays a very important role in why this is lasting and seems as deep as it is. We are not really given a break, nor do we hear about what is doing well. People are so concerned with the DOW and that's about it.

The DOW, and all the trading markets, are ultimately just perceived value of a company and not "real" value. So, yes, when things are bad, this perceived value is strongly affected. But think about companies that are still profitable and doing well, yet their value is completely decimated in the markets. What does one think would happen to the people's view and confidence in that company? The quick answer is, they think it is doing horribly. So yes, there are plenty of factors that could be viewed with a great deal of apprehension concerning the economy, but consider this, the IMF forecasts that the US should see an end to the recession in late 2009 and its recovery beginning in 2010. Though this has been reported before, it has become rather consistent recently. Also, we have seen a bit of a stabilization in the markets as of late. Prices, gains, and drops are no where near as volatile as they have been. So it seems that if the MSM and people themselves, begin to research and look into and report on the GOOD news and not the gloom and doom, we might begin to feel at ease again.

P.s. Those of you who are holding back from starting your own business, now is not that time. It is actually a great time to start for you will be ahead of the curve when everything corrects itself. Therefore, you will see the most profits.

Prepare for the worst, hope for the best!

Here's a quote from an "alert" sent by the head of my investment club over these events:

Here is an interesting take of one person's view of the current economic collapse in the USA to that of the USSR 17 years ago, and the analogies thereof.

Has anyone looked into what's happening in China right now?

They're the only big nation that is experiencing sustained double digit (or close to it) growth.

Long term solution:

Become Chinese.

Assuming the Chinese take over the world's currency in the next 20 years-- and could also become the #1 world power militarily-- how do we become Chinese?

Please, no conspiracy theories. I'm being serious-- from an entrepreneur's perspective, how does one become invaluable/indispensable/irreplaceable to the Chinese?

-Russ H.

MJ, this is one of those topics I really have no clue how to react to.

Here is my dilemma:

Hyperinflation, so your cash is worth less and less every day (or every hour, like it happened in Argentina a few years back). The dollar collapses.
What can you do about it then?
Buy milk and bread with gold coins? Trade your wheat for drinking water?
I can go to my backyard and start digging to hide my food cans meanwhile. For how long should I store food? Plan for what? 3 weeks? 3 months? 3 years?


OK, so let's assume that this will happen and the conclusion is to move to another country, there is nothing we can do here for now... but where? If we are in bad shape here, the rest of the world is in an even worse shape. Heck, a 10% unemployment rate would be a reason to celebrate in any third-world country (oops, sorry, "countries-in-development").

China stops buying our paper... what do they do then? They have rising unemployment and a social problem growing back home...
Europe's financial system is, for what I understand, in a 50-to-1 leverage position that is killing them, worse than the U.S.
Africa, Latin America, most of Asia is poor anyway... and Japan is going nowhere, just like in the past 20 years...

So I feel like there is nothing that I could realistically do today.

I really really have no clue how to react to this...

this is very confusing, no?

I remember reading about China's situation in another thread...
China's hard landing

I agree, Andres. How do you trade it?

"I'll give you a dollar today, if you'll agree to give me $1,000 in a year."
I mean who's going to take you up on something like that?

Especially if they think that the dollar you just gave them will only be worth $.001 next year.

Or would I have to give you $1,000 now to get $1,000 back in a year, since both values would decrease equally?

Moving (or at least your money) to another country is a good strategy for this situation. Yes, some countries will be pulled down with the US dollar, but I'd offer Canada, maybe I'm a bit biased? as an example.

Some points of strength:

• 15 years of budget surpluses that were used to pay down national debts, national balance sheets in decent shape
• largely commodity driven economy that will do well as a hedge to US dollar due to huge demand from China
• banks in best shape of top 20 nations

move to Canada, amass a fortune, buy US assets at rock bottom prices, just bring warm clothing

this is the other article I read about China's situation...
Hard Landing In China? - Forbes.com

So they are expecting growth of ~7%

If China stops buying commodities at the same pace, what is expected about prices then?

Can't we just get you guys to buy us???

I'm going to write to my local politician and see if I can convince him to put in a low-ball offer for Arizona.

Uh huh! Apparently I was a step ahead this whole time!

Seriously though, do not move to Canada unless you like paying close to 60% taxes before another 19% on credit cards.

And the best part - most banks only have the 19% credit card option - which coincidentally might be the reason Canada could be doing better at the moment.

mmm, not sure where you're getting your info.

In Alberta where I live, there is no provincial sales tax, completely free medical, and personal tax rates of about 25% (mind you my income comes in the form of dividends from a company).

In general taxes here may be slightly higher, especially in some provinces, but compared to hyper inflation, I'm sure the ROI would be positive.

I posted a while back about this and I think hakrjak was the only person who looked at it .

There is a book that just came out called Emergency: This book will save your life! by Neil Strauss. Definitely a great read. It talks about how to get a second citizenship, how to protect your money and assets, how to be able to cross borders without being stopped. He talks a lot about what is currently going on in the economy and makes references towards the holocaust.

Not that it's the same thing but the reason why so many Jews did not leave Germany was because they weren't allowed to. It was locked down. In a country like ours, they could just suspend air travel and lock down the borders and then NO ONE could get in! ... or out....

Pick this book up, I'm almost done with it, they go over almost exactly how to do all of this stuff as well as survival tips and all sorts of things.

Thank you for the concrete ideas. This is why this forum is so cool.

I read recently that Jim Rogers is buying farmland in Canada. Not a coincidence. He is out of the US and into commodities..... at the source. Farmland.

Hyperinflation is something that we have been preparing for for the last couple of years. I tried, unsuccessfully to bring the topic up in this thread Survive and Thrive in All Economic Times Mostly it was a FAIL as it just turned into a match between me and Easy..... but there are a few Hyperinflation gems in there.