Do you ever feel like “enough is enough” when it comes to bad news in the headlines? That’s how I’m feeling after more than two years of Covid-19, political turmoil, and natural disaster news. It’s been a rollercoaster of a couple of years. Now, rapidly rising prices, snarls in the supply chains, and shortages at the grocery store have us wondering if we are going to experience more trouble in the form of hyperinflation in 2022.
What Is Hyperinflation?
Hyperinflation is rapid, excessive, and out-of-control price increases for goods and services at a rate of 50% or more per month.
An easier explanation is when prices are skyrocketing so quickly that a loaf of bread costs $5 one day, but $7.50 by the end of the month. The next month that bread will cost $11.00 or more and so on. As things heat up, your dollar buys less each day until dollars are essentially worthless.
A country with a healthy economy will strive for an inflation rate of 2% per year. And, in fact, the US has hovered around 2% since 1990.
How is inflation measured and what is the current rate in the U.S.?
We are currently at a rate of 7% and rising. The last time we saw rates this high Reagan was in office and we were aerobicizing to Let’s Get Physical.
It is also important to note that the US government has changed the way they measure inflation. If the US were using the same measure of inflation now that it used then, inflation would be much higher, somewhere around 15%. This graph shows a comparison of inflation measures.
What Causes Hyperinflation?
Hyperinflation is caused by one of two things:
- The government injecting huge amounts of currency into its economy OR
- “Demand-pull Inflation,” where a spike in demand or drastic drop in supply causes a rapid increase in the price of goods.
On a large enough scale, either of these factors is enough to trigger hyperinflation. Over the last two years, we have had both.
How Government Actions in 2020 and 2021 are Affecting the Economy Today
In 2020 government stimulus packages injected more currency (almost $6 trillion) into the US economy than it already held. The last of these, The American Rescue Plan, was especially dangerous because it dumped an additional $1.9 trillion into the economy after it had already started to rebound. Since demand for goods was already strong, infusing free cash into the economy was like throwing gas on a fire.
To make matters worse, the US has experienced both an unrelenting demand for goods and a reduced ability to supply that demand. Labor issues, shipping challenges, packaging shortages, global demand, natural disasters, and higher costs of commodities have rocked our “just in time” delivery system.
The delicate balance of global supply and demand is slowly buckling under too many pressures at once. Retailers have thus far been able to keep shelves partially stocked, but if the underlying pressures persist, we will see fewer–and more expensive–goods for sale in 2022.
Has This Happened Before?
While it’s true that hyperinflation is a rare event, we do have examples in recent history. Most notably:
- the U.S. after the Civil War
- Germany after WWI
- Venezuela in the last decade
- and most recently in Lebanon
In each case, paper money became so worthless it was better used as heating fuel than currency. People literally purchased scarce goods with wheelbarrows full of money.
Today people often use debit or credit cards, but the concept of money being worthless remains the same.
Will the United States see hyperinflation in 2022?
I originally wrote this article in March of 2021 to gauge the threat of hyperinflation in 2021. At the time, I suggested that, if our economy went into hyperinflation, it might look like this:
Prices will begin to climb even though, at first, food and goods are still available. Then, random shortages of goods start to appear, driving up prices and creating a domino effect on other industries. It might take some time or it might happen quickly, but eventually, widespread shortages will become common.
Does this sound eerily familiar?
In the last year, food on grocery store shelves has ebbed and flowed in ways we have not seen before.
Remember when panic buying cleared out TP and pasta at the beginning of the pandemic? That was a predictable, knee-jerk, reaction to an immediate event. The holes we see on the shelves now have more to do with long-term issues like packaging shortages, labor absences, and skyrocketing freight costs.
When will the supply chain return to normal?
These issues are locked in until global demand for goods falls. For example, one grower on the West Coast reported he is paying triple the pre-pandemic prices to ship his produce to the East Coast. Along those same lines, the cost to ship a container from Asia to North America went from$3800 to $14,000 in 2021. Now, it’s even higher.
Clearly, we will see higher prices as a result. Costs are always, eventually passed along to the consumer.
Some of the supply issues will be resolved as Omicron subsides and people return to work. Processing plants and food distribution networks hampered by employee absences will begin to open up.
There’s another challenge on the horizon though…
A deeper problem–one that will impact our food supply at least through 2022–is the issue of skyrocketing fertilizer costs. A global shortage of fertilizer ingredients has driven up the cost of fertilizers anywhere from 100% to 214%.
Nearly any commercially grown food, regardless of where on the globe it is grown, will cost more. In some cases, substantially more. As a result, feed prices will also continue to increase making it more expensive to raise livestock. Whether food is grown or raised, it will cost more for the foreseeable future.
To prepare for this, you should learn about household items that could be used as fertilizer.
The Natural Evolution of Hyperinflation
The truth is no one knows what lies ahead as far as hyperinflation in 2022. We may see lines to buy scarce products. If you’re old enough to remember the energy crisis of the 1970s, you will remember the accompanying long lines and short tempers at the fuel pumps. That is a shadow of what we might see with shortages of the everyday products we rely on AND prices that go up on a weekly or daily basis.
During hyperinflation, a barter economy will inevitably develop until events stabilize. Since paper, or fiat, money is worthless, goods and services are exchanged on a barter basis. This has its pros and cons as described in this article, but in many scenarios, it can be the best option.
Using precious metals as a currency is risky, but it’s something buyers and sellers can use when they can’t agree on a fair exchange of goods and services.
At this point, as the economy spirals downward in a true case of hyperinflation, the local community becomes the only arena in which goods and services are easily exchanged. People with strong networks of trusted friends who encompass lots of occupations will have an advantage as will those with useful skills or desirable goods to trade.
In fact, take a look at this list of what becomes money in an economic worst-case scenario.
Are We in Danger Right Now?
Yes, I believe we are in danger right now. We are experiencing inflation levels not seen in 40 years and they continue to rise. Demand remains high and supply chains are still uncertain. In addition, until the cost of producing and shipping food falls, the prices we see in our stores cannot go lower.
It’s not only food prices that are going up. Household products that we use every day are getting more expensive. Huge companies such as Kraft Heinz, Proctor and Gamble, and Mondelez have already announced price increases in 2022 ranging from 7%-20%. These companies make everything from condiments to detergent to diapers, which will impact your monthly budgets.
Therefore, you should think about what you should be buying now in case hyperinflation does happen.
An Indicator of Inflation That Hides In Plain Sight
Finally, price increases are not the only indicators of inflation. Shrinkflation in the form of smaller ice cream containers and fewer TP squares on a roll will also eat into a budget. Smaller cereal boxes and cans of tuna mean we have to buy more of them to feed our family.
Prices rising on a few items can be absorbed. Cumulatively, they may break the bank.
Some economists believe there is no danger of hyperinflation even in the long term. I am no economist, but it seems the complicated and delicate balance of factors that impact inflation is in unprecedented territory.
Our underlying economy is still strong so it may be that prices are alarmingly high for a couple of years and then will subside. The truth is, no one knows. Another jolt to our economy–like a conflict with Russia–could be enough to send us into hyperinflation in 2022.
How Can I Prepare for an Uncertain Future?
There are steps we can take now to buffer ourselves in the event of hyperinflation.
First of all, don’t panic. If you are reading the Survival Mom, chances are you are already doing many of the things that will help you survive during economic chaos.
Paying off debt and investing in gardening are a couple of things you can do to protect your family. For more steps, read 13 Ways to Prepare for Hyperinflation.
Relationships will be more important than ever also, so also focus on strengthening your personal community. The Survival Mom Bootcamp Facebook group is all about family-centered, practical prepping for everyday disasters and worst-case scenarios; if you feel alone in prepping, you don’t have to! Join here.
Some Final Words of Wisdom
As you take steps to prepare for possible hyperinflation in 2022, remember that our mindset determines our trajectory. As The Survival Mom says: Prep More, Worry Less.
Or put another way:
“One thing that makes it possible to be an optimist is if you have a contingency plan for when all hell breaks loose. There are a lot of things I don’t worry about because I have a plan in place if they do.”
― The Last Lecture
seems to me you wouldn’t want to pay down debt if you’re expecting hyperinflation, use the cheaper dollars to pay down debt later
Some people do think that’s a good strategy. In fact, a decade ago people were putting thousands of dollars for freeze-dried food on their credit cards thinking they could pay it off pennies on the dollar when the inflation they expected would happen. Well, they are stuck with that debt. I’m not one to gamble on this and don’t recommend it.
not talking about credit card debit, looking at long term debit like a mortgage on a home that will increase in value over time, although I could make a good case for the freeze dried food when I look at the cost of it today vs ten years ago (stuff lasts about 25 years)
I understand the principle and technically you are correct. However, as a practical matter, if you have limited dollars to spend in a month and some of that has to go toward debt, then the principle that it’s actually a good thing because you’re getting a bargain on your debt feels pretty abstract. I would prefer to have all of my dollars for my immediate needs. But that’s me and you might operate differently!
I have long held a 30 year fixed rate mortgage at less than 4% interest, after tax deductions even less than that, been lucky to have more than enough in liquid investments to pay it off, would never do that for the very reason you state “have all of my dollars for my immediate needs”. Good philosophical discussion Valerie
I was taught that the only cause of inflation is the government printing press. printing unbacked dollars. No printing of fake money, then no inflation. Inflation is good for the government as it eventually pushes everyone into higher tax brackets. The price jump on individual items can be caused by temporary shortages, either real or imagined. For example, the run on toilet paper last year. An imagined shortage. Blessings.
Hyper inflation happened in Germany after World War 1. especially after the U.S. stock market crash.
You are correct. That was a typo on my part that I fixed. Definitely after WWI which set the stage for the rise of Hitler. Thanks for noting that.
They’re working on digital currency (opt out and your paper/online currency is worth pennies on the dollar). China is already using theirs and the EU is on schedule for implementation in the next couple of years.
Our own J Yellen is “prepping” us for it. As soon as it becomes a fait accompli hyper inflation is all but certain.
Once we have ZERO ideas what things are really worth due to hyperinflation, the government then sets prices and can decide who gets what by capping transactions on specific goods or accounts. They’re using weeding out fraud as an excuse to push digital. However that’s simply a ruse to legitimize algorithms that put a limit on any good or service deemed unnecessary or illegal.
Bloomberg radio hosts are often asking these questions and sounding shocked when they’re reassured it’s not happening yet. They seem like they’re in never never land-they know it’s coming just not when.
It feels like the reason trillion $ deficits are no big deal is they may magically disappear when the transition occurs. Idk. Hoping not.
Yes, KC, I’ve been hearing about this and it’s diabolical.
I would be interested in a list of possible barter items. I know I have my own ideas – some vices to use as trade, but some practical lists might be helpful.
Thanks!!
Barter items are okay for stocking up, but what I believe is better are skills and knowledge. In many cases, they don’t cost anything, can’t be stolen, and you take them wherever you go. Construction skills, cutting hair, sewing/tailoring skills — the list is endless.
Too bad all the ads are ruining the great articles!
Hi John. Thanks for the feedback. Sometimes certain advertisers change their code and my ad network doesn’t catch them in time to block. I’ve emailed the network and asked them to review.