Hyperinflation: Cause for Concern or Food for Fiction?

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image: inflation, hyperinflation, man with stacks of dollar bills

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 a year of covid-19 news and watching more violent protests than I ever care to see again. Now, with news of more trillion-dollar government spending, it seems inevitable that talk of economic collapse and hyperinflation prepping will once again take center stage in social media and in news sources.

What Is Hyperinflation?

Hyperinflation is the term for rapid, excessive, and out-of-control price increases for goods and services at a rate of 50% or more per month. That’s a mouthful. An easier description is when prices are skyrocketing so quickly that a loaf of bread costs $5 in the morning, $7 in the afternoon, and $10 the next day. Your dollar buys less and less each day until dollars are essentially worthless.

Considering that an inflation rate of 2% per year is considered normal in a healthy economy, inflation rates of 50% or more a month mean you are in economic collapse. If a country is anywhere near that number it means you’re already in a heap of trouble and headed for more. Hyperinflation prepping is taking a proactive stance to protect yourself and your family from this worst-case scenario.

What Causes Hyperinflation?

Hyperinflation is caused by one of two things:

  • A government injecting huge amounts of currency into its economy in an attempt to stabilize it; or
  • “Demand-pull Inflation” where a spike in demand or drastic drop in supply causes a rapid increase in the price of goods.

Does the first sound familiar? Can you say “Covid Stimulus Package”? In 2020 our government injected more currency into the US economy than already existed and an even bigger “stimulus package” is due shortly.

Even more frightening, the 2021 Federal Debt now exceeds the entire value of all the goods and services in the US. And that’s without yet another stimulus bill being debated in Congress. Yikes! Regardless of hyperinflation, those are pretty scary numbers.

None of this is good news and nor does it increases consumer confidence in our economy or in those who make these enormously influential decisions.

Has This Happened Before?

While it’s true that hyperinflation is a rare event, we have examples in recent history, most notably, the U.S. after the Civil War, Germany after WWI, Venezuela, and most recently in Lebanon. In each case, paper money became so worthless it was more practically used as heating fuel than as currency. People literally purchased goods with a wheelbarrow full of money! Not that it mattered when there were so few goods for sale. Many people rarely use paper money anymore and opt for the use of debit or credit cards, but the concept of money being worthless remains the same.

What Would Hyperinflation Look Like Today?

Here is a typical scenario of the onset of hyperinflation and its trajectory and effects. Consider how working on hyperinflation prepping might help mitigate some of these effects.

Prices 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 become common and fear sets in. Think about the reactions of people in early 2020, when toilet paper, Lysol wipes, and hand sanitizer disappeared from store shelves for months at a time. You can expect more of that but with many more products in a time of hyperinflation.

Sadly, and again, as we saw with the covid-panic buying, instead of the slow accumulation of emergency supplies as practiced by preppers, people will stockpile anything and everything, exacerbating shortages even more. The result is, you guessed it, prices begin to skyrocket even higher.

Lines to buy scarce products will start to become the norm and many things will simply be too expensive to buy. If you’re old enough to remember the energy crisis of the 1970’s, you will remember the accompanying long lines and short tempers at the fuel pumps. That is a mere glimpse of what you would see during a time of hyperinflation 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 inevitably develops 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?

Currently, the official level of inflation in the US is below 2% so we are not in any immediate danger, although inflation isn’t always about obviously rising prices but in shrinking containers and redefining what is a “half-gallon” of ice cream. Am I the only person who noticed a while back that a half-gallon of ice cream actually is quite a bit less? And don’t get me started on those mysteriously shrinking rolls of toilet paper. Yes, I DO notice that the cardboard center becomes bigger and bigger, thus decreasing how much actual toilet paper is on the roll.

Inflation has more forms than just price tag increases.

Some economists believe there is no danger of hyperinflation even in the long term. I am no economist, but it seems there is a complicated and delicate balance of factors that impact inflation and most of them are outside our government’s control. So, OF COURSE, there is plenty of disagreement amongst the experts on how stimulus money and government debt will affect our economy long term. Some say it’s good and some say it’s evil. Only time will tell and so long as the economy stays strong, there is little danger of hyperinflation.

Having said that, it remains that our government has dumped a LOT of money into our economy through stimulus bills and has plans to do more of the same. Also, the pandemic has left a lot of question marks regarding the health of small businesses and employment that won’t be answered until stimulus checks stop coming and covid restrictions are lifted.

As of the writing of this article, the CDC is likely to extend the Renters’ Eviction Moratorium again, which may be a positive for renters temporarily, but eventually, the rent must be repaid to landlords who still need to continue paying the mortgages on those properties along with taxes and other related expenses. Kicking the can down the road to the tune of many, many billions of dollars is going to result in pain. Whether or not it contributes to increased inflation and the beginning of an extreme economic disaster remains to be seen.

Under this cloud of uncertainty, hyperinflation prepping for future economic trouble just makes sense.

What is hyperinflation prepping?

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.

  1. Pay Off Any Debt. Having debt during an economic crisis will only serve to create stress and make it that much harder to stay afloat financially. As the price of goods increases, even basics like bread and milk will stretch the budget. If money is paying off debt, you will have that much less for food and fuel.
  2. Diversify Your Investments. Financial gurus suggest that real estate, precious metals, commodities, and growth stocks can all be a hedge against inflation. This is a huge topic and completely outside my expertise. Here is one article that outlines simple strategies for diversifying your portfolio.
  3. Invest in Tangible Items. Perhaps a more relevant strategy for most of us is to invest in tangible goods. These are goods that can actually be consumed by your family or bartered in trade. As the old saying goes, “You can’t eat gold.” Food, alcohol, medicine, tools, weapons, and livestock can all be used to keep your family alive or traded for other essentials. Widespread shortages of goods will only increase the value of what you have.
  4. Diversify Your Income. Find lots of ways to increase your income: sell excess produce or useful crafts; teach skills; have a rental property, or start an online blog helping moms prepare for emergencies or in your own area of experience and expertise. Creativity counts here. Look for a need and fill it. This one step of hyperinflation prepping might be the most important.
  5. Identify and Strengthen Your Community Now. The single most powerful weapon for finding a job, bartering with a trusted partner, or surviving the unknown is your people network. Having a community you can count on during a crisis is invaluable. And as much as we all love and learn from our compatriots on Facebook groups, it makes more sense to have lots of people in your local geographic area that you spend time with face-to-face. It’s how deep friendships and trust in each other are built.
  6. Learn as Many Old-Time Skills as Possible. The more skills you have in your arsenal before a crisis strikes, the better prepared you will be to weather any storm. Plus, learning old-time skills that our great-grandparents had is fun. The possibilities are endless so scan The Survival Mom for articles to help you get started. Some ideas are:

This article from the Survival Mom archives has even more suggestions for hyperinflation prepping.

Words of Wisdom (Not Mine)

Obviously, hyperinflation is a worst-case scenario, but if preparing for the worst means we can handle anything that falls short of that, then it makes sense to prepare for the worst and hope that it never happens.

“Another way to be prepared is to think negatively. Yes, I’m a great optimist. but, when trying to make a decision, I often think of the worst-case scenario…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.”
Randy Pausch, The Last Lecture

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Valerie Whittle

Valerie Whittle has been an attorney, a homeschool mom, and a prepper. I leave it you to decide which she enjoyed the most.

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10 thoughts on “Hyperinflation: Cause for Concern or Food for Fiction?”

  1. 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

    1. 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.

      1. 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)

        1. Valerie Whittle

          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!

          1. 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

  2. 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.

    1. Valerie Whittle

      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.

  3. 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.

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