Questions That Arise When Considering Future Hyper-Inflation
Many people agree that eventually, we will have serious inflation. Possibly, hyperinflation. I’m not ready to jump on board the hyperinflation train yet, because I think there is still a way to avoid it, but I’m struggling to find a way that we won’t have at least some level of inflation in the future. The problem with jumping both feet into the hyperinflation camp is deciding what to do about it.
To see what I mean, consider the following questions:
- Should you not hold any cash?
- Should you stop paying off your mortgage? After all, if we have hyperinflation, then your debts will be inflated away
- If you’re certain of hyperinflation, shouldn’t you just run up your credit cards and buy a bunch of gold?
These are questions that depending on how you answer them might result in some pretty extreme action. Additionally, if you were in the camp of going all out to protect yourself from inflation, what are you doing to hedge against the possibility of not having hyperinflation?
If you take all your cash and put it into gold, what if we get massive deflation and gold takes a hit (along with everything else)?
I believe in holding gold, but I also believe in not putting all your eggs in one basket. Therefore, I think it’s smart to diversify across the following assets:
- Gold & other precious metals
- Cash – including actual cash held at your property
- Defensive, dividend stocks that will be able to perform in an inflationary environment
Your allocation might be different than mine based on how much of a believer you are in inflation. Personally, I think we still have some deflation ahead until we get big time inflation. If gold & stocks take a hit, I will use that opportunity to unload more cash into those assets. Until then, I’m still holding a pretty good amount of cash.
I don’t really have enough cash or gold to worry about since I lost my teaching position last year due to budget cuts. There are already signs of food costs inflating (the highest increase last month in 26 years), so this is one area I can get a jump on inflation. I have a small container garden and purchase food in bulk. I am dehydrating, vacuum sealing and canning as much as possible. Even if the food prices do not continue to climb (lol…very doubtful!), I’m saving money and eating better quality food. Win/win situation.