In Jim Cook's Archive


We are often asked what would a person use for purchases during and after a runaway inflation. As one client pointed out, you wouldn’t take a one-ounce gold coin to purchase a gallon of ice cream at a convenience store. I can only speculate on the answer based on the Weimar Republic inflation in Germany in 1921. The government would certainly be on top of this so there would only be a brief period with a worthless currency that bought nothing. Up to that point, prices would be jumping daily. Gas would go to $5 a gallon one week and $10 the next.  The following week gas would be $50 a gallon and then $100 and in the third week, $500 a gallon. You would still be using dollars for purchases during this period of rising prices. Wages would be trying to keep up. However, savings, annuities and insurance would be lost. This is when gold, silver, diamonds and other tangibles would save you just as they saved people in the German inflation. These tangible assets would appreciate at close to the inflation rate, providing you with the necessary purchasing power to survive. You would convert a gold coin into dollars and immediately spend it to avoid the ongoing and immediate depreciation. For example if you wanted to buy two weeks of groceries for your family you would sell the gold coin for $100,000 and immediately buy the two weeks of groceries you needed for the same $100,000. Periods like this don’t last long because when people lose faith in the currency’s ability to hold value they begin to spend it as fast as they can to buy real goods.

This destructive period would likely be over in a few weeks. Perhaps foreign currencies would come into use and silver coins would gain immediate recognition at the cash register. Something takes the place of a failed currency almost immediately. Remember how cigarettes were the means of exchange in post-war Germany. Furthermore, the government would be frantically engaged in issuing a new currency to replace the depreciated dollar. They did that after the Weimar inflation and things began to settle down fairly soon. It’s only that brief period when the currency fails completely that you have to find a way to survive comfortably. Most tangible assets would maintain their value with gold and silver among the best of these because of their liquidity and portability.

Most people scorn the possibility of runaway inflation. The mainstream media looks at such concerns as nutty. However, enough people ask about what to use for money in a hyperinflation that we need to have an answer. Is it possible that the dollar could suffer such a massive depreciation? According to the Austrian School of economics it’s probable.

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