A question I frequently receive relates to what happens to debt in the event of HYPERINFLATION – and more specifically, mortgage debt. This is obviously a very important question – which should definitely factor into your overall financial outlook; however, it can be a very dangerous road to tread, particularly if viewed in terms of “profit potential.”
The inevitable COLLAPSE of the U.S. dollar is a mathematical certainty, but the timing of its occurrence is impossible to predict. Assuming no “black swan” events – like nuclear war or catastrophic market crashes – I believe the dollar will have lost the last vestiges of its “reserve currency status” within two to three years; and likely, within five years be replaced by a new, gold-backed currency. However, such numbers are pure speculation, as no one truly knows what will happen, or – more importantly – when, and why.
That is why I repeatedly recommend ownership of PHYSICAL gold and silver; as regardless of this time frame, the likelihood of prematurely selling your bullion is extremely low – barring personal financial emergencies, of course. And the same goes for “betting” on the timing of HYPERINFLATION – as if you hold too much debt before it occurs, you could lose the underlying assets – such as your home – or even your PHYSICAL PMs if you need to sell them to pay off your debts.
Moreover, think long and hard about the wisdom of purposefully holding large amounts of debt into what could be a cataclysmic financial event. Ann Barnhardt says to pay off as much debt as possible beforehand, with the aim of distancing oneself as much as possible from “the system” when “the Big One” hits. And frankly, I agree with her, 100%. Sure, if your bank fails, your mortgage obligation may go with it. But who’s to say the bank won’t be acquired by a more evil entity, such as the U.S. GOVERNMENT? For all we know, a new, totalitarian dictator will declare all mortgaged homes state property – or some other, equally draconian decree.
As for what happens to debt during HYPERINFLATION, it is absolutely devalued – benefitting the borrower, at the expense of the lender. Out of control MONEY PRINTING may cause a loaf of bread to cost $500,000, but your $500,000 mortgage will still be the same; in other words, worth the same as the bread. If you have limited savings, you still won’t be able to pay off your mortgage – especially if you lose your job, a highly likely scenario. However, you could sell ITEMS OF REAL VALUE – like a loaf of bread, or a gold coin – to obtain the funds to pay off your mortgage. Moreover, a handful of companies might even institute inflation-adjusted pay – though I wouldn’t count on it.
HYPERINFLATION could break out at any time – as in the case of the aforementioned “black swan” events. However, more likely a 1930s-like scenario of unemployment, poverty, social unrest, and war will precede it. PHYSICAL Precious Metals will protect you under all scenarios, but DEBT could prove just as much an albatross as a boon. It’s VERY rare for anything positive to ever come of debt, so I strongly advise you do not consider it an “asset.”
PROTECT YOURSELF, and do it NOW!
Call Miles Franklin at 800-822-8080, and talk to one of our brokers. Through industry-leading customer service and competitive pricing, we aim to EARN your business.
I believe a new monetary system that includes the G20 nation currencies,including gold and silver,is needed.We obviously live in a global economy,so it makes no sense to allow the largest debtor nation in the history of the world to continue to print as much fiat as it wants.it should be clear to our creditors by now that we will pay them back with debased pieces of paper.
Moreover,should gold and silver be recognized as money and reestablished to some economic degree,it would not matter if the world went back to some kind of hard money standard.The option to use it in trade agreements would render the digital money of the Fed obsolete literally overnight.The more options to the Fed,the better for all humanity.What do you think?
I agree 100%, and have written of this INEVITABILITY for years.
It’s not that it’s just “needed” – it’s the ONLY system that works.
Most likely it will be FORCED onto the world by collapsing currency markets, with a TINY chance the bankers actually create it uncoerced.
But rest assured, it’s coming – at PM prices TENS, if not HUNDREDS of times greater than today’s – in TODAY’S DOLLARS.
here’s my take,
Theoretically, hyperinflation SHOULD let a debtor eliminate his debt in exchange for a piece of gold or something else of value, and it has in the past. However, It seems like the game is more rigged than ever before and there are fewer exits for ordinary people. I just get the feeling that TPTB will somehow rig the game to make sure ordinary people that made the right choices will still end up losing.
I just get an uneasy feeling that even if ordinary people do the right things, the rules will change to somehow screw them.
That being said, If I ever get the chance to pay off my mortgage for 50 ounces of silver, I will.
On another topic, What do you think of Bill Still? I recently saw a clip of him pounding the gold standard. I personally don’t want a gold standard, I want gold & silver money. If I can’t trade my paper money “backed” by gold for AN ACTUAL piece of gold, then it is NOT gold money.
I agree with a lot of bill’s points on money quantity but these guys that preach that fiat would be ok if only the gov’t did it, I just can’t get onboard with.
YES, we need to end fractional reserve banking and debt based money, but I am a strong believer in my money ACTUALLY having value. I don’t care if its gold or corn flakes, as long as it holds its value.
I believe you would feel the same way ( correct me if i’m wrong ) but the point is, If you agree with me, I would love to see a rant taking him on.
In the old days of barter, someone traded something of value for SOMETHING ELSE of value. Money is supposed to make that exchange easier for both party’s by giving them something that is universally accepted as being valuable. By replacing half of that trade with a worthless piece of paper takes the whole win/win scenario out of play.
You are 100% about the risks that ANY scenario will be rigged against you. Thus, we must all prepare for the worst, and hope for the best.
As for “Bill Still,” I never heard of him, and couldn’t care less about him. I have no need to challenge him personally, as I am writing DAILY about the flaws of his thinking.
However, if he wants to debate me – he won’t, they never do – I’d be happy to do so.
I don’t think that the government will outright confiscate homes because in the political calculation, even the dictator must have the majority on his side, otherwise, he’ll have to deal with the increasing revolution and conspirators. In the political calculation, nothing more quickly incites an armed mob than the confiscation of a man’s property or his family.
In the old days, it was easier to control a million people than to kill a million people. Today, it is the opposite.
There must first be a device in place to declare anyone a criminal that legitimizes the mass confiscation of homes.
Of course this brings up the thoughts of germany against the jews, but I do not believe that will happen in a republic; a place where people know and vividly remember what freedom is; and so will defend freedom which will make it more difficult for the dictator to cross the public.