How to protect against hyperinflation

[shnaek]

How would members on here suggest protecting your savings against hyperinflation? I was discussing this with colleagues in work. One suggested buying art. Though you would need a place to store it, and a good knowledge of art!
Many are piling into gold at the moment, but most are buying paper gold, which is almost as useless as fiat money.
Some suggest that if gold reaches $5,000 or above, that governments will introduce a 90% tax on it. This would be true to form.
You could buy property - if you could get a loan. Better to be a borrower than a saver when hyperinflation hits.
What suggestions have you to hedge against hyperinflation?
Do many people believe hyperinflation to be an imminent threat?

 

[ringledman]

Big mortgage but only if you had a long term fix, as interest rates would rocket in hyperinflation.

There is emperical evidence (think by Pretcher) that gold performs better in deflation than inflation (ie in high inflation, gold goes up but not as quickly as prices rise / currency debases).

Foreign stocks or currency in a sound currency would make one very wealthy if inflation hit at home.

Cant see hyperinflation for 5-10 years but certainly a likelihood for the dollar the way it is being debased.

The government would try and steal your wealth by silence (inflation) or simply by stealth (capital controls etc) under a hyperinflationary environment.

Marc Faber says expect the US government to make gold illegal, pay you the full worth for it and then up th value per ounce ten fold.

His book 'tomorrows gold' is excellent on hyperinflation.

 

[ringledman]

An interesting article on the effect of various asset classes during the Weimar hyperinflation period -

http://www.usagold.com/germannightmare.html

What seems of interest from what I have read is that those with mortgages (that went to zero cost) seemed to have these part reinstated in order to pay back the creditors who lost out due to hyperinflation.

I think what is clear is that if there is hyperinflation the government(s) will do everything in their power to ensure that the man on the street doesn't gain from it.

 

[Chris]

I would say art is a very bad asset to hold in a hyperinflationary time. All past hyperinflations have been in extremely troubled economic times. The last thing that people will want to buy in such times is something nice to hang on the wall.
Personally I have a considerable amount of gold allocation in my portfolio; between physical bullion and mining stocks I am at about 30-40%. There is increasing talk of a gold bubble, and personally I don't buy into the idea for following reasons:
- the general public is not buying gold, but rather being enticed by cash for gold shops to sell their gold
- there is talk of German's rushing to buy gold, but again it is not the average Joe; I recently received letters from two banks that I deal with in Germany, both of them advising against adding to allocations of gold
- the inflation adjusted price for gold would have to go to about $2400 to meet the 1980s level
- gold mining stocks are selling at very low p/e ratios in the low teens; if it were truly a bubble then we would be seeing soaring p/e ratios
- there has not been a blow off rally like can be seen in the dot com bubble of the most recent past

Saying all that I have not added to my physical gold since the price was at about €1050, and wouldn't at at the current price. What I have been doing at current prices though is adding to my gold mining stocks, as these are still quite cheap, in my opinion. When the next correction in the gold price comes I will be looking at adding then.

 

[farmerette]

I would say art is a very bad asset to hold in a hyperinflationary time. All past hyperinflations have been in extremely troubled economic times. The last thing that people will want to buy in such times is something nice to hang on the wall.
Personally I have a considerable amount of gold allocation in my portfolio; between physical bullion and mining stocks I am at about 30-40%. There is increasing talk of a gold bubble, and personally I don't buy into the idea for following reasons:
- the general public is not buying gold, but rather being enticed by cash for gold shops to sell their gold
- there is talk of German's rushing to buy gold, but again it is not the average Joe; I recently received letters from two banks that I deal with in Germany, both of them advising against adding to allocations of gold
- the inflation adjusted price for gold would have to go to about $2400 to meet the 1980s level
- gold mining stocks are selling at very low p/e ratios in the low teens; if it were truly a bubble then we would be seeing soaring p/e ratios
- there has not been a blow off rally like can be seen in the dot com bubble of the most recent past

Saying all that I have not added to my physical gold since the price was at about €1050, and wouldn't at at the current price. What I have been doing at current prices though is adding to my gold mining stocks, as these are still quite cheap, in my opinion. When the next correction in the gold price comes I will be looking at adding then.

ive a few hundred euro worth of shares with patagonia gold but it seems to be a bit of a dud

gold mining shares dont always track bullion price as some of them are poorly ran companys , you got any tips , perhaps the market vectors mining ETF is a good bet ?

 

[Chris]

ive a few hundred euro worth of shares with patagonia gold but it seems to be a bit of a dud

gold mining shares dont always track bullion price as some of them are poorly ran companys , you got any tips , perhaps the market vectors mining ETF is a good bet ?

Don't want to break any posting guidelines over stock recommendations, but you are right about some gold companies being badly run. What is interesting about gold mining companies is that they are now trading at prices around the January 2008 level where gold was $1000. As already mentioned the p/e of some of the companies are very reasonable, which is why I do not believe there is a bubble in gold yet.
Of the five largest gold mining companies in the world I own all 4 that are not US domiciled. That should be something for you to start looking. I basically applied my usual fundamental value analysis.
I also own one junior gold company, but this is a very speculative "investment". When it comes to junior mining companies make sure you look at only those that are actually close or at production stage.

 

[lingsun]

I believe that hyperinflation is an imminent threat. The Federal Reserve is printing trillions of bogus dollars. I believe that hyperinflation is a 100% certainty.

The other big threat is the collapse of the dollar. The dollar has been losing value against other currencies. It's only a matter of time before the world abandons the dollar as the world's reserve currency. I believe that the day will come when OPEC no longer accepts dollars as payment for oil. When that happens, countries around the world will dump them as fast as they can. I believe that will cause the dollar to lose 90% or more of it's value in a short time. You can only imagine the chaos and the panic when food prices double or quadruple or more in a matter of weeks.

I wouldn't put a dime in the stock market. I believe it's heading for a crash because the economies around the world are so bad. When it crashes it will take the good companies with the bad.

I still like investing in gold. Central banks around the world have been buying gold by the ton. I have my money in "paper" gold. I bought it all at one place. I can easily sell it there whenever I need the money. I believe that gold will keep going up as the dollar goes down. Since the dollar will eventually be worthless, the price of gold has almost no ceiling.

I've heard of a possible gold tax but I can't base my investment decisions based on that. First I have to maintain the purchasing power of my dollars. I'll worry about the tax consequences later.

Since I believe inflation is an imminent threat, I've bought a year's supply of food and water. We have a camp stove and fuel. I'll soon have kerosene heaters and kerosene. I also own guns.

I also have some money in "junk silver". A lot of pre-1964 coins are 90% silver. A 1950 dime is worth between $2.80 and $3.00 today. I believe that junk silver coins could emerge as an alternative currency during hyperinflation. I found a place to buy them online where I only paid 6% over the spot price and that included the credit card fee, shipping, and insurance.