Is your money safe?
Is hyperinflation coming to America?
Is a loaf of bread going to be $100?
A lot of influencers seem to think so,
but there is a piece to this puzzle that many of them are missing.
I'm going to explain what hyperinflation is,
what it does to people and economies,
and then I'm going to break down the major flaw in the hyperinflation narrative.
Stay until the end because it's actually going to be way worse than you think.
Let's get it!
Welcome to BitBoy Crypto!
My name is Ben.
In this video, I'll be talking about hyperinflation and why it is not coming to the United States.
Stay to the end of this video to get my take on what you can do to create wealth
during this economic downturn.
Hyperinflation by definition is when the CPI increases by 50% or more in one month.
That's different than high inflation, where CPI is 10% to 49% in one month.
But that's a huge range.
For example, 25% inflation sustained over months
is incredibly disruptive to any economy and creates a lot of poverty.
But what is it about the 50% number that deserves the title of hyperinflation?
50% is seen by many economists as a point of no return.
As outlined in the book When Money Dies by Adam Fergusson,
hyperinflation is when people have lost faith in that country's money.
Economist Cullen Roche defines hyperinflation as a disorderly economic progression
that leads to a complete psychological rejection of the sovereign currency.
In the worst case of hyperinflation,
prices of goods will double every day,
and sometimes can double within an hour.
When prices on commodities rise that fast,
people start spending their money as fast as they can.
This starts the vicious feedback loop,
the velocity of the money rising parabolically along with prices.
Not only is a lot of money needed to do basic business,
but there is a lot of it running through the economy.
Thus making prices go higher and the payment greater
and on and on until you get a total collapse of the economy
and, soon after that, the government.
It's a scary thing to think about.
But it's happened several times over the past 100 years.
The most notable was what happened in Weimar Germany in 1923,
Zimbabwe in the 2000s and, most recently, Venezuela in 2015.
In the early 2000s,
Venezuela was a thriving socialist state thanks to its vast oil reserves.
The oil provided money for the massive government programs
that President Nicolas Maduro had put in place.
However, in 2014, oil prices plummeted, and the country's economy took a nosedive.
Without a capitalist system,
there was nothing left to back up the government handouts
once the price of oil started to head down.
Venezuela's government under pressure by President Maduro
began printing money, the bolivar, to finance his expenses,
ultimately sparking hyperinflation.
As prices skyrocketed, the bolivar's value evaporated.
By 2018, the inflation rate reached a staggering 1,700,000%.
The government attempted to curb the crisis by introducing a new currency,
the sovereign bolivar,
but this only provided temporary relief.
The consequences of Venezuela's hyperinflation?
Well, they were severe.
Citizens faced food and medicine shortages,
with many resorting to bartering for essential goods,
poverty rates soared,
and millions of Venezuelans fled the country in search of better opportunities.
To this day, Venezuela continues to grapple with the effects of hyperinflation,
and its people bear the brunt of this ongoing crisis.
Even though hyperinflation has been happening throughout the last century,
no one in the central banks or federal government is learning any lesson from it.
And while hyperinflation probably isn't possible in the US,
more on that later,
it's worth examining the potential consequences
that such an event would have on the everyday lives of American citizens.
After all, inflation doesn't have to hit 50% for things to get bad.
I want to break down the various ways in which high inflation could affect employment,
savings, consumption patterns and social stability in the United States.
In a runaway inflation scenario,
employers would face rising costs for raw materials, utilities and other business expenses.
To maintain profitability,
they might resort to cost-cutting measures such as layoffs,
wage freezes or even wage reductions.
Consequently, labor market would become increasingly competitive,
and the purchasing power of salaries would erode rapidly,
leading to a decrease in the standard of living for many workers.
This wouldn't be limited to one job sector.
The effects would reach everyone except for the super wealthy.
Runaway inflation would significantly impact the value of savings
and investments held by US citizens.
As the purchasing power of the dollar plummets,
savings accounts, retirement funds and other dollar-denominated assets
would quickly lose their value.
The uncertainty caused by inflation could also lead to volatile financial markets,
making it challenging for investors to find safe havens for their capital.
This erosion of wealth would have long-lasting effects
on the financial security of American households.
This is part of the reason Bitcoin was created,
an alternative to manipulated currencies that a person can have digital custody of.
Prices skyrocketing in an alarming pace,
US consumers would likely alter their spending patterns
to cope with the shock waves in the economy.
Essential goods and services take precedence,
leading to a reduction in spending on luxury items and discretionary purchases.
Hoarding and panic buying could become widespread
as people attempt to secure goods before further price increases,
exacerbating shortages and further driving up prices.
Think of the COVID toilet paper craze but times 1,000 and with more desperation.
In a runaway inflation scenario,
the cost of borrowing will become prohibitively higher for both consumers and businesses,
as lenders would demand higher interest rates
to compensate for the rapidly diminishing value of the currency.
This would result in decreased access to credit for the average American,
hindering their ability to finance significant expenses
such as education, home purchases or starting a business.
Defaults would also skyrocket,
and large lending institutions would fold,
leaving thousands out of work and feeding into the spiral.
The hardship and challenges posed by runaway inflation
would not be limited to just economic turmoil.
No, the erosion of wealth and the reduction in the standard of living
will lead to increased social unrest as citizens struggle to cope with the new reality.
We've seen this time and time again throughout history.
The old saying goes,
society is only three meals away from anarchy.
This unrest could manifest in various forms,
including protests, strikes or even an increase in crime rates
as people become desperate to meet their basic needs.
The unrest and the destruction of property is usually the tipping point of no return.
It's like pointing a leaf blower at a campfire and turning it on.
Things will get heated up and burn out quickly.
Keep in mind that the scenarios I laid out don't just apply to hyperinflation.
Even something like 15% inflation drawn out over months can have similar effects.
So far, I've shown you a few ways that a high inflation environment
can impact you on a personal level,
but what is all this talk about how the US is headed for hyperinflation?
Some are even saying it's going to happen within a few months.
All of that is bunk. And here's why.
The main ingredient that sets off hyperinflation, the yeast and the dough, if you will, is debt.
As the country gets more and more debt, the worse its financial situation gets.
It has to borrow more and print more to be able to borrow more.
But what does a country like Venezuela or Zimbabwe have to change their money into
in order to buy more debt?
The dollar, the world reserve currency.
The bolivar, the Zimbabwe dollar and the Argentine peso
all lost their value to the dollar.
That's the difference with the USA.
We control the reserve currency for the entire world.
Because of that unique ability, hyperinflation is all but impossible until it isn't.
Assuming it does stay on top,
there won't be severe economic consequences for the criminal mismanagement
that our government has done to our money for the past 50 years.
For us here in the United States,
it'd be like a slow poisoning,
nothing getting better,
everything slowly getting worse and worse until the whole game slides off the table.
But that will take decades, if not 100 years.
And that's if all things remain equal and nothing is corrected.
A few years of balanced budgets or high GDP will slow the bleeding.
But there is another scenario that could break the dollar
and send all the Western economies into a tailspin.
And that's called BRICS,
an alliance of countries led by China to depose the dollar as the reserve currency.
Now, BRICS deserves its own video, which is why we recently made one.
So check it out.
But suffice to say that if there is a threat to the dollar superiority,
it'll come from China and the BRICS alliance.
If that happens,
fight would be swift and would make Venezuela look like Disneyland.
So here's the lesson.
The dollar is not an asset.
In a credit economy like the one we have, only hard assets hold value,
and the more you HODL, the safer and more rich you're going to be.
That's all I got.
Be blessed.
BitBoy out.