Will Hyperinflation overcome 2021 Financial Growth

Will hyperinflation overcome our 2021 financial growth potential?

How can we protect ourselves from the disturbing financial forecast of many well known economists? How much do most Americans know about hyperinflation?

The word inflation alone in these days and times makes us cringe. Even more so the idea of hyperinflation, and the thought of financial loss seems to deal a double blow.

In this article we discuss the the following areas.

What is Hyperinflation?
What Causes Hyperinflation?
When Does Hyperinflation Usually Occur?
Are We seeing Signs of Hyperinflation in 2021?
Who is Affected Most by Hyperinflated Prices?
How Can We Prepare For Hyperinflated Prices?
Is It Safe To Keep Your Savings Accounts During Times of Hyperinflation?

hyperinflation by definition

What is hyperinflation?

Hyper means to be over, beyond or in excess. Inflation means the currency or value of cash decreases, while goods and services prices increase. Therefore by definition is the excessive inflation of prices and loss of dollar values at the same time.

Accordingly, hyperinflation can occur when a country is in “economic turmoil” because of the excessive printing of money through the central bank. [3] Hyperinflation like untreated blood pressure can surge in a matter of days, and spiral to out-of-control levels.

Additionally, when hyperinflation occurs, prices for daily needs such as food, water and fuel increase because the items become more costly to provide to the consumer.

problems associated with hyperinflation

What causes hyperinflation?

Hyperinflation is the exaggerated growth of cash or money put into an economic system without the support of products (such as gold, silver, etc.) to balance the in-coming cash. Basically, hyperinflation is a man-made problem.

When the government prints and injects money into the economy to cover deficits, the new money lowers the value of all of the money. The more money they put into circulation, the lower the value of the money, the more prices rise. [5]

Therefore, it is safe to say that when the government stops printing excessive money, inflation slows down. When inflation slows down the value of the money increases.

Hyperinflation: Natural flow of supply and demand

When does hyperinflation usually occur?

Supply and demand has a natural flow in our economic system. However, when the natural flow of supply and demand is thrown off balance, it creates an inflated-cost-pull or inflated-cost-push in either or both goods and services. A supply cost-pull happens when the demand for an item occurs through over-purchase in a short amount of time.

We witnessed an inflation-pull in 2020 with toilet-paper supplies (hoarding). An inflation-cost-push on the other hand happens when the actual supply of certain goods are not available. In that case the cost increases because the stores know that consumers will pay the additional price.

I believe that we also saw some inflation-cost-push with various meats. The packing house employees were sick from covid-19. The sick employees caused a shortage of meats available to sent to the stores. Then the supply trucks were not able to get to the stores because the truck drivers were sick.

Additionally, some states were not allowing the trucks to cross state lines. As a result of a combination of the above incidents, some stores rationed available meats to only 2-packs per family. Also, the prices of a pack of chicken wings increased from about $5.50 to $18.00+ dollars.

2021 Signs of hyperinflation

Are we seeing signs of hyperinflation 2021?

When you review the most recent historical aspects of hyperinflation we see that Zimbabwe suffered with this issue from 1998 to 2008 and North Korea from December 2009 to January 2011. Both countries finally ended their plight with only using foreign currency for purchases.

The first pattern seen on the road to hyperinflation is excessive spending. That excessive spending causes the loss of value in the dollar. Currently the dollar has lost value when compared to other foreign currency. [2]

Nonetheless, the Federal Reserve report for April 2021 shows an increase of debt to over 7-trillion dollars, some from the stimulus money sent to American in 2020 and 2021. Numerous economists warn that printing and issuing the extra stimulus could put American in an inflated mode.

Next, we see an enormous increase in food prices. According to Forbes and the Federal Bureau of Labor Statistics, food prices rose more than they have in over 50 years. [4]. Additionally, according to the Consumer Price Index, food prices rose 2.7% for bakery items and 5.3% for meat, eggs and poultry.

The third sign of hyperinflation seen in 2020 was store shelves that were completely bare. Incidentally individuals hoarded food, cleaning supplies and toilet paper. Additionally, as stated earlier the items were also hard to find because they are not readily available in the supermarkets.

Historically, in addition to the value loss of the dollar, employment became an issue. However, the current unemployment issue stems from Covid-19 shut-downs. About 75% of America was shutdown in 2020 for two to six months.

The Covid-19 Pandemic shutdown has been attributed to the loss of numerous small businesses which have not been able to recuperate. In comparison to the great depression when unemployment rose to 20%, the pandemic shutdown set 2020 unemployment at nearly a combined rate over 48%.

Once again I ask, will hyperinflation overcome 2021 financial growth? Currently, the potential for savings rewards growth is very slim.

Those at Greatest Risk of loss

Who is effected most by hyperinflated prices?

The unemployment problem has forced many families to use their savings as a means of living. Those who did not have an extended amount of savings have been forced to stand in food lines.

Additionally, hyperinflation has also put retirees and the elderly at the greatest risk for financial lack. Why? This group usually lives off their retirement savings, pensions and social security.

Accordingly, the saving become depleted because the working class cannot pay their loan payments. The lack of payments causes the banks to go out of business and the money in the savings accounts is lost. However, the promise of the US government and FDIC insurance says that money in federally insured accounts is always protected.

Financial Growth and Economic Warning

How can we prepare for hyperinflated prices?

Being prepared for a crisis is the best possible solution to a lingering problem. I recommend that we listen to the warning of the numerous economists. Nonetheless, we should also watch their actions.

Warren Buffet recently sold 21 stocks, including 13 million shares in Delta Airlines. I believe that we may be able to review his actions and help ourselves prepare for a financial rocky road.

Therefore if you have a large investment portfolio:

Speak with your investment counselor and diversity your portfolio
Balance your assets and know what you own including, gold, silver and property
Practice your bargaining skills, you may need to barter for a loaf of bread
Increase your DIY skills so that you can provide as many self-needs as possible

How safe is Your savings account during times of hyperinflation?

Is it safe to keep your savings accounts during times of hyperinflation?

Numerous economists warn of the loss of income to retirees who are depending on living on the interest from annuities and savings accounts. Their predictions of loss can be scary. Make a plan for how you can budget and reduce unnecessary spending.

However, there is hope for the actual protection of hard cash and accrued interest that is already in your bank account.

According to the FDIC insurance policy, if your money is in a bank or credit union that has federally insured your account, you are covered up to $250K.

This is a list of the actual types of accounts that are covered by the FDIC Insurance.

Checking accounts
Negotiable Order of Withdrawal (NOW accounts)
Money market deposit accounts (MMDA)
Certificate of deposits (CDs)
Cashier’s checks, money orders and other official items issued by a bank

This is a list of accounts and items that FDIC Insurance does NOT cover.

Stock investments
Bond investments
Mutual funds
Life insurance policies
Annuities
Municipal securities
Safe deposit boxes and their content
US Treasury bills, bonds or notes *

US Treasury bills, bonds and notes are backed by the “full faith and credit of the U. S. government.” If you do not see your account listed, you can easily check the entire list at FDIC.gov.

Conclusion

We began the article by asking a hypothetical question concerning the potential of hyperinflation in 2021. We also asked how can we protect ourselves from the economic forecast and the current trend of inflated prices.

Next, we defined the word hyperinflation, and stated some of the causes of the inflation. After that, we showed some of the patterns from recent countries who suffered from the negative effects of hyperinflation. Then we move forward to show recent reports from the Federal Reserve and printing of money for stimulus payments.

After that we showed the Consumer Price Index report on food prices, and the 2020 work-shutdown which led to record unemployment rates. Finally, we stated FDIC insurance policy protections for various types of bank and credit union accounts.

Resources

1.) Getting ready for Hyperinflation https://survivalist101.com/tutorials/financial-planning-for-preppers-financial-prepping-101/getting-ready-for-hyperinflation/

2.) Hyperinflation https://corporatefinanceinstitute.com/resources/knowledge/economics/hyperinflation/

3.) Hyperinflation: Its causes and effects with examples https://www.thebalance.com/what-is-hyperinflation-definition-causes-and-examples-3306097#:~:text=When%20prices%20soar%20over%2050%25%20in%20one%20month%2C,or%20depression.%20Demand-pull%20inflation%20can%20also%20cause%20hyperinflation.

4.) Risk of Stimulus Spending: Are we headed toward inflation and pension devastation https://www.forbes.com/sites/ebauer/2020/05/14/risk-of-stimulus-spending-are-we-headed-toward-inflationand-pension-devastation/?sh=366115191d5c

5.) What is hyperinflation? https://inflationdata.com/articles/hyperinflation