Monday, September 27, 2010

Keeping multiple currencies in cash‏ and Hyperinflation

I received an email a couple days ago regarding the wisdom in stocking up different paper money currencies. The reader asked how much sense it made to do so and if it was a waste of time and space. That’s a good question because often survivalist and preppers think they are doing this savvy move by storing this or that, by having certain items or products to trade, when in reality the likeliness of that event occurring of such an item gaining the value you expect is rare.

For example, other than gold and silver, stocking coins and other items because of their metal speculating on a huge increase in the price is not something I’d waste my time and space. There’s a reason why they are not “precious” metals. Better buy gold and silver rather than trying to guess what people may want to barter.
Now, I have recommended having some Euros just in case. If you feel the need to stock any other paper currency, then stick to Euros alone, something every country will want if the USD ever collapses. Specially if you plan on moving to some other country when SHTF, the Euro currency will come in handy, and readily accepted. Its smart to stock up on gold and silver, and it is safer than Euros or any other kind of paper money, but as we saw several times already you need cash the first couple of weeks during the first stages of the collapse. When Chile’s economy collapsed the word on the streets was “only USD” if you wanted to buy in the black market. Something similar went on in Argentina after its economy collapsed in 2002, prices where often in USD and people traded pesos for USD even on the streets. But if the US dollar collapses? Expect most people, even in US, quoting the European currency price instead. Is the Usd likely to collapse? Don’t think so, hope not, but know it may turn out this way if it does.

This link has some pretty good info on how an American hyperinflation would be like. The author mentions his experience during Chile’s economic collapse as well.

How Hyperinflation Will Happen

Hyperinflation, Part II: What It Will Look Like

Enjoy people, I’ll write some observations about these two links tomorrow, so it will make more sense if you already read it.

Take care guys.



Anonymous said...


I enjoy your BLOG, and 99% of the time you are right.

Not this time!

This time we all live in a global, interconnected economy.

Whichever major currency (USD, Euro, ...)will collapse first, will bring down ALL other fiat currencies in a flash.

It would be safer to hold gold, silver, and if possible a non-fiat currency from a neighbor country (e.g. USA --> Canadian dollar), or
stocking and rotating barter items (e.g. cigarettes, beer, gasoline).

Just my $.02FRN

Yulek said...

I'm not certain if Euro is a good choice, given the situation with PIIGS, so I'm considering Swiss Franc. How about it?

Anonymous said...

From what I gather, the money of P.I.I.G.S. are not a safe bet. I would be more inclined to listen to Marc Faber when he suggests the Asian currencies as he does in this short video:

Additionally, I take it you're dis'ing those who save nickel and copper coins? Zimbabwean's experience during their hyperinflation with their coins having no influence? It's not about a surge in value, it's about less than zero.

Daniel said...

Peter Schiff recommends Asian currencies:

Singapore Dollar, Japanese Yen (although they're printing more Yen), then Australian dollars, New Zealand currency.

There's going to be a giant shift in economic might from USA to Asia.

Anonymous said...

If the USD goes down it will quickly pull the Euro and the Pound down with it. I agree that Asian currencies, especially the Yen, may be a better bet. I don't trust China to act rationally when it comes to the Yuan, so I'd stay away from it.

The Euro has too many problems to be a go to currency in case of a USD collapse. The British Pound was at one point worth more than the Euro in relation to USD (L2=$1) but I think the financial system of the UK is too closely linked with America and the PIIGS.

Anonymous said...

They understand that chaos is not acceptable, therefore and odds, are the USD will be revalued and as apart of that, a new reserve currency may be adopted. Of course not all many be in agreement, particularly China. Go with Schiff's recommendations for the bulk of it. Depending upon where you live, say near Switzerland, then Swiss Francs would be a good option, or near Canada, Canadian, Scandinavia, Norwegian Crown. Also depending on where you live, there will be buyer of PM's, desperate to give you cash... If traveling in Europe, Swiss France, Euros and few small chunks of gold well hidden of course. It is difficult to buy PM's in Europe even at the vending machines in Germany.

There is competitive devaluation occurring and debt increases simultaneously to keep the game going. Bond Market will start to fall with the USD, then it's time to get very worried. Once all confidence is lost in a currency, it's Game Over. If they don't revalue currencies and the debt behind each currency against the USD, then the current and only currency capable of being world reserve currency, if agreement is not reached upon a new reserve currency, will hyper inflate and export that hyperinflation. If the Euro goes first for some reason, countries will resume using the native currency if still present and it would likely be coordinated. Scandinavia has it's old currency in place, and Germany probably has an emergency supply of Marks warehoused. Others may not, but can go to a digital currency. a

gaga said...

Gold bugs like to talk about 'Fiat money' and its disappearance. Well, for paper money to be accepted it has to be acceptable to 95% of the population and Gold bugs are such a tiny minority that the rest of us will still accept paper.

So the claim that the Euro etc will go down with the dollar simply doesn't hold up - even with the economic collapse, the Dollar rose as a safe haven. The same will happen again, another paper currency will take over, becuase there simply isn't enough gold to use as a currency.

Personally, I think that even if the dollar is battered, it won't stop being used it has too much physical momentum. The Euro has is even more resilient due to the shear number of wildly differing economies using it.

If the PIIGS go down, they willbe ejected from the Euro, but
the Euro will survive. Remember, each Euro not has its own national identity code, so you can hold German, French or Dutch Euro notes if you want and avoid the PIIGS.

Anonymous said...

a says, "It is difficult to buy PM's in Europe even at the vending machines in Germany."

What do you mean, it's difficult? What could be difficult about buying from a vending machine?

Anonymous said...

I don't think the Europeans share your liking for the Euro, consider this,

" the second quarter of 2010, Europe was still “the source of 35% of the world’s demand for small gold bars and coins,” whereas just two years ago, European demand for gold had been only a “relatively insignificant” 7% of global demand."

Dave said...

I would recommend holding onto gold or silver. Going from the USD to the Euro is liken to running from one burning house into another one.

"The same will happen again, another paper currency will take over, becuase there simply isn't enough gold to use as a currency."

Gold needs to be revalued at a much higher level if it was going to back the USD again. Amount of currency does not matter as long as it stable, hence why Gold has been used as currency for centuries.

gaga said...

"Gold needs to be revalued at a much higher level if it was going to back the USD again. Amount of currency does not matter as long as it stable, hence why Gold has been used as currency for centuries."

There isn't enough physical metal for everyone to carry it about holding their entire personal wealth.

Gold hasn't been used in real money for a very long time. It has to be converted to paper money first to be used. Its a very convenient way of storing value but its no different, fundamentally, than any other physical asset such as oil, aluminium or Platinum.

Dave said...

"There isn't enough physical metal for everyone to carry it about holding their entire personal wealth."

Sure there is, that's one of the good properties of Gold that makes it a good money. It's easily divisible. It's not the amount that matters.

Do you think the banks have enough cash for all their depositors to withdraw their money at the same time?

Anyways, I highly recommend reading the following book. It taught me a lot of things I did not understand about money:

Adventures in Self Reliance said...

I think ferfal's advice of not all putting your eggs in basket would apply here as well.
I am building Barter boxes that will include all kinds of personal items, batteries, candles things that go 1st in an a disaster type stuff. A little silver in coins and bars and I'm looking into some Canadian Dollars as they seem to be doing well and Canada is relativly close.
I don't think you can pick any 1 item and say everyone will value it the same as you do, as humans are just too different. I think the best thing is to look at most people want in country that has collapsed.
If you go back to ferfal's posts of what he wish he had during the "collapse" or the stories out of Russia and Serbia, I think you would do okay for awhile .