What would you do if your money became worthless?

by Mary Logan

I am working on a policy post, but it is still cooking. So I will instead post a link to the best description of hyperinflation in Weimar Germany that I have ever read, that was written in 1970 when we went off the gold standard for good. Forty-three years later, our currency sins are finally beginning to catch up with us. What will penance for currency abuse look like? Since I have never received an answer to the question, “what would you do if your money becomes worthless,” I’ll ask it again.  Dead silence on this topic implies big blind spots.

Bezemer & Hudson, 2012 http://michael-hudson.com/2012/09/incorporating-the-rentier-sectors-into-a-financial-model-3/
Bezemer & Hudson, 2012 http://michael-hudson.com/2012/09/incorporating-the-rentier-sectors-into-a-financial-model-3/

While inflation in most countries is still manageable, the rate of inflation is increasing. That means that the amount of money relative to the underlying worth of the economy is expanding, through expansion of debt and money printing. Currently the debt in wealthy countries is mostly sequestered in the financial iron triangle loop, with little escaping into general circulation except where corporate salaries and graft trickle down to wealthy managers. At some point the sequestration will end, and the trickle down will turn into a rush. The jockeying that we are seeing now between countries attempting to balance their devaluation with the devaluation in other countries will become a race, and inflation will increase. How will our inflation race play out, and how will it be different from the description of the German Nightmare linked here? Another longer descriptions of the process is linked here. Might we segue into a new currency without pain and defaults for too-big-to-fail entities? Can we escape hyperinflation, given our bankrupt political processes?

wheremymoneywent

Header: Slave Market with Disappearing Bust of Voltaire, Salvador Dalí, 1940; Dalí describes his work on the painting “to make the abnormal look normal and the normal look abnormal.” While Dalí apparently disagreed with Voltaire’s philosophies, Voltaire had several relevant quotes on money that may apply here; “Dont think money does everything or you are going to end up doing everything for money” and “Paper money eventually returns to its intrinsic value — zero.” 

  • It appears that those who have fixed-rate, long-term debt are the winners in hyper-inflation — you can make your mortgage payment for an hour’s work at McDonalds, perhaps.

    Is that an accurate assessment, or am I missing something? Will property deflate to make up for this “free lunch?”

    • In the short term, yes. But this time is different. The corporations are coming down, and the bonds will eventually back a lot of worthless promises, as society shifts to something a lot smaller and more local. With the current relationship between the corporation and the government, you could still be holding debt obligations to BigBiz/Govt even though there’s nothing left of value except broken promises. In the longer term, if debt slavery comes back, who’s to say who will fight our next resource war? With almost everyone holding debt, who will win when the real resources behind the currency are apportioned out? Monetary inflation combined with implosion of the economy with widespread defaults. Ugh.

      • From reading the USAGold.com description you referenced, it appears as though farmers could have made it through unscathed, if they didn’t invest in excess unneeded equipment.

        I’m thinking the production of fundamental needs, low on Maslow’s Hierarchy, is what will be needed and valued during such times. And yet, that article said those who invested in such frivolous things as art and stamp collections fared well.

        Other than a scary bit about the populace raiding farms for subsistence, it would seem producing food would be a good thing to do, no?

        Also missing from the account is a total lack of attention to energy issues. I hold that all economic happenings have energetic underpinnings. I realize that is controversial in some circles, but I think it’s “HT Odum 101,” no? Do you have an interpretation of those events that involve basic trophic exchanges? If not, isn’t the coming storm fundamentally different — at least among us cognoscenti, who understand the energetic underpinnings of current world events?

        • Jan, thanks for the comment about farmers. I have a friend who went into significant debt to buy a seiner and a fishing permit (which is the Alaskan version of farming). And now he wants to go into even more debt to buy a bigger boat. This is at a time when there are many uncertainties about overfishing, radiation, acidification, and other destruction of fisheries through trawling and industrial methods. That if is a big IF. Our expectations lead us to invest in bigger and better at a time when we should be doing the opposite.

          I agree that I don’t think luxury items (art and stamp collections) will fare well this time. This time its different. All countries are experiencing overshoot of various forms. Producing food is a good thing, yes. Attached is a photo today of our greenhouse. And snow. It has been snowing all day. May 4th. Snow. It has been a long winter here in Anchorage, Jan. Yummy lettuce–it tastes so much better than what comes from the store.

          Yes, the account at the link is not really valid for the current circumstances, but it gives people who cannot think outside the box a sense of the relative insecurity of currencies, which are simply a confidence game at this point. When the game is up, there will be a big shake up in the hierarchy, in ways that can’t be predicted.

  • David MacLeod

    In answer to the question, “What would you do if your money becomes worthless?”

    What I will do will depend upon what kind of other opportunities present themselves at the time. I think the best I can do now is to attempt to prepare for a few different possible scenarios while at the same time maintaining one foot in the existing structure.

    Some ideas: get some land or access to land on which you can grow as much of your own food as possible. Divest of investments such as IRA’s, and invest in practical things – garden tools, bicycles, and onsite renewable energy come to mind. Prepare for emergencies, including perhaps some stash of cash, gold coins, and silver coins (more tradable than gold).

    Do some prep on the neighborhood and community level as well. Raise some awareness and build connections via Neighborhood emergency planning groups, CERT training, Transition Initiatives, Resilience Circles. You’re only as strong as your network of support. Work toward increased resilience and relocalization in your community.

    BTW, some, such as Stoneleigh and Ilargi at Automatic Earth believe that the long emergency will be deflationary rather than hyperinflationary.

    http://theautomaticearth.com/Finance/us-hyperinflation-is-a-myth.html

    • Those are some good suggestions, David. On deflation, what will our politicians do in response to too many obligations to the future? We’ve told everyone that they can have about $200T in promised healthcare, pensions, Medicare/Medicaid, and so on. Do you really think that our politicians will get serious and do the right thing and contract the money supply? They don’t even have control–a private corporation (the Fed) is in control. We’re just warming up on the inflation–do you see any deflation?

      • Brian

        Strange that people still make the distinction between corporations and governments. If the F35 fighter, no child left behind, and AHCA weren’t enough to convince people, than what is?

        Hyper inflation is really the question of: what would you do if your government became worthless? The answer is to create a new government. Germany chose the populist route, but many chose warlordism. Money and gold are just symbols of energy flows and during turning points they both lose the ability to signal who is controlling the flows of energy in the human economy, so those closest to the energy spigots (military or isolated farmers) are often better off.

        • Good answer, Brian. Two routes for the future–struggling to get closer to the beginning of the fossil fuel pipeline, while trying to elbow everyone else out of the way who is trying to do the same, or hunkering down and satisfying oneself with what earth blesses us with, the renewable energy flows. Which team was more appealing in Avatar? Which one sounds like more workable for the longer term, more fun?

      • David MacLeod

        I am personally agnostic as to whether we’ll see hyperinflation or deflation. I think it could go either way, but haven’t put much time into trying to predict which is more likely.

        BTW, today is “International Permaculture Day,” and in that spirit, consider “Investing. The Option They Never Told You About.”

        “The time now is of transition, of asking yourself, where do I want my
        money? Where do I invest my time? Start with yourself. Research this
        idea of the Great Reskilling and ask yourself what you know already,
        what you want to know, and what you need! How can you be so much more
        than just a “consumer”? What can you produce? What can we produce together? Let’s produce a legacy worth saving.”

        http://permaculturenews.org/2013/04/29/investing-the-option-they-never-told-you-about/

        • But the reason for hyperinflation or deflation is important. Per Tytler, or other attributions at the link:

          “A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship. The average age of the world’s greatest civilizations has been 200 years (Tytler?) . . .

          “The release of initiative and enterprise made possible by self-government ultimately generates disintegrating forces from within. Again and again, after freedom brings opportunity and some degree of plenty, the competent become selfish, luxury-loving and complacent; the incompetent and unfortunate grow envious and covetous; and all three groups turn aside from the hard road of freedom to worship the golden calf of economic security. The historical cycle seems to be: from bondage to spiritual faith; from spiritual faith to courage; from courage to liberty; from liberty to abundance; from abundance to selfishness; from selfishness to apathy; from apathy to dependency; and from dependency back to bondage once more. (Toynbee?)”

          http://www.lorencollins.net/tytler.html

  • RJ

    I’m kind of surprised to see someone of your intellect referencing a USA Gold Weimar article. That’s meant as a compliment by the way. Most people cognizant of the relationship between increasing energy costs and our economic environment seem a bit too sanguine when it comes to US Dollar supremacy.

    The interesting part of the coming showdown between physics and hubris may just be seeing what the hell happens when a system forged in the furnace of perpetual growth meets $ 5.00 gasoline. That would appear to be what policymakers are gunning for, and I can’t imagine it will be pretty. Until that time though, I would expect they will lie, borrow, steal, and make war to keep the current arrangement viable.

    In answer to your question, my money will never become worthless. I have none.

    • Consensus thinking and the voice of authority are so far out of kilter these days, RJ, that mainstream media/publications have less and less meaning for me. The internet is invaluable in finding unbiased history, but even there, the truth is hard to find, as history is bent to fit the story of the growth paradigm. I take it where I find it. Clues are buried in what the mainstream media chooses to ridicule at this point. From the design matrix:

      1. gather complete information – more than one source
      2. understand and define terms (make others define terms, too)
      3. question the methods by which results were derived
      4. question the conclusion: do the facts support it? is there evidence of bias? remember correlation does not equal causation.
      5. uncover assumptions and biases
      6. question the source of information
      7. don’t expect all the answers
      8. examine the big picture
      9. look for multiple cause and effect
      10. watch for thought stopping sensationalism
      11. understand your own biases and values

      From Human Biology: Health, Homeostasis, and The Environment, 3rd Edition, by Daniel D. Chiras. And from Boynton and Kemp’s Synthesis essay (2012) below, what is required to think outside the box. Data comes from all over–it’s the big picture framework that you assemble it on that’s important. You get that wrong, and you can create a chimera out of data.

      No money may be a good thing at this point–the future norm in a chaotic world.

    • Freude

      A worthy individual for a world that could potentially evolve beyond the need for this worthless currency system. As brutal as it may sound, the only way to truly fix the mess that’s been made by mankind and its pursuit of wealth and power would be to identify individuals not receptive to the idea of a world without money where everyone is equal, and simply kill them. Think of it as disease control. The people who value money are a disease, a cancer if you will, on the growth of the species as a whole. Until they are exterminated we will only continue to fester and become more infected as a whole until we eventually destroy ourselves. All for money? Not I, good sir.

      • We don’t have to do anything, Freude. The system corrects eventually. One article I read quoted a Guinean man as saying about Ebola, “of course the disease will spread, because it travels on the back of money and we are all moving around looking for money.” Our imperative to make money and grow the economy conflicts directly with the necessary tools to quell a pandemic. There may come a time when going to work becomes deadly.

        http://africasacountry.com/ebola-in-new-york-and-manhattan-bugs-out/

  • Freude

    When will people wake up and realize that money is absolutely
    worthless.. Every aspect of it. Why waste your entire lives working to
    earn something that is completely worthless? Do you feel that your
    time is worthless is well? And therefore your life itself is
    worthless? IF everyone would wake up and simply stop working, and I
    mean EVERYONE, corporations and any financially based institution
    (including our useless government) would crumble and we could finally
    become the supposed “Land of the Free”.