Hyperinflation and Bitcoin in the USA in 2021
When prices started to rise in 2020 during the COVID pandemic, many companies blamed this on supply chain disruption and lower levels of productivity at their factories. But now it’s 2021, and prices are still high. In fact, in some places they’ve climbed even higher than their 2020 pandemic levels. This leaves many American’s wondering just what is going on and what this means for their finances and their future.
What Is Hyperinflation?
Inflation is a word used to describe the rising prices of goods and services within a society. Hyperinflation is therefore used to describe when the prices of goods and services are rising rapidly and somewhat out of control of the government. Typically this term is when goods and services double in price over the course of a period of 30 days.
Is The USA Experiencing Hyperinflation?
Currently, the prices of goods and services are rising rapidly in the US. However, these prices are not quite rising at the rate of 50% per month. So technically, no, the United States isn’t currently experiencing hyperinflation according to the government experts. This doesn’t mean what is happening in the US right now is fine. This is because prices could be increasing at a rate of 40% per month, which is still insane and unmaintainable. This is like a loaf of bread being $1 one month, $1.40 the next month, then $1.96 the third month. Over the course of three months, the price of a loaf of bread has still doubled.
So what is the current rate of inflation in the US? Well, this is where the answers start to differ. The US government, which has been hiding levels of inflation since they went off the gold standard in the 1970’s, would tell you that there is no inflation and everything is fine. But tell this to a family of four who has gone from spending $100 in groceries for a week to almost $400 since the third stimulus check was delivered to American’s bank accounts in January. This is clearly inflation, as there is no longer supply chain issues to blame because the US has been fully open since January 2021. Then why are the prices higher?
McDonalds in 1972
This is inflation. Whether you want to realize it or not, the way the US government has been printing money the last couple of years is completely unsustainable. This has devalued the money in your wallet and savings accounts alike. One dollar no longer buys what it used to in the American market and it’s time to face the facts.
There is another way to measure hyperinflation and that is by looking at a country’s spending to income ratio. And if you look at the US debt to income ratio, you will find that the spending out spends the income by 60%. Any government spending which is over 40% of what the country is bringing in is considered hyperinflation. But of course, the US government won’t tell you this, they will merely stand behind the fact that prices haven’t completely doubled in 30 days as mentioned above.
What Are The Results of Hyperinflation?
Although hyperinflation is rare in first world countries, it does happen, Germany being a prime and recent example. And when hyperinflation is allowed to occur in a country, unfortunately the outcomes aren’t good. Hyperinflation typically leads to food hoarding, food shortages, and hunger on a personal level. And business bankruptcy on a professional level, as well as widespread unemployment. And typically, once these symptoms of hyperinflation start to show, it is already too late. And in many past examples the country is only saved by changing its national currency to some other currency.
How Can I Save Myself From Hyperinflation?
Sounds scary right? And it should. Hyperinflation is something which will affect every single American no matter your job or living situation. This is why you should do everything possible to protect yourself against hyperinflation. You can protect yourself and your money from the damages of hyperinflation by investing in things such as precious metals, property, and your own educations.
When you invest in precious metals, you are investing in a physical store of value. Of course investing in precious metals does get difficult. Mostly because they are hard to carry and store, especially in the increasingly digital and nomadic society. This is why several people have turned to investing in Bitcoin as a digital currency. This is because Bitcoin is by nature deflationary. There are only ever going to be 21 million Bitcoins made. This will cause the value of the cryptocurrency to only rise over extended periods of time. This is why people think Bitcoin is a good investment in uncertain times such as those involving hyperinflation.
But what about stocks? If you search for ways on the internet to protect yourself against hyperinflation, you will find a number of companies recommending you buy stock. Stocks can sometimes be a good investment, especially if they are in a commodity which will be necessary even during inflationary periods, such as in food or oil. This does not mean however that stocks are safe from hyperinflation. The prices of stocks will also rise as the value of the dollar falls, and if the US dollar collapses, so too will the stock market. But, unlike just keeping a pile of cash under your bed, at least when you invest in a company, you will have something to show for your money in the end.
But overall, it’s probably better if you skip investing in stocks and invest in something like Bitcoin. But you should also invest in property. This is because property, although affected by inflation, will not have a value that goes to zero. Yes, you could lose some money when you invest in a property, but at least you will have a place to live when the market crashes.
And this brings up the third way you should be hedging against hyperinflation, and this is by investing in yourself. Enroll in a college course, further your education online, or pick up a new trade, as you never know what may happen to your current profession when you get to where this hyperinflation is taking you. And having a plan to fall back on is a great way to protect yourself against the damages of hyperinflation.
No matter what you decide, if that’s to buy Bitcoin, or to teach yourself how to code, the important thing is that you chose something, as keeping your money sitting in a bank account will never help you to conquer the damaging effects of hyperinflation. Because whether you like it or not, what is happening to the US dollar right now is not financially healthy—and it likely won’t be getting better any time soon.