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I’m
not saying a hyperinflationary period is happening in the U.S., but I’m also
not denying it.”
Romanian Youtube vlogger
Lehel recently did a series of videos on how his family
survived hyperinflation in Romania in the ‘90s.
While financial pundits and
academics have their reckonings and theories… there’s nothing quite like
hearing from someone with experience going through a currency collapse.
Moreover, to understand
what happened, Lehel’s also studied hyperinflation and understands a good deal
about economics.
Today, we’ll roam through the
larger points in his video series.
His biggest takeaway?
“Things that were important
before were not so important…. and things that were not important became very
important.”
It Begins
Starting in 1889, and then
really kicking off throughout the ‘90s, Romania went through severe
hyperinflation.
“We had a four zero
inflation,” says Lehel. In ‘89, a loaf of bread was around 1 leu (pronounced
“lay”). In the span of five to seven years, a loaf of bread was 10,000 leu.
(If you have $10,000 in
your checking account right now, imagine only being able to buy half a dozen
eggs with that amount.)
Lehel tells of his
relatives who had enough in the bank to buy three houses before inflation
kicked off. “After this period,” he said, “they were only able to buy a
television set. And I think it was a black and white television set back then.”
That’s hyperinflation. And
it’s also why moving your money out of the dollar and into inflation hedges is
so important.
Lehel:
“You might think that this
could not happen, but it does. It does all the time. It’s just a different
country every 10 or 20 years. And that’s your reset. Your bank account gets
reset to zero. Everything you saved for gets reset.”
And what of those saddled
in debt? Technically, he says, your debt would become worthless. But that’s not
set in stone and depends on the political situation. If you have fixed
long-term debt and you’re confident everyone will keep their promises and the
political situation will remain the same… then your debt could go away.
But that’s not guaranteed.
“Inflation,” says Lehel,
“is a transfer of wealth. Your rich uncle who saved a lot of money in the bank
will get wiped out and he will become poor if he doesn’t do anything. And you,
if you have a lot of debt, you’ll be able to pay the debt off with bread money…
as long as the political situation doesn’t change.”
Problem is, dramatic
political changes usually do take place: “The government wants to wipe out
their debt, but not necessarily your debt. So don’t bet on that.”
Like student loan debt, it
could become unforgivable, putting you under the thumb of the government. (In
short, get out of debt.)
Lehel outlines how
hyperinflation hit Romania:
→ The cost of raw materials
starts to rise
→ Other things begin to rise in staggered waves
→ Supply chains begin to break down
→ Salaries begin to rise to compensate
→ Rationing begins at the supermarket
→ The value of savings is destroyed
→ Loss of confidence in everything
→ Social collapse
“The first thing you’ll see
in hyperinflation or high inflation is starting to happen is that the cost of
raw materials is rising… you would think that it’s just some supply chain issue
or some other issues, but actually the cost of everything is rising. Absolutely
everything is rising. It just happens in waves. First, it’s this, then it’s
that, then it’s that… everything gets its turn. Usually, it’s raw materials at
first.”
While everyone believes
things will normalize, they don’t. The cost of simple tools started rising.
Then, the cost of other staples and necessities. Shortages begin popping up.
Eventually, once employers realize this is the new normal, the salaries begin
to rise, too.
Lehel:
“Also somewhat last but not
very last is food prices. Governments or authorities cannot let food prices go
up too high because society becomes unstable so there’s either some subsidy or
something that will happen that food prices need to be a certain level.”
And then, the shortages
really ramp up: “There will be shortages in eggs, and then shortages on this
and that.” Then, rules will be put in place that you can only buy a certain
amount as rationing is normalized.
Then the social
deterioration.
“People make fun of
Russians or Eastern Europeans and say, ‘Oh those Russians, they drink a lot.’
Well, that was a coping mechanism. Life was hard. You had to deal with it
somehow.”
Eastern Europe has one
advantage over America and Western Europe: strong communities.
“People don’t tend to move
a lot,” Lehel explains. “If they bought a property it was probably their
grandparent’s property and the neighbors were usually family. Everybody knew
their neighbors. Everybody knew if someone needed help. Having a community was
a must. In Western Europe and in the United States people move a lot and they
don’t tend to build strong relationships. That value saved everyone. Everyone
knew someone who could help out and everybody would help out someone who would
need help.”
Assets
“The key thing to remember
is that whatever you have before this period, you don’t want to sell it during
this period.” During a time when there’s the most suffering, things that most
people think are valuable become worthless and things you thought were
worthless become highly valuable.
The obvious: food,
shelter, and practical manual skills.
The non-obvious: Honesty
and being a good person. Being a trustworthy person will get you far in times of
crisis.
“We got to know who we
could rely on. In the worst of times, you will see the best of people and the
worst, but you will know.”
What assets best helped
Romanians weather the storm?
Lehel:
“Real estate was
OK. It didn’t necessarily appreciate in value.” Rather, said Lehel, it was more
of a store of wealth. “If you had the house before, you still had a house
after.”
But more isn’t always
better. “If you had too many houses… political stuff could happen where you
would be taxed at higher rates because you were the bad guy and all of this is
because of you.”
Playing
By New Rules
While many people fell to a
perma-underclass… many people got rich. Many of them got super rich.
The vast majority of them
understood one thing: the game is rigged… and the powers at the top keep
getting richer.
The secret, then, is to do
what they do.
The same thing’s happening
again, right here in the United States.
Wall Street has the market
rigged… and those in D.C. benefit the most.
If you want to get ahead
and stay there, you’ll have to play by their rules… for now.
House
prices are going up, but only if you’re measuring them in dollars. Measured in
gold, they’re falling.
In the ‘90s, savvy
Romanians got rich during hyperinflation because they broke the habit of
measuring things in terms of the paper currency.
Once they realized what was
happening with their savings, they learned to measure things against assets.
That way, they could anticipate what would rise in value as the currency fell.
And, eventually, they found
ways to bypass the volatility of the national currency entirely.
Why
Gold Isn’t a Cure-All
When cash-rich people in
Romania began realizing what was happening to their savings, they began buying
up assets.
The (unofficial) price of
precious metals rose in paper currency, but then, after a while, normalized
when the price of basic necessities began rising exponentially.
Though gold was up when
compared to paper currencies, it actually started to go down compared to
staples.
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BONUS RESOURCES:
·
20 Genius Ways to Recycle Coffee Cans
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Separate hamburgers. Before you put those hamburger patties in
the freezer, stack them with a coffee-can lid between each and put them in
a plastic bag.
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Hold kitchen scraps. ...
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Bake bread. ...
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Make a bank. ...
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Keep the laundry room neat. ...
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Make a dehumidifier. ...
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Create luminaries. ...
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Create a canister for pet treats. ...
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Keep toilet paper dry when camping. ...
Genius Ways to Recycle Coffee Cans | Reader's Digest
www.rd.com/article/extraordinary-uses-for-coffee-cans/
SIDEBAR:
You might be a racist if…
A waitress asks you how you want your coffee and
you say “black.”
You voted for Donald Trump.
You are a conservative or, God forbid, a
card-carrying Republican.
You support the police.
You’re proud to be an American.
You believe in any form of meritocracy.
You believe that the nuclear family should not
be disbanded.
You respect the Founding Fathers, you are
racist.
You want to teach American history without including
“The 1619 Project,” you are racist.
You like classic films like “Gone with the
Wind.”
You read your children or grandchildren Dr.
Seuss books.
You like classic Disney films like “Song of the
South” and “Dumbo”—or even if you’ve so much as seen them.
You think Colin Kaepernick doesn’t deserve
another shot in the NFL because he is a crappy quarterback,
You think Barack Obama was anything less than
the best dang president we’ve ever seen.
You like Aunt Jemima syrup on your pancakes.
You were born in the suburbs…or currently live
in the suburbs…or live near the
suburbs…or even drove
through the suburbs one time.
You think that students should be told to show
their work on a math problem.
You don’t believe in race-based hiring quotas.
You don’t support Affirmative Action.
You say you have black friends when someone
accuses you of being racist (in which case you’re just using them as a token
because obviously you can’t really be
friends with a person of color).
You once said that you don’t want your kids to
grow up in a “racial jungle.” Oh wait…that was from Joe Biden, and since
Democrats can’t be racist, I guess this one’s okay.
You tell a black podcast host that he “ain’t
black” if he doesn’t vote Democrat. Dang it…Biden again. This one’s fine too.
You say that “poor kids are just as bright and
talented as white kids.” Wait…what is that? Oh, another Joe Biden
statement? Man, this guy sounds like a racist if there ever was one. But can’t
be because he is a Democrat. My bad.
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9 Stores That Will Pay You for Your Clutter
These national chains will give you credit or cash for your
stuff
Getting started prepping and building a food stockpile is
overwhelming; I found it hard to get started. The best place to start is to build a
two-week emergency food supply for yourself and your family and then expand
from there.
To be honest, figuring out what to
include in your emergency food supply is frustrating because you have no idea
what your situation will look like. Will you have electricity? Do you have a
means of cooking if the grid goes down? Will you have to bug out?
It’s impossible to know the answer to
all of these questions, so you have to do the best that you can. I will give
you a list of foods you can buy to build a two-week emergency food supply...
How To Build A Two-Week
Emergency Food Supply
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Useful stuff
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Useful Resources
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3 comments:
As they used to say on the 70s show "Good Times," DYNO MITE!
Loved this post; love the humor & the coffee can shed!
Great post. I will definitely be checking out the guy from Romania's videos.
I can't believe how bizarre this country/world has become in just a few short years. Beam me up Scotty!
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