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Gold and such in Venezuela
rmpsrpms
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Given the hyperinflation happening in Venezuela, is there any info on the use of Au in commerce or elsewhere? I presume the economy is running primarily on barter, and that would tend to include Au, but I am not sure.
On a related note, I am also presuming that a hyperinflation situation such as this would essentially nullify all debts. So all private property would be be owned free and clear after a final payment in hyperinflated funds. This is assuming property ownership means anything in the socialist environment. Anyone know enough to comment on this?
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Venezuela's Bolivar is down almost 40% in just the past three days and down over 96% in the past year.
gold's value, priced in local currency, reflects confidence in the currency and in the central bank responsible for protecting it. I imagine most of the citizens there are hoarding what gold they have and are not spending it. they are also hoarding US dollars. This currency is in a controlled slow decline and is safer than one in a fast decline.
Give Me Liberty or Give Me Debt
So it has not come to the point where PMs are used for barter? Anyone care to speculate at what point this occurs in a situation like Venezuela?
http://macrocoins.com
PMs are not widely held enough. An alternate, but more stable fiat currency (in this case the US $) will be widely accepted. This will be the case in similar situations, but depending on where and when, the alternate currency remains to be seen. Only when no fiats are on strong legs will something else become money.
Give Me Liberty or Give Me Debt
people are more worried about food, water and safety. I'm sure a firearm is much more valuable than gold/silver there...
Food, water and safety, under such condition, are obtained either through cash on hand, alternate currency (i.e. U.S. dollars), barter or theft... in all cases, firearms and ammunition may play a significant role. Cheers, RickO
Wow, down 96% in past year! Yikes. Pray that doesn't happen here.
100% Positive BST transactions
It already did. Nobody really noticed cause it happened over a 100 year span.
Give Me Liberty or Give Me Debt
And yet, we not only survived, but flourished.
Knowledge is the enemy of fear
yep, very slow losses over time are like no loss at all, even when they add up to a big loss.
Give Me Liberty or Give Me Debt
Yup, just like small gains over time. Unless you're talking about equities....those are big gains.
Knowledge is the enemy of fear
Why not? Their equity market had a good day yesterday and a pretty good 12 months.
Knowledge is the enemy of fear
I hope their market is up 2500% to counter that 96% currency decline.
Stock market above is very misleading. Note that there are days when the number of transactions are way less than 100,000. What kind of market is that? So few participating (just the very wealthy) and appears to be ONLY for a select few.
bob
The dollar volume traded is more important than the number of shares traded. Higher price will invariably mean fewer shares traded.
Knowledge is the enemy of fear
I would imagine gold and silver are nearly completely useless in vz right now as they have been in other hyperinflation instances. Short of leaving the country, Solid foreign currency is your best bet, although it's almost always officially illegal to use.
Of course I referred to the 96% decline in one year. But the US dollar decline over 100 years is pretty bad.
100% Positive BST transactions
Does that really mean anything? Folks just have more of them. No currency has ever meant to be a store of value, just a means of transaction. There is also this little concept of interest rates....money earning money. How cool is that?
Knowledge is the enemy of fear
I used to sell all the Venezuelan silver and gold I came across to one person . She split time between there and here in the US . I haven't spoken to her in 2 years I think I'll send her an email . She has purchased pounds of silver bolivars from me and I'm sure other sources.
My thought would be that there isn't enough honest junk silver in country to do much good. On top of the scarcity , the tradition of PM's as money there must be dimly remembered.
Is anyone here ( or anywhere) lamenting over the 96% loss in puchasing power of their dollars that they earned in 1917 that they are still waiting to spend.
Every time that stupid, irrelevant "chart" gets posted, do we have to explain again how time works?
Liberty: Parent of Science & Industry
Didn't Venezuela repatriate its gold reserves just a few years back? If so, has the new dictator stolen it yet?
How time works:
That stupid chart reveals an unspoken truth that is nothing short of a stealth devaluation. Not as bad as the overnight devaluation that many currencies experience, but, still a devaluation none the less.
Give Me Liberty or Give Me Debt
Currency is a store of value - that of one's labor until it is spent on consumption. Even I can remember when saving produced gains. The loss of those gains has purposely forced most to spend future money (debt). This turn about is not an accident, it is by design. After all, doesn't the banking industry profit most from debt?
Runaway debt will be our economic downfall just as it is for many individuals.
Give Me Liberty or Give Me Debt
Currency is a store of value
No it isnt.
when saving produced gains. The loss of those gains has purposely forced most to spend future money (debt)
No it hasnt.
Knowledge is the enemy of fear
currency is a store of value to the person holding it because they traded something of value for it. Someone is always holding it, therefore it is always a store of value. It's value, however, ultimately gets determined by the next person to accept it, not by the person holding it. As the earlier, stupid chart shows, that value declines over time making it a not so good store of value. Periods of extreme inflation demonstrate how quickly the masses get rid of it for something that is a better store of value.
If the FED truly wanted to stimulate money velocity (spending), it would expedite the dollar's decline.
Give Me Liberty or Give Me Debt
What your stupid chart does not show is the interest that $1 earned over the last 100 years. You guys are so consumed by holdING a non-productive asset that you think that applies to every asset. Can't you see how wrongly you view this?
Knowledge is the enemy of fear
Oh geez, now we see the big Zimbabwe bill for the umpteenth time. Every cliche in the tired old book, eh derryb?
Liberty: Parent of Science & Industry
"'Those who cannot remember the past are condemned to repeat it."
Give Me Liberty or Give Me Debt
As indeed the PM bulls have.
Knowledge is the enemy of fear
thanks to the FED, boom bust cycles from here on out. Stack up.
Give Me Liberty or Give Me Debt
Boom and bust cycles happened long before the FED. Stop the blame game.
Knowledge is the enemy of fear
So any stories about gold and silver getting people through these trying times in Venezuela? Hungary? Weimar Republic?
So any stories about gold and silver getting people through these trying times in Venezuela? Hungary? Weimar Republic?
The book, "When Money Dies" by Adam Ferguson, 1975 does a pretty good job of describing what life was like in Weimar Germany. It's pretty dry reading for the most part and it's somewhat tedious keeping up with how the political and monetary policy developments interacted with the value of the money, but it does get the point across. Many of the reports from the British liason at the time actually tie the value of the German currency to both the US dollar and to gold for reference. Interesting stuff.
Since I'm part German, I've developed an interest in German coins and how the coins reflect the society that produced and used them. It's quite interesting to see the highly-crafted silver coins from the 1600's, 1700's and 1800's from each of the provinces before Germany became Germany, how they all merged together into Imperial Germany in the late 1800's and early 1900's, and then to see what happened to the coinage during, and after WWI and WWII.
The coinage does tell the story.
During WWI, (from 1915 through 1919 or so) the shortage of official coinage induced every province and many municipalities, banks, and some merchants to produce their own coins which were then accepted in day to day transactions because there just wasn't much "official" coinage floating around. These coins and notes were called "Notgeld" and many of the coins reflect various themes and political or social commentaries that were relevant at the time. I've become a collector of this stuff and it's interesting, to say the least.
If you know history (of which I didn't know a lot until I started becoming interested in these coins), you know that after WWI, Germany had some serious restrictions and demands for reparations placed on it. From 1920 to the end of 1923, the economy sucked for many various reasons and there was just no way that Germany was ever going to make good on the war reparations requirements being imposed on Germany by France and the Allies. There were multiple causes for the hyperinflation, but I've collected coins from this era that tell the story.
In 1914 a German Mark was about the same as a quarter, same size, silver composition, nice design, solid money. By 1921, a Mark was mainly found as Notgeld, either in aluminum or ceramic or some other cheap metal composition. Many Notgeld coins were made from iron. I don't know if the government even made any official Marks in 1921.
One series of Notgeld coins that exemplify the Weimar hyperinflation progression are from Westphalia Province, which I like because of the reverse on each coin which has a rearing stallion. In 1921, I have a 50 pfenning (50 cents), a 1 Mark, and a 5 Marks in this design, all from aluminum. I also have a larger 1921 Westphalia 10 Marks coin in Bronze. Those must have been the most common denominations for every day transactions in 1921.
In 1922, it seems that things got pretty dicey. Although I have some official government coinage from 1921 - a 5 pfenning (in bronze), a 50 pfennig (in aluminum) and a 3 Marks (in aluminum), it appears that most of the transactions were done with much higher denominations of Notgeld coinage. I do have a 1 Mark ceramic coin from 1922 as well. Notgeld was the mainstay for most transactions. The only other 2 coins I have from 1922 so far are a 100 Mark in bronze and a 500 Mark in bronze, both from Westphalia. The 100 Mark is about the size of a quarter and 500 Mark is about the size of a silver dollar.
In 1923, we know that all hell broke loose on the hyperinflation front. I do have a government-issued 2 pfenning in bronze, which was probably early in the year, because the only other 2 government issued coins I have are a 200 Mark in aluminum and a 500 Mark in aluminum. I've also collected a series of aluminum bank tokens from Hamburg that appear to have the official Hamburg crest on the reverse, but they are featherweight light and weird to think that they were money with any substantial value. It looks like Hamburg went to pieces fast, because I also have other Notgeld from Hamburg in aluminum, of 200,000 Marks and 1/2 Million Marks. Sheesh.
The Westphalia series with the stallion reverse does a good job of illustrating what happened during 1923. The smallest denomination that I have is a 50 Marks in aluminum. There is also another 100 Marks in bronze and another 500 Marks in bronze. At that point, hyperinflation must've gone on a tear. My next Westphalia stallion coins are a 10,000 Marks in gilded bronze, a 1/4 Million Marks in aluminum, a 2,000,000 Marks in aluminum, a 5 Million Marks in gilded bronze, a 50 Million Marks in gilded bronze. All of the bronze coins are slightly larger than a silver dollar.
I'm guessing, but it seems that the next step was even more dramatic. I have a Westphalia stallion 50,000,000 Marks in aluminum that is cheaper and smaller than the one in gilded bronze. I think that is about when they gave up trying to make coins for transaction purposes. There is only one other Notgeld series that I've seen with higher denominations and they consist of 75 Million Marks, 100 Million Marks, and 500 Million Marks (from a different province).
At some point in late 1923 or early 1924, the government did a monetary reform that incorporated some form of land ownership built into the monetary guarantee. Along the way, a "GoldMark" was discussed or used that implied some gold as part of the equation. All of the coinage from 1924 reverts back to mostly normal metals and some semblance of value built into the coinage, i.e. some silver. The hyperinflation was over in 1924.
Besides the 1923 Westphalia coins, I have a 1 Million Mark from Menden in aluminum, a 1 Million Mark from Frieburg in aluminum, a 2 Million Mark from Menden in aluminum, a 5 Million Mark from Menden in bronze, and a couple of "GoldMarks" from Bielefeld in gilded bronze.
Read the book. I don't think I'd wish hyperinflation on anyone. I had a reference to the hyperinflation in Bosnia or Croatia during the 1990's, but I can't lay my hands on it at the moment. Survivalist stuff, for sure.
I knew it would happen.
Very interesting @jmski52 . Good read and history lesson.
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Cool stuff Jmski52!!
Knowledge is the enemy of fear
What reference/catalogs would you recommend for comprehensive listings accompanied by photos and pricing if available for notgeld - paper and tokens (metals and porcelain)?
atom, I know that there are some large World Coin reference books, but I've never bought one of them. I would look on ebay or on Coin World's website for books. I mostly peruse ebay and stalk whatever coins I'm interested in for awhile before I decide to buy. If you search Weimar and Notgeld, there are tons of them that pop up.
Many times, the descriptions of a coin give a pretty good history and usually you will see the same variety of coin offered by different vendors if you wait long enough. Waiting and learning are complementary in nature because you get a better deal if you have scoped out the variety long enough.
One of the phenomena that I allude to but didn't specifically mention, is that when hyperinflation reared its head, the coins got more cheaply made as the face values kept climbing. It's really a good illustration of "destruction of the currency". In the paper currency, at one point, the printers couldn't get enough paper to keep printing higher and higher denominations of notes, and when they did get paper, to save on ink they only printed on one side of the note.
Another point, that I got from the book "When Money Dies" is what happened to the people when all of this was going on. As much as cohodk and Baley will contend that the stock market is doing well and that people are doing well in spite of the doom & gloom around a precious metals blog, there are many instances in Weimar Germany where people had their money in stocks and as the stock prices went up, the hyperinflation outpaced stock gains so badly that they lost everything. E-v-e-r-y-t-h-I-n-g.
In many cases, those people were middle class or well-to-do retirees or pensioners who were still being paid their pensions in full while hyperinflation rendered those payments completely worthless. They then had to sell their stocks at significant losses for a currency that immediately became worth less the very next day - and the effects only snowballed from there. It happened. It was real. Never think that it can't happen anywhere, including here, because it can.
The OP's question regarded the use of gold. From what I've read, some people did have gold and it did preserve their wealth, but it wasn't anywhere used in daily transactions. Over the course of a year or two, the government sold off about 3/4 of Germany's gold reserves in a futile attempt to support the Mark. That gold simply evaporated into world markets with nothing for Germany to show for it. The remaining gold reserves were part of what the government pledged in backing a new currency when hyperinflation was stopped.
Lest it seem that I'm 100% at odds with cohodk and Baley, I'm not. The things that were totally screwed up in post WWI Germany that caused the hyperinflation were not exactly like what we have here and now. They had hurdles to overcome that we in the USA have never had to face. True, there is enough incompetence in governance and in monetary policy and in fiscal spending - just as there was in Weimar Germany, but the circumstances are not the same.
In my opinion, we still have so much wealth reserve and capacity that it will take a whole lot of governmental and central bank mismanagement to destroy it. Also, we haven't been wrecked internally by war since the Civil War. We do have profligate spending problems in the Welfare State and corporate welfare, in financing endless external wars and in the dumbing down of the educational system that if they are not addressed, we can become another Rome, only on steroids. It took Rome centuries to decline, it might just take one major stock market crash and destruction or a serious breakdown of the supply chains to screw us over these days.
If what I read about the amount of leverage in derivatives now compared to 2007 is correct, the financial system is even more drastically overleveraged and alot more fragile now than it was then. Many financial commentators feel that way. Besides that, it's a completely different society than it was 50 years ago, and that worries me too. Like I said, the reasons may vary and the triggers may not be the same, but never think that it can't happen anywhere, because it can.
Got precious metals?
I knew it would happen.
Got precious metals? Yes.
And real eatate, some paid for, some partially still mortgaged.
What happens to balances owed during periods of hyperinflation? Will we be able to pay off our debts so easy when gold prices goes to the moooooon?
Liberty: Parent of Science & Industry
I've thought about this too . I think debts you owe to the state won't be forgiven because the state will retain power over you. If the state keeps supporting the banking cartels they way they have been then you are not going to pay your mortage off with coffee money either.
Look to the situation of hyperinflation in Israel in the early 1980's and that's probably how that will work.
However if you borrowed money to buy a car from some corner lot then that guy is going to be screwed.
What happens to balances owed during periods of hyperinflation? Will we be able to pay off our debts so easy when gold prices goes to the moooooon?
Perhaps, but probably not the way you'd expect. It's been awhile since I read it, but in one case the govt "recalibrated" the loans to reflect the same amount of indebtedness as there was before the hyperinflation event, i.e. if you had 25% of your loan paid off before, you still had another 75% of the total loan amount to repay after - only in the newly-revalued currency and not in the devalued currency.
You might benefit from a pickup in inflation if you hold precious metals and pay off the debt as the price of your metals increases, but before a revaluation or monetary reform takes place, but how do you gauge the timing of something that you can't predict? You can't.
The best way to deal with debt is to manage it and to extinguish it as soon as feasible. The best way to get hung out to dry is to borrow too much when you have no business doing so. Debt does have a purpose, but basing an entire economy and banking system on debt isn't it.
If the inflation scenario becomes high inflation without becoming hyperinflation, it's possible that holding precious metals would put you in an advantageous position as you suggest, but I don't think that's a slam dunk scenario either. The fact is that we're in uncharted territory, as in unpredictable. Our economy and situation isn't comparable to Weimar. OTOH, nobody has ever run up the amount of massive debt that our gov.com lackys have done for as long as they've done it. Every time someone thinks that they have all the answers, they screw up. One thing about gov.com is that they always seem to act like they have all the answers. They don't.
I get the tinge of sarcasm in your post, but I also know that you know what I'm saying isn't totally off the wall. That's why we get along, Baley. You are a classic investor using classical methods, with a nod towards a precious metals hedge. That will work. You still invest in the system, and you will benefit from it. I admire your positive approach, even though I don't share it completely. I simply don't agree - for various reasons - with the Zuckerbergs, Elon Musks and Bezos's of the world and I won't support their system. Enough said.
To your point, the rules can change anytime. We don't get to make the rules and for the most part we react. So, do you react before or after a problem happens? If you react before the problem happens you are delusional. If you react after a problem happens, you are too late.
Hedge away.
I knew it would happen.
nobody has ever run up the amount of massive debt that our gov.com lackys have done for as long as they've done it
Japan?
Knowledge is the enemy of fear
What about private equity loans? If you bought a house with a loan for $250k, and currency was devalued 90%, then your loan would still be for $250k, and you could pay it off for the equivalent of $25k, correct? A car loan was described earlier as being bad for the dealer, so perhaps all private loans would go that way?
I also disagree that currency is not a store of value, though it would be better described as temporary. If it weren't a store of value, then you could not buy anything with it. Eventually inflation (slow or quick) reduces what you can buy with it.
http://macrocoins.com
What about private equity loans? If you bought a house with a loan for $250k, and currency was devalued 90%, then your loan would still be for $250k, and you could pay it off for the equivalent of $25k, correct? A car loan was described earlier as being bad for the dealer, so perhaps all private loans would go that way?
If you had a loan for $250K and the currency was devalued overnight by 90%, that means that your loan amount would be set (by law) at $25K in the new currency. It means that if you owned any of the old currency in large quantities, you would be screwed. If you owned gold, you would simply sell it at the fair market value in terms of the new currency and you wouldn't be hurt. You wouldn't be able to pay it off with $25K of the old currency because it would only be worth $2.5K in the new currency.
However, if the devaluation occurred over a period of 6 months or 3 months, you would have some time to pay off chunks of the loan in advance of the new law, or new ruling, or new mandate - whatever you want to call it. Once that part (or all of the loan) was paid off, you would only have to worry about the remaining part being re-set.
Remember that there are no hard & fast guidelines here. The gov.com can do anything they want as long as they continue to get away with it. You can't predict what politicians are going to do. Obamacare wasn't a tax, until it was ruled to be a tax, long after it was already enacted and long after all of the false advertising had been used to great effect on the general public in the run-up to the legislative vote. Politicians have an exemption for the same things that you and I would be thrown into prison for doing, like their immunity from insider trading laws and their gold-plated taxpayer-funded healthcare plans. end of rant
I knew it would happen.
Anyone read this book?
https://johntreed.com/products/how-to-protect-your-life-savings-from-hyperinflation-and-depression
I have not read the book, but it looks to be geared towards selling books. We discuss all of the same things right here! $39.95 is fairly pricey.
I knew it would happen.