Tuesday, April 27, 2010

Lessons On Surviving Hyper-Inflation

Earlier this evening, I had a conversation with a woman who lived through the great Yugoslavian inflation.

Given the debt situation here in the U.S., hyper-inflation can certainly not be ruled out as a possibility. Her comments on how she survived the hyper-inflation, and what it was like might become valuable.

She said, of course, that once she got paid, she spent the money immediately, as in a week the value of the currency would be half. "It was a lot of  paper," she said.

She said you quickly learned to buy things with credit cards. If you bought some furniture, you put it on the credit card and by the time it came time  to pay the credit cad bill, what it cost you for the furniture was now what it cost to buy a pack of cigarettes, because of the quick devaluation of the currency. Since wages climb up roughly as fast as other  prices, to pay off the credit debt becomes a minor cost.

She said you learn to drag out and not pay your utility bills, like the telephone and electric bills, until the last minute as the currency would have depreciated so fast that the bills become inconsequential expenses.

She said everyone lived poorly except for those who had foreign currency or gold. She said if you had access to even only ten German marks per month you could live like a king because everyone valued anything that offered price stability.

The woman lives in the U.S. now and she says she never wants to live through that again. She says she now divides her savings into three parts. She puts a third into the dollar, a third into the euro and a third into gold.

1 comment:

  1. Yeah... typical workflow was:

    - get paid, convert it into cash (or get paid in cash)
    - buy German Marks immediately (on black market); then as a month goes on, convert Marks into local currency little by little - you are going to be ahead the longer you can hold onto Marks
    - as credit cards were very uncommon, people delayed payments by writing checks; by the time the check was taken from your account (~ 2 weeks) - you were already in a much better place than you were before...