Many of us in the USA have the mindset that the economy is terrible and it can’t get any worse. Of course that is before they knew about hyperinflation and what it could bring to the equation. Should this happen in the future there are several things that could likely happen.
More Paper Money
Most of us have thought at one time or another that it would be nice to have piles of cash around that we could do whatever we wanted with. In times of high inflation the government may create more paper money to circulate as a means of trying to stimulate the economy. This is really part of the root cause of hyperinflation though.
Let’s say you do have that pile of money around as you have always dreamed of. It won’t last long though because something that once cost $10 will then cost $15 the next, $20 in a few more days, and by the time the week ends it may cost $30 or more. This will be the scenario with everything you need to buy.
This occurs because there isn’t enough gold in place to back up that paper money. It really does become nothing more of value than just some paper. It is a complex compilation of events but if we have learned anything throughout history it tells us that printing more paper money is going to be more of a problem than a solution.
When inflation occurs it is tough on the citizens in the USA. At the same time though when there is hyperinflation and it increases at an alarming rate then you have to issues where people are in a panic. That is fuel to the fire though and it will only cause the problem to get worse.
Yet there isn’t much you can do about such panic. We are creatures of habit and our finances are something that is a very emotional situation full of tension for many of us already. Therefore, it doesn’t take much for panic and chaos on an economic level to ensue.
Credit that is Easy to get
During high inflation and the brink of hyperinflation it starts to seem like there is more credit to be accessed out there. The idea is for the Federal government and for lending institutions to offer up more money in the area of credit. They offer incentives, lower rates of interest, and more to entice people.
The idea is that this will help with being able to help with getting the economy back on track. The lenders find that they are offering funds that go beyond what they have in reserves though and that is why problems can escalate from that point.
Issuing credit to those that may not be able to pay it back increases. Lending to potential business ideas that may have a tough time making it in a good economy and very little chance in a poor economical state also add to the tension and difficulties. When credit is readily there it can be enticing for those that otherwise wouldn’t be pursuing it.
As a result of credit being easier to access, it can cause a spectrum of problems. For example there are all types of debts that grow out of products that are made and business ventures. Yet they so often prove to be fruitless that even when there were good intentions this becomes part of the problem and not a realistic solution.
All of this results in conflicts, more distrust of the citizens of the USA, and the government will be blamed for inflation that continues and for busting the bubble of people that thought this was a step for the economy to improve.
It is often ironic that it is seen as a means to help calm panic and to get trust back in the American dollar. On the other hand though what is taking place behind the scenes is stirring up more chaos and driving the rate of inflation higher and higher.
The government may be sending a message to come and get money, it is cheap to get, and it is easier to get than ever. That is a mistake though and we do need to be very conscious of it.
Yet when you look at what is going on with incentives to start businesses, parents encouraged to go back to college, and even programs to help people get newer vehicles and to buy homes you can see these patterns of easier to get credit all ready in place for the US dollar. That is why the outlook for hyperinflation continues to be more of a reality all the time.
Ending the Credit Availability
What happens next in that scenario though is that the easy to get credit is going to have to come to an end. It isn’t realistic to think that they can continue to lend on reserves that aren’t in place for long.
The issue becomes how to work out those debts. The banks and other entities will be looking to the Federal government to help them out of the financial crunch. This in turn is going to create more of a deficit for the Federal government.
Citizens will be burdened with collections, high rates of interest for missed payments, and feeling that they are in a never ending mountain of debt that they can’t escape from. During that reallocation period though there is more panic and doom. That is when people start to lose their businesses and their homes.
Loss of Income
As businesses fail though many of them are laying off people and so the overall income of people continues to drop while the prices continue to increase. Those that have investments out there in various elements as part of their portfolios also start to realize that they are no longer worth what they thought they were.
For those that have had money invested in their retirement funds for many years, it could dwindle down to next to nothing. That can make it hard to plan the future. For many people it means working 10 or more years longer than they had planned to due to the loss of financial security for their future.
Some older people aren’t in good enough health to continue working. For those that are laid off due to business cut backs and closures it is extremely difficult to find another business that will hire them.
Banks can only see so much in the form of bad debt before they have to stop lending. For small business that also means lines of credit they once had to rely on for supplies and to keep things afloat are eliminated. They often can’t continue the flow of business without them.
When you think that their volume of sales has been reduced too, they may be just barely getting by. Without the bank there to help them out of a bind they are going to have their own creditors breathing down their necks.
Assets aren’t Worth Much
Another element that will occur when hyperinflation is present is that assets aren’t worth very much anymore. A household may decide to sell a vehicle they have but they discover they can’t get what they owe on it. If it is paid for they will find they can’t get the blue book value on it.
For someone that wants to sell their home to get out from under the debt they will likely find that the value is well below what they still owe on it. This is very true for anyone who has lived in their home for less than 10 years and has a 30 year mortgage on it.
Should a vehicle be repossessed or property foreclosed on the lender to will sell it for what they can get out of it. They will then pursue the person they lent the money to for the difference. So you could lose your vehicle or your home and still not be out of the debt.
Credit is definitely a driving factor that can allow hyperinflation to occur. When you think of the number of people that are relying on credit cards to get by you can easily see how that is possible. They are paying the minimum due monthly but racking up more and more on the debt all the time.
They aren’t doing this to live extravagantly or to buy things they want such a toys and gadgets. They are using that credit to buy food, to get fuel in their vehicles, and to pay for basic household necessities.