Will or would gold hold up under a hyperinflation scenario?
This may sound like some sort of scifi, Ayn Rand scenario, but that’s what the people of the Weimar Republic of post WWI Germany thought and yet lived through. The people of Germany had to withstand price increases that doubled every 28 hours or 20 billion times over where they started. Then you’ll say “well that was a long time ago and we are more modern and sophisticated than they were”. Well if we are soooo sophisticated and advanced, then how did we get into the WORST recession and economic environment since the Great Depression? The answer is that we have not learned our lessons and in some ways we’ve forgotten the lessons of our ancestors.
What is hyperinflation?
Hyperinflation is defined by a 50% or more price increase in a single month. Hyperinflation generally has one root cause – too much money (i.e. the money supply greatly increases). This scenario typically occurs when a government engages in too much spending, creating deficits to such unsustainable levels that investors lose confidence in the government. Sounds a little familiar.
There have been 29 incidences of hyperinflation since 1919 (Weimar) which is about once every three years. So, this fact countermands the statement that we’ve moved beyond this problem. We have not. What actually ends up happening in the US is anyone’s guess, but the obvious strategy is that people should be considering hard assets such as precious metals and real estate.
What you should be doing with your self directed IRA
Given the simple fact that our government continues to spend, create deficits, print money (i.e. put more money into circulation), it only seems to make sense to hedge your portfolio with metals and real the estate. The real question is not if you should do this, but how much of these asset classes you should be holding in your self directed IRA.
The information provided is for educational purposes only and are not a solicitation or offering of an investment, investment advice, or tax advice. You should consult with your tax, legal or financial advisor to determine the suitability of any investments made with a self directed IRA account.