On my post about hyperinflation from yesterday, my advice was to move finances into assets like precious metals or real estate. An anonymous commenter had this to say:
I think precious metals are a fools errand. First, when the crisis strikes you will be making your target – meaning that you are going to risk your life for a thing. Second, it is not worth much for day-to-day transaction. I am aware of several who accumulate gold bars and coins. You cannot simply shave off parts of the bar for doughnut, and you are almost invariable going to get a lot less for the coins than it is worth.
I decided that this would be a good time to share my thoughts on this. My wife and I do have SOME savings in physical metals. Metals are not bought as a way to carry out day to day transactions. They are a hedge against inflation, and not meant to be used as currency to purchase things in some sort of a ‘Mad Max: SHTF’ scenario. Honestly, ammo and food would be worth far more in such a case.
No, I am talking about storing your wealth in a medium that will preserve your life savings during the high interest/high inflation economic troubles that will surely follow the idiotic policies that are being put in place by our new communist overlords.
I personally think that more than a few ounces of PMs are a bad idea. There is a loss buying in (a one ounce gold coin costs 5% over melt value), there is a loss selling (another 5 to 10%), and the coin is a nonperforming asset- meaning that it doesn’t make money for you, other than being an inflation hedge.
Real estate is different. If you own real estate, it can make money as rental property, as well as the fact that it gains value at a higher than inflation rate.
My wife and I discussed our options yesterday and have decided to close all of our accounts (other than IRAs and 401k accounts) and use the money to buy more real estate.
In an inflationary economy, you are better owing money than having money. A fixed rate loan for real estate is denominated in pre-inflation dollars, but paid with inflated dollars. If the loan is a fixed rate loan, the Fed increasing rates won’t affect your loan.
There are other pitfalls to owning real estate, but there are ways to reduce those risks. That is an entirely different and more complicated conversation.