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A question
I frequently receive relates to what happens to debt in the event of
HYPERINFLATION – and more specifically, mortgage debt. This is
obviously a very important question – which should definitely factor
into your overall financial outlook; however, it can be a very dangerous road
to tread, particularly if viewed in terms of “profit potential.”
The
inevitable COLLAPSE of the U.S. dollar is a mathematical certainty,
but the timing of its occurrence is impossible to predict. Assuming no
“black swan” events – like nuclear war or catastrophic
market crashes – I believe the dollar will have lost the last vestiges
of its “reserve currency status” within two to three years; and
likely, within five years be replaced by a new, gold-backed currency.
However, such numbers are pure speculation, as no one truly knows what
will happen, or – more importantly – when,
and why.
That is
why I repeatedly recommend ownership of PHYSICAL gold and silver; as
regardless of this time frame, the likelihood of prematurely selling
your bullion is extremely low – barring personal financial emergencies,
of course. And the same goes for “betting” on the timing
of HYPERINFLATION – as if you hold too much debt before it
occurs, you could lose the underlying assets – such as your home –
or even your PHYSICAL PMs if you need to sell them to pay off your debts.
Moreover,
think long and hard about the wisdom of purposefully holding
large amounts of debt into what could be a cataclysmic financial
event. Ann Barnhardt says to pay off as much debt
as possible beforehand, with the aim of distancing oneself as much as
possible from “the system” when “the Big One” hits.
And frankly, I agree with her, 100%. Sure, if your bank fails, your mortgage
obligation may go with it. But who’s to say the bank won’t
be acquired by a more evil entity, such as the U.S. GOVERNMENT? For
all we know, a new, totalitarian dictator will declare all mortgaged
homes state property – or some other, equally draconian decree.
As for
what happens to debt during HYPERINFLATION, it is absolutely devalued –
benefitting the borrower, at the expense of the lender. Out of control MONEY
PRINTING may cause a loaf of bread to cost $500,000, but your $500,000
mortgage will still be the same; in other words, worth the same as the bread.
If you have limited savings, you still won’t be able to pay off
your mortgage – especially if you lose your job, a highly likely
scenario. However, you could sell ITEMS OF REAL VALUE – like a loaf of
bread, or a gold coin – to obtain the funds to pay off your mortgage.
Moreover, a handful of companies might even institute inflation-adjusted pay
– though I wouldn’t count on it.
HYPERINFLATION
could break out at any time – as in the case of the
aforementioned “black swan” events. However, more likely a 1930s-like
scenario of unemployment, poverty, social unrest, and war
will precede it. PHYSICAL Precious Metals will protect you under all scenarios,
but DEBT could prove just as much an albatross as a boon.
It’s VERY rare for anything positive to ever come of debt, so I strongly
advise you do not consider it an “asset.”
PROTECT
YOURSELF, and do it NOW!
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