[genna]

Gut check here


What to Do When - Not If - Inflation Gets Out Of Hand


Submitted by Tyler Durden on 09/05/2012 12:53 -0400

Submitted by Jeff Clark of Casey Research,

The cheek of it! They raised the price of my favorite ice cream.
Actually, they didn't increase the price; they reduced the container size.

I can now only get three servings for the same amount of money that used to give me four, so I'm buying ice cream more often.

Raising prices is one thing. I understand raw-ingredient price rises will be passed on.

But underhandedly reducing the amount they give you… that's another thing entirely. It just doesn't feel… honest.

You've noticed, I'm sure, how much gasoline is going up.
Food costs too are edging up.
My kids' college expenses, up.
Car prices, insurance premiums, household items – a list of necessities I can't go without. Regardless of one's income level or how tough life might get at times, one has to keep spending money on the basics. (This includes ice cream for only some people.)

According to the government, we're supposedly in a low-inflation environment. What happens if price inflation really takes off, reaching high levels – or worse, spirals out of control?

That's not a rhetorical question. Have you considered how you'll deal with rising costs? Are you sure your future income will even keep up with rising inflation?


Be honest: will you have enough savings to rely on? What's your plan?
If price inflation someday takes off – an outcome we honestly see no way around – nobody’s current standard of living can be maintained without an extremely effective plan for keeping up with inflation.

It's not that people won't get raises or cost of living adjustments at work, nor that they will all neglect to accumulate savings.

It's that the value of the dollars those things are in will be losing purchasing power at increasingly rapid rates. It will take more and more currency units to buy the same amount of gas and groceries and tuition. And ice cream.

I'm not talking science fiction here.

When the consequences of runaway debt, out-of-control deficit spending, and money-printing schemes come home to roost, it's not exactly a stretch to believe that high inflation will result.

We need a way to diffuse the impact this will have on our purchasing power. We need a strategy to protect our standard of living.


How will we accomplish this?
I suspect you know my answer, but here's a good example. You've undoubtedly heard about the drought in the Midwest and how it's impacted the corn crop. The price of corn has surged 50% in the past two months alone.

Commodity analysts say the price could rise another 20% or more as the drought continues.


While the price of gold constantly fluctuates, you would have experienced, on average, no inflation over the last 30 years if you'd used gold to purchase corn. Actually, right now, it'd be on the cheap side.

When you extrapolate this to other food items – and virtually everything else you buy – it's very liberating. Think about it: gold continues its safe-haven role as a reliable hedge against rising inflation.

I believe that those who save in gold will experience, on average, no cost increases in the things they buy and the services they use. Their standard of living would not be impacted.

I think this kind of thinking is especially critical to adopt when you consider that supply and demand trends for gas and food dictate that prices will likely rise for a long time, and perhaps dramatically.


So how much will you need to make it through the upcoming inflation storm and come out unscathed?
Like all projections, assumptions abound. Here are mine for the following table. I'm assuming that:

• The price of gold, on average and at a minimum, tracks the loss in purchasing power of whatever currency you use, and that it does so from current prices. Given gold's history, this is an easy assumption to make.

• Gold sales, over time, capture the gain in gold and silver so that your purchasing power is preserved. (This doesn't mean I expect to sell at the top of the market; I expect we'll be selling gold as needed – if gold has not itself become a widely accepted currency again.)

• We pay taxes on the gain. This will decrease our net gain, but there should still be gains. In the famous Weimar Germany hyperinflation, gold rose faster than the rate of hyperinflation.

To calculate how much we'll need, I looked at two components, the first being average monthly expenses. What would we use our gold and silver for? From corn to a house payment, it could be used for any good or service. After all, virtually nothing will escape rising inflation.

Here are some of my items:
groceries,
gas,
oil changes and other car maintenance,
household items,
eating out,
pool service,
pest service,
groceries and gas again,
eating out again,
vitamins,
movie tickets,
doctor appointments,
haircuts,
pet grooming,
kids who need some cash,
gifts,
and groceries and gas yet again.

Groceries include ice cream, in my case. How many ounces of gold would cover these monthly expenses today?

And don't forget the big expenses – broken air conditioner, new vehicle, vacation… and I really don't think my daughter will want to get married at the county rec hall. How many ounces of gold would I need to cover such likely events in the future?

The point here is that you're probably going to need more ounces than you think. Look at your bank statement and assess how much you spend each month – and do it honestly.

The other part of the equation is how long we'll need to use gold and silver to cover those expenses. The potential duration of high inflation will dictate how much physical bullion we need stashed away. This is also probably longer than you think; in Weimar Germany, high inflation lasted two years – and then hyperinflation hit and lasted another two. Four years of high inflation. That's not kindling – that's a wildfire roaring through your back yard.

So here's how much gold you'll need, depending on your monthly expenses and how long high inflation lasts.

Every corn-based product on the grocery shelf will soon take a lot more dimes and dollars to buy. But wait – what if I used gold to buy corn?
Ounces of Gold Needed to Meet Expenses During High InflationMonthly expenses in US dollarsMonthly expenses in gold, oz*Inflation Duration6 months1 year18 months2 years3 years4 years5 years $500 0.31 1.9 3.7 5.6 7.5 11.2 15.0 18.7 $1,000 0.63 3.8 7.5 11.3 15.0 22.5 30.0 37.5 $2,000 1.25 7.5 15.0 22.5 30.0 45.0 60.0 75.0 $3,000 1.88 11.3 22.5 33.8 45.0 67.5 90.0 112.5 $4,000 2.50 15.0 30.0 45.0 60.0 90.0 120.0 150.0 $5,000 3.13 18.8 37.5 56.3 75.0 112.5 150.0 187.5 $10,000 6.25 37.5 75.0 112.5 150.0 225.0 300.0 375.0 $20,000 12.50 75.0 150.0 225.0 300.0 450.0 600.0 750.0*Based on $1,600 gold price

If my monthly expenses are about $3,000/month, I need 45 ounces to cover two years of high inflation, and 90 if it lasts four years. Those already well off or who want to live like Doug Casey should use the bottom rows of the table. How much will you need?

Of course many of us own silver, too. Here's how many ounces we'd need, if we saved in silver.
Ounces of Silver Needed to Meet Expenses During High InflationMonthly expenses in US dollarsMonthly expenses in silver, oz*Inflation Duration6 months1 year18 months2 years3 years4 years5 years $500 17.9 107.1 214.2 321.3 428.4 642.6 856.8 1,071.0 $1,000 35.7 214.3 428.5 642.8 857.0 1,285.6 1,714.1 2,142.6 $2,000 71.4 428.5 857.0 1,285.6 1,714.1 2,571.1 3,428.2 4,285.2 $3,000 107.1 642.8 1,285.7 1,928.5 2,571.4 3,857.0 5,142.7 6,428.4 $4,000 142.9 857.1 1,714.2 2,571.3 3,428.4 5,142.6 6,856.8 8,571.0 $5,000 178.6 1,071.4 2,142.8 3,214.3 4,285.7 6,428.5 8,571.4 10,714.2 $10,000 357.1 2,142.6 4,285.0 6,427.8 8,570.4 1,2855.6 17,140.8 21,426.0 $20,000 714.3 4,285.7 8,571.4 12,857.0 17,142.7 25,714.1 34,285.4 42,856.8*Based on $28 silver price
A $3,000 monthly budget needs 1,285 ounces to get through one year, or 3,857 ounces for three years.

I know these amounts probably sound like a lot. But here's the thing: if you don't save now in gold and silver, you're going to spend a whole lot more later.

What I've outlined here is exactly what gold and silver are for: to protect your purchasing power, your standard of living.

It's like having your own personal financial bomb shelter; the dollar will be blowing up all around you, but your finances are protected.

And the truth is, the amounts in the table are probably not enough. Unexpected expenses always come up. Or you may want a higher standard of living. And do you hope to leave some bullion to your heirs?

It's sobering to realize, but it deserves emphasis: if we're right about high inflation someday hitting our economy…

Most people don't own enough gold and silver.

If you think the amount of precious metals you've accumulated might be lacking, I strongly encourage you to put a plan in motion to save enough to meet your family's needs.

Whatever plan you adopt, my advice is to make sure you have a meaningful amount of bullion to withstand the firestorm that's almost mathematically certain to occur at this point. And now you know exactly how much gold you're going to need.

[Uplillacype]

If you have to use you Gold and Silver during the lean years you already lost.

The trick is to have enough tangibles or items for barter that can alllow you to eek through.

Once economic stabilty is restored then you can leverage your Gold and Silver holdings To acquire Land, Workers and favorable terms with the big wigs of the day faster then you dare to dream.


The correct mix of Hard assets, Tangibles and little bit of Good Timing will vault you and your Family to Status of Duke,Barons and Lords.

[Calluffence]

One of the things that interests me about this is that it assumes that you will be bartering with gold or silver. That means you don't go to a dealer and sell coins for fiat. If you did that, you would have a problem with taxes. But this is a problem we have today as PM prices have increased over the last few years.

You could be completely above board and legitimate if you sold gold or silver that have appreciated 100% over your purchase price, and you claimed the amount of the 'profit' as a 'casualty loss'. In other words, a theft. Because it really is a theft resulting from the government's policy of printing excessive amounts of money. What sense does it make to allow the government to steal from you twice by taxing the increase in fiat. What has been stolen from you is the purchasing power of the asset. So, any 'gain' on the sale of your PMs can be considered an insurance payout, and therefore not taxable. You bought the PMs as insurance against just this eventuality. It may be smarter to just not report any PM transaction, and if any questions arise, use the aforementioned argument in your defense.

Hatha

[finasteridonline]

That idiot is thinking that WTSHTF he will live as he is doing now.......it will be time to bunker down and do your own pool cleaning and your own hair cuts, I have been doing it for the past 27 years........pet grooming? WTF.....movies?.....this guy is going to be dead a so will his kids.

Not counting gas and food it cost me $4,400 a year to live here and as soon as I get my Land Patent that ammount will go down by about $350.00 and I can cut out another $600.00 if I have to.

Remember that I have around 7 years of food in stock and I don't travel much so that I don't spend that much on gas.

Next year I will plant my first garden, let's see what will happen.

[Brewpralgar]

I say it all the time"

Did you pay taxes to earn the money? Definately

Did you pay taxes to have it shipped or when you Purchased? Probally.


So if you paid taxes at the start and the middle WTF makes you think you have to pay taxes at the end?


If you want to pay King Cesar Three times ......you go right ahead

I think I will save that portion for my Family or Someone who I will contract Business with.

[IronpumpedLady]

My concern with the accounting method is thus: it is very linear. Mortgages, for instance, are nominal expenses and go to 0 in the event of hyperinflation. Therefore, if a household that has a mortgage is spending $3k/mo or x troz Au, it will not be spending the same quantum of gold because one of the largest expenditures is not linked to gold.

I foresee a deflation in gold-indexed terms in the event of a Latin inflation (15-20%/yr) or a hyperinflation (>50%/yr) on account of two things: reduction of overhead, and the emergence of black markets, thus cutting out the dead weight attributed to government regulation and taxes.

[Tij84ye]

Fuck man, this guy really likes his ice cream.

[qp0yfHOf]

I believe that those who save in gold will experience, on average, no cost increases in the things they buy and the services they use. Their standard of living would not be impacted. This statement only applies if you are living off of saved gold during the hyperinflation. If you depend on an income (paid in FRN) to pay your bills, obviously this won't work because as we all know, wages do not keep up with inflation, especially hyperinflation. So, unless you have enough gold saved up to live through the estimated two-four years of hyperinflation, you're still screwed.

[Lydiaswingert]

I think it is more like this: http://gold-silver.us/what_silver_gold_buys.html

[Plaumpholavup]

This article is useless.

Gold is not staying at $1600 nor is silver staying at $32.

[Markdogas]

This statement only applies if you are living off of saved gold during the hyperinflation. If you depend on an income (paid in FRN) to pay your bills, obviously this won't work because as we all know, wages do not keep up with inflation, especially hyperinflation. So, unless you have enough gold saved up to live through the estimated two-four years of hyperinflation, you're still screwed.

And that's why I have a "few" rolls of generic silver rounds......when other will be paying $175.00 for a jar of jam (Soilent Green) I will still be paying $1.50...............two yeras of hyperinflation? HA!....... what will give hyperinflation a life of its own is the fact that we no longer produced what we use in our every day life and that which we will need will be few and in between......and if you can find it then the price will be sky high...............I still say that this country will regress back to the 1800 hundreds and probably to the end of the 1700.