Will hyperinflation really happen, and, if so, will it affect my retirement?
Currently, a large swath of people are reading and talking about hyperinflation after we just watched the US government dole out stimulus checks and money to the tune of roughly $3.5 trillion in 2020: followed by an additional $1.9 trillion in 2021 . Beyond this, it's widely believed that even more stimulus is in fact on the way as well. That remains to be seen, but what we do know is that over the last two years, the US government has printed roughly $5.5 trillion in cold, hard cash due to COVID-19.
I believe that, historically, one of the biggest tools used to control people is the devil. If you don’t believe in that sort of thing, one can certainly swap that out with the emotion of fear: an extremely powerful sentiment that has proved so effective at controlling people and motivating them to act in a certain way. As we can’t help but browse some fear-mongering articles that I beg my clients not to read, we begin to experience these emotions—in this case—feelings of anxiety generated by articles surrounding the government’s decision to print so much “extra” money. Yes, you heard that right. These articles written by supposed financial “gurus” are in fact striking fear in the hearts of the innocent people who read them. So, you ask, why would someone write an article with the intention of generating fear?
As we examine the reason(s) why someone might do this, it's very difficult to drill these down just to one. Rather, there are a variety of many reasons why a person—particularly a financial guru or economic analyst—would want to churn up these fearful emotions. First, let’s take a step back . Fear is one of the most, if not the most, powerful feeling humans experience: right up there with anger, in my mind. [Love is also a commitment and actions, so I don't list it here as an emotion. Sorry Disney and all the rock songs.]
The Bible tells us 365 times to “fear not.” How many days are there in the year? But of course! I don’t believe it's a coincidence that the numbers sync up precisely.
Going back to the afore-mentioned articles, they go on and on about hyperinflation, money printing, healthcare/gas/food prices rising, and—at the end of the day—warn that you won’t have enough money to cover these costs after you retire: so what are you going do? And then of course, after they tell you how absolutely horrible this situation is, they might mention that they know a solution to help you avoid this dreaded scenario: a solution so amazingly easy and awesome that you can just enter your email and receive a free booklet with all the answers. Or perhaps you can pick up the phone and call them to talk about it, free of charge. This solution will have the ability to not only protect your money from losses, but help it grow and grow: the perfect elixir for your worries. Certainly annuities might come to mind here, but varied other types of other investment plans can purport to help you quell the effects of hyperinflation.
Yet, the point is not what the solution is. It may in fact take shape as a legitimate investment like annuities or stocks, or perhaps it winds up being some sort of scam. That is not the point. Rather, the key takeaway is that average, everyday investors or those who enjoy the guidance of a financial planner whom they trust should not read these articles, as they distract us from living the life that we've been called to live here on earth. It's very difficult for us to love and serve other people and love God if we're in a constant state of fear about hyperinflation or some other financial worry.
This is why God gifts us so many principles in His word—which I believe to be the Bible—as to how we should handle the money He puts in our care. One distinct matter He talks about of course is staying out of debt. Another area of guidance? Diversifying the money He gives us across various investments. Now of course, one Bible verse we've quoted many times in our blog entries is Ecclesiastes 11:2, which says to “divide your portion among seven, or even eight, for you do not know what disaster may befall the land.” These articles I mention proclaim there it but one solution, yet God tells us to diversify His money seven or even eight different ways. One way we can do this is through bonds and annuities, for example. You can lump these two together depending on the type of annuity (not a variable annuity). Another option is to leverage global stocks, or perhaps US stocks and foreign stocks and large/small cap, but global stocks are often highly correlated. Gold or precious metals present another opportunity, particularly the former option, as well as real estate. Whichever method you employ, these are examples of how you can diversify your investment strategies in an effort to help answer the question posed by this article:
Will hyperinflation really happen, and if so, will it affect my retirement?The answer is very clear. The second part of Ecclesiastes 11:2 states: “for you do not know what disaster may befall the land.”
We've seen so many economic pundits and investment gurus make predictions about what will happen in the future, and most of the time, they're wrong. If they do happen to get it right, they launch newsletters and create investment companies all based on the one correct call they made amongst hundreds of others. They feed off that, share video footage and quotes and say, “Well I wrote this article back then, and I was right.” This is not really wise material or a good way of thinking, and asking if we will experience hyperinflation, putting that out into the world, is irresponsible . With that said, let's review a brief history of hyperinflation in the US.
The highest level of inflation America has ever experienced actually happened way back in 1776 when the country was born. Soon thereafter in 1778, we saw a 29.78% inflation rate: the highest rate ever recorded. Now in 1970 we did experience a very high inflation rate of around 8%. However, even in the 70s—and people always want to talk about the 70s, which saw the highest inflation since the 40s—the average rate clocked in at 6.85%. During that time period, the highest level of inflation occurred during 1973, which saw an inflation rate of 7.5%: eclipsing all previous levels observed since 1917. Overall, from 1930 to 1980, the average rate was 3.41%, and so, that's the history of inflation in the United States of America.
When people bring up hyperinflation, they often intend to reference the hyperinflation period that followed World War I in Weimar, Germany: whereby true hyperinflation did occur and the Treaty of Versailles required Germany to make reparation payments through the Bank of International Settlements for the damage caused by the war. As such, the German government was forced to print loads of money and punish their own citizens for the sins the country committed during World War I. Now, just what type of inflation was this? Well, it was actually pretty darn severe and devastating. At 30,000% per month, the country's prices doubled every few days. Many of you have seen pictures—perhaps even in these recent hyperinflation articles—of people in Weimar, Germany during that time who burned cash because doing so was less expensive than purchasing firewood. Some people also reference a Ezekiel 7:19 verse that states: "They will throw their silver into the streets, and their gold will be treated as a thing unclean. Their silver and gold will not be able to deliver them in the day of the Lord’s wrath."
People will exploit these verses and what happened in Germany to provoke emotions of fear by talking about hyperinflation. Yet, there's no need for us to fear anything if we simply do what we have been told to do by God. 2 Timothy 1:7 says, "For the Spirit God gave us does not make us timid, but gives us power, love and self-discipline." The thing I believe we should do as stewards—and what I encourage my clients to do—is merely do the best we can to try and follow the financial principles laid out for us in God's word, letting Him take care of the rest. He gave us these principles so that we can focus on Him and others. If we instead become preoccupied with hyperinflation and the fear that generates, it becomes more difficult than it already is for us to always love God and others.
And so going forward, I encourage each of you to diversify your money into non-correlated assets: ones that would perform well during periods of hyperinflation. Some of them won't, but you don't have to lose sleep or try to predict the future. Don’t let your thoughts and your mind and your emotions get caught up in the fear of what could be rather than addressing today's trouble, which presents enough challenges of its own.
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Also I encourage you to watch my free retirement video: https://go.thirdactretirement.com/strategy
If you have any questions or would like to talk to me about your investments and learn if you have enough assets to adequately preserve your wealth during a period of hyperinflation, I invite you to click on the link above to schedule a free 20-minute call. We can discuss where you are, where you want to be, and I can share a few tips my clients use to help them follow God's principles: with no need to worry about hyperinflation because they're prepared for it.