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During WW2 people in Germany would take wheel barrows of cash to the grocery store to buy bread and milk. The value of German currency dropped so low that peopl

During WW2 people in Germany would take wheel barrows of cash to the grocery store to buy bread and milk. The value of German currency dropped so low that people would steal your wheel barrow and dump out the cash. While I agree with your sentiment that you should only buy what you can pay for today, I wouldn't put too much trust in your (US) cash being worth tomorrow what it is today. Investing in foreign currencies can build a nice hedge in times like these.

bokonist 18y ago
Almost every foreign currency has at least an informal peg to the dollar. The European and Chinese Central Banks are working hard to make sure that the dollar does not fall too much. The only truly foreign currency is gold. But the potential for a dollar crash is already factored into the price, so buying gold too is very risky. The safest place to put money would seem to be a combination of FDIC insured CD's, dividend paying stocks ( as opposed to non-dividend, purely speculative stocks), and gold.
- thwarted 18y ago
  I don't follow how CDs, FDIC insured or not, wouldn't be affected by inflation in exactly the same way cash would be. Say you buy a $10 CD that pays 10% after 12 months. Within that year, the dollar is devalued by 50%, but your CD still only pays out $11, even though you'd need $22 to have the same purchasing power.
electromagnetic 18y ago
That's because they pumped up inflation by like 15000% it wasn't the depression that caused the problem, it was the idea that making more money would help. The government isn't dumb enough to do that with inflation, the Bank of England has been stalling inflation for the last couple of years to ensure this doesn't happen and the federal institutions in the US are doing the exact same thing.
nradov 18y ago
In most recessions/depressions you are more likely to see deflation instead of inflation. This is driven by a drop in demand. The Federal Reserve has been increasing the money supply lately (printing) which by itself would be inflationary, but that action has been more than balanced out by reductions in credit. If customers can't get credit to buy things then demand drops and prices fall.
- kingkongrevenge 18y ago
  It depends how you measure. Asset deflation (property, equities, etc) is a sure thing. Household expenses do not deflate. Despite all the talk of deflation in Japan over the 90s the cost of living continued to rise, and that was in an era of cheap commodities. I think prices for all sorts of things will collapse, but your grocery bill will continue to rise.
buffers 18y ago
Are you sure this episode happened during WW2 and not rather during the hyper inflation from 1921 to 1922? edit: I've talked with somebody born in Germany in 1931. According to him there was no visible inflation during the war. Prices were dictated by the government. But money was basically worthless because people additionally needed government issued vouchers in order to be allowed to buy stuff and they got these only for what the government regarded as people's basic needs.
stcredzero 18y ago
My father, uncle, and grandmother were refugees during the Korean war. They were strafed by a plane, and a piece of shrapnel hit my grandma in the middle of her thigh. Fortunately, she had sewn a hidden pouch in her clothing, and the shrapnel was stopped by the big wad of cash she had there, thanks to wartime inflation. (My mom was also a refugee, but she has an entirely different set of stories. My mom's side of the family is actually from North Korea.)
- sundeep 18y ago
  > My mom was also a refugee, but she has an entirely different set of stories .. go on .. (im a sucker for a good tale :) )
kingkongrevenge 18y ago
You are talking about the hyperinflation of the 30s, which stopped well before the war started, before the National Socialists even. There were price controls and scarcity during the war, but no wheelbarrows of cash.
jon_dahl 18y ago
Inflation-protected bonds (like TIPS or I-Bonds) are a much better inflation hedge than foreign currencies. Real estate and stocks also make great inflation hedges over the long term, though maybe not the short term.

bokonist 18y ago

Almost every foreign currency has at least an informal peg to the dollar. The European and Chinese Central Banks are working hard to make sure that the dollar does not fall too much. The only truly foreign currency is gold. But the potential for a dollar crash is already factored into the price, so buying gold too is very risky. The safest place to put money would seem to be a combination of FDIC insured CD's, dividend paying stocks ( as opposed to non-dividend, purely speculative stocks), and gold.

thwarted 18y ago
I don't follow how CDs, FDIC insured or not, wouldn't be affected by inflation in exactly the same way cash would be. Say you buy a $10 CD that pays 10% after 12 months. Within that year, the dollar is devalued by 50%, but your CD still only pays out $11, even though you'd need $22 to have the same purchasing power.

electromagnetic 18y ago

That's because they pumped up inflation by like 15000% it wasn't the depression that caused the problem, it was the idea that making more money would help. The government isn't dumb enough to do that with inflation, the Bank of England has been stalling inflation for the last couple of years to ensure this doesn't happen and the federal institutions in the US are doing the exact same thing.

nradov 18y ago

In most recessions/depressions you are more likely to see deflation instead of inflation. This is driven by a drop in demand. The Federal Reserve has been increasing the money supply lately (printing) which by itself would be inflationary, but that action has been more than balanced out by reductions in credit. If customers can't get credit to buy things then demand drops and prices fall.

kingkongrevenge 18y ago
It depends how you measure. Asset deflation (property, equities, etc) is a sure thing. Household expenses do not deflate. Despite all the talk of deflation in Japan over the 90s the cost of living continued to rise, and that was in an era of cheap commodities. I think prices for all sorts of things will collapse, but your grocery bill will continue to rise.

buffers 18y ago

Are you sure this episode happened during WW2 and not rather during the hyper inflation from 1921 to 1922? edit: I've talked with somebody born in Germany in 1931. According to him there was no visible inflation during the war. Prices were dictated by the government. But money was basically worthless because people additionally needed government issued vouchers in order to be allowed to buy stuff and they got these only for what the government regarded as people's basic needs.

stcredzero 18y ago

My father, uncle, and grandmother were refugees during the Korean war. They were strafed by a plane, and a piece of shrapnel hit my grandma in the middle of her thigh. Fortunately, she had sewn a hidden pouch in her clothing, and the shrapnel was stopped by the big wad of cash she had there, thanks to wartime inflation. (My mom was also a refugee, but she has an entirely different set of stories. My mom's side of the family is actually from North Korea.)

sundeep 18y ago
> My mom was also a refugee, but she has an entirely different set of stories .. go on .. (im a sucker for a good tale :) )

kingkongrevenge 18y ago

You are talking about the hyperinflation of the 30s, which stopped well before the war started, before the National Socialists even. There were price controls and scarcity during the war, but no wheelbarrows of cash.

jon_dahl 18y ago

Inflation-protected bonds (like TIPS or I-Bonds) are a much better inflation hedge than foreign currencies. Real estate and stocks also make great inflation hedges over the long term, though maybe not the short term.