With anxieties among American citizens, politicians and individual investors rising high about the future of both the American and global economies, it's important to look at some of the potential negative outcomes that could occur in the next few years. Of the possible consequences of continued bank bailouts and ongoing financial assistance to certain industries, both in the United States and abroad, currency hyperinflation tops the list of worst-case scenarios.
Today, we'll look at this type of monetary event, its impact and its history. With this information, investors and those preparing for retirement can examine their own strategies and make informed decisions moving forward.
Hyperinflation, in its simplest definition, is a phenomenon that occurs when the amount of available money skyrockets while purchasing power diminishes at a similar pace. For example, if a shopper were to pay $3 for a loaf of bread on Tuesday but $4 on Wednesday, that individual might become concerned about future acquisition and start buying more. If enough people catch on to this trend and behave similarly, demand might push this price up to $10 by Friday. Once panic about bread supplies sets in, there's really no telling how far the price could go.
According to Whiskey & Gunpowder, a commodities investment research firm, government institutions only have so much power to stem rising hyperinflation. The principal tool in these events – making money more available – can actually drive down that currency's value, thereby making the symptoms of hyperinflation worse than before. During the German Weimar Republic in the 1920s, efforts to stop the plummeting value of the Deutschmark only exacerbated the issues and led to significant declines in the quality of life during that period.
In our next piece, we'll look at other examples of hyperinflation in history and how investors can use methods for wealth preservation to protect themselves from this unique financial disaster. Stay with GreatWealthStrategies.com to learn more about this and other important topics.