If you were a reader of my previous article about the BRICS drama coming in August. You may be thinking what can be done to combat this? Other than the obvious which is to buy precious metals and don’t buy debt (bonds, p2p loans, certified deposits, etc.), what can be done? I think Jesse Myers (@Croesus_BTC on Twitter) laid out a pretty good visual of asset classes which can weather the storm. Stoked Wallet has covered the different asset classes, but has never categorized them into risk baskets for an event such as this.
What evidence do we have that Bitcoin and gold are good units of trade in a hyperinflation environment? Well in Weimar Germany we know gold was an incredible store of value as from January 1919 to November 1923 the price of one ounce went from 170 marks to 87 trillion marks (170 -> 87,000,000,000,000!!!). Bitcoin, one might say is relatively unproven, so it would be prudent to be skeptical of listing this as a “steel” asset during economic turmoil. The evidence we do have is actually from a country which ironically experienced sanctions from the US. Venezuela reached a point in 2017 where WoW (World of Warcraft Online MMO) Gold was worth more than their currency.
Subsequently many Venezuelans turned to Bitcoin. Something which they are turning to and using to this day.
Chances are good the BRICS meeting in August does not substantially impact the global markets immediately as the London Price Fix has a long history of you know what, but with sustained pressure I don’t think they could keep the price they’d like to keep. Bitcoin maxis welcomed with open arms Vanguard and Blackrock ETFs, but it could be a trick to lock down another steel asset class. All I know is the more the west shorts gold the greater gold’s buying power disparity becomes in relation to the BRICS markets and therefore the faster gold flows east in an arbitrage like scenario.
How about the other forms of value like stocks and land? They aren’t making any more of it so land and real estate will always be a fantastic dollar hedge. I think stocks will absorb some of attacks against the asset it is valued against, but could buckle when the companies themselves are strained by the loss of working capital and productivity. How about pop culture collectibles and antiques (art, historical documents, etc.)? These will increase in dollar value to the point where before people understand what is going on they will all think they are getting rich (as they did in Weimar). You can’t really go wrong with collecting history, but pop culture collectibles are very volatile in economic turmoil as it’s the first thing people jettison off the decks of the sinking ship (buying opportunity not selling opportunity). The other problem with stocks, land, antiques, and collectibles is they aren’t fungible and therefore realistic to use for everyday exchange in the case of a dollar event.
An important part of being a prudent investor is to not trade emotionally. If you own debt, don’t sell at a loss hoping to avoid some storm that may never materialize. If you aren’t diversified and only have gold and bitcoin, don’t use this as a confirmation bias to not further diversify your portfolio. You have to go with your gut on some level, but then also act rationally so you don’t end up the Timmy trying to pay $100 for a loaf of bread. I bought some more gold, maybe you should too before August.
Framed Einhundert Millionen Mark
This framed desktop ornament serves as a both a reminder and a warning about the perils of bad monetary policy. Contains pencil marks in corner of unknown origin. Serial number 077739. Only one available.