I have first hand experience of high inflation and how it can wipe out savings and investments of the unprepared overnight, but also provide opportunities to increase wealth more quickly and easily than during “normal” times for those few people who have prepared themselves.
In 2000, the government of Zimbabwe launched a campaign to violently remove all commercial farmers from their legally owned and operated farms. Over the following 3 years, the agricultural sector which had been the largest foreign exchange earner and the biggest employer of labour was effectively destroyed.
The inflation rate in Zimbabwe began to be measured in 1000’s of %. Prices increased overnight, in 2002, the largest denomination note was $500, 2000 of these could be packed into a standard shoe box to form an unofficial new unit of currency called a brick. The $1 million Zimbabwe dollars in the box were worth less than US$100. The currency went into free fall, with the exchange rate to the US$ eventually reaching into the millions and new notes with face values of billions and trillions of Zimbabwe dollars being printed. Finally in 2008, the local currency was abandoned and the use of US$ and South African Rand became both legal and essential for survival.
The effect on people without access to “hard” currency was disastrous, savings were wiped out, imported consumable items became unaffordable and locally produced items soon followed them. In a short period, a huge section of the country’s work force became unemployed.
Interest rates soared, to ridiculous levels. Credit became unaffordable, importers stopped importing unless the buyer could provide “hard” currency or foreign payment.
But there were opportunities for exporters who did have access to “hard” currency, with prices increasing so rapidly and acute shortages of most consumer and industrial items, sharp businessmen could find opportunities to convert their export earnings to goods for import that could be sold profitably.
It was a strange and bewildering time, a personal example which has stuck in my mind, is the used 3 ton truck I bought for ZW$100 000, used it daily for 3 years and then sold it for ZW$1 million – but in real terms, it lost about 50%of it’s value over that period.
No one could afford to hold the local currency, after I left the country and inflation had increased, to the millions%, my son related how a cheque banked on a Friday could lose half it’s value by the time it was cleared by the bank on the following Tuesday. Commodities became an alternate currency, petrol (gas) and diesel were in extremely short supply and often impossible to buy for weeks on end. The person with stocks of fuel was holding something of real value.
So I am not for a moment suggesting that inflation in North America will reach these levels, but even a moderate level can create untold misery for millions of people.
With all this on my mind recently, I was very interested to learn that Mike Dillard of Magnetic Sponsoring, one of the most successful Internet Marketers I know of, had started the “Elevation Group”. Like many of us, he is concerned about the current state of the economies in most of the major countries. He has some ideas on how to protect our wealth and how to find ways to increase income even in inflationary times.
Mike has produced a video, if you want to find out how you can protect your finances I strongly urge you to watch it. Watch it here today.
Wishing you success in all your endeavours.