Inflation is coming! For those of us who remember (or have studied economics) – inflation and hyperinflation can be a very painful beast to tame. In the late 1970s and early 1980s, the US had annual inflation in excess of 13%! That means that you buy groceries one day for $100, but by the end of the year it costs $113 for the same items! Low inflation is fine, but runaway inflation changes people’s behavior.
When the prices of goods increase so quickly, people have the incentive to buy unnecessary goods in anticipation of a price increase. It creates inefficiency and waste and is not good for long-term growth and stability.
As a Prepper we must be prepared for things that have a low likelihood of happening but would have a material impact on our lives if they did! Coronavirus and the Federal Reserve’s recent actions and comments lead many to believe that higher inflation is coming. The Fed even said so recently!
Imagine this, you keep $1,000 safely at home for emergencies starting in 1980. The money sits there and goes unused for a solid 10 years before a real emergency comes up and you need it. Unfortunately, the last decade has severely reduced the purchasing power of the $1,000 and in real terms, it can only purchase $586 worth of goods!
Down 41% in 10 years!
Right now, inflation is low and has been low for a long time. Unless you are paying for medical bills or college, but that is another story.
With recent Fed actions, its important that Preppers rethink their emergency cash and other aspects to prepare for coming inflation. Here are the top moves every Prepper should make and why.
Keep Cash to a Minimum
As you can see, cash (a piece of paper with a promise) can loose value or purchasing power due to inflation. If you put away a solid chunk of cash and we experience higher inflation, be prepared to watch its value go down (imagine down 41% in 10 years).
In our new higher inflation world, it makes sense to keep emergency cash lower. In the past we would recommend at least 1 month worth of cash to cover critical living expenses – see our Survival Cash guide.
With higher inflation on the way, keep cash at home to a maximum of $1,000. Anything more than that should be invested in things that have a chance of keeping up with inflation like gold, silver, or other survival items you can use to barter.
Longer term you should consider your investments as well. Real assets (stocks and real estate) have a chance to go up in price with inflation. Bonds, CDs and savings accounts will get hurt by inflation and you could even find out that your purchasing power decreased.
Consider looking to purchase assets that can keep up with inflation and watch out for savings vehicles that won’t!
Immediate Actions to Fight Inflation
Invest Emergency Cash in Gold and Silver
If you have excess emergency cash (amounts more than $1,000), it makes sense to buy gold and silver. Theoretically, you could use gold and silver to buy things during a real emergency. If not, I am sure you could find a place to exchange them back into paper currency when the time comes.
At least with gold and silver you have a fighting chance of keeping your purchasing power! Gold and silver are not directly related to inflation and have certainly had their ups and downs over the years.
On the plus side, gold and silver can help offset the risk that the government prints too many dollars and they become worthless. In that case, gold and silver have proven to hold value over long stretches of time.
Buying precious metals does not provide certainty. But with inflation on its way, it is certain that the value of paper money will erode over time. At least with gold and silver you may be able to keep up.
Invest in Barter Items and Survival Gear
Now is a great time to invest in barter items and survival gear as their price will only go up with inflation. Major disasters are happening more frequently and gear that can save your life has added value these days.
Consider looking at some of the top barter items we suggest:
- Water Filter
- Water Treatment Tablets
- Freeze Dried Food in Individual Packets
- Hard Alcohol
- OTC Medications
In addition, it’s a great time to make sure you have enough emergency food at home. No, I am not talking about canned beans that only last a few years!
I would suggest you consider buying bulk freeze dried food that can last up to 30 years! Buy enough to cover each family member for 30-90 days. Then if things ever get ugly you can tap into your pre-bought food.
Its also great to have around for major disasters!
- QSS-certified food supply
- Averages 1,854 calories per day
- 8.5-gallon watertight pail is easy to transport
Longer Term Actions to Fight Inflation
Don’t Pay Off Debt Early – Refinance to Lower Rates
During times of inflation the value of real assets increases, but your debt obligations stay the same. With rising inflation there is less incentive to pay off debt that is secured by assets (think real estate and even auto loans). If you have loans with high interest rates (credit card debt), then please pay that off quickly and make sure you seek professional advice.
The best thing to do today is to lock in low rates while you still can and make the regular monthly payments going forward. Keep that excess cash to buy more real assets (see next point).
Invest in Assets that Appreciate in Value
When inflation hits you will see everything go up in price (not value). That’s why its important to make sure you have your excess cash working for you and increasing in price.
During times of inflation real estate, stocks, and other hard assets and income producing properties tend to go up in price. Make sure you have exposure to things that will go up instead of parking money in things like bonds, CDs, or savings accounts.
Remember cash will go down in value and assets will go up!
Preppers Need to Prepare for Inflation
Inflation and possibly hyperinflation are coming – the fed even said so! Now is the time to prepare yourself for higher inflation and make sure you are prepared.
Make sure you keep your cash to a minimum and invest in assets that can appreciate. Cash, bonds, CDs, and savings accounts will be losers over the next decade. Position yourself properly to take advantage of the huge inflation wave that will be coming soon!