How Quickly Could the Dollar Collapse?


". . .we believe the attendant collapse of the dollar will play out far more quickly than the German mark during the Weimar hyperinflation. . ."

We were on the "wrong" side of the inflation/deflation argument recently with a hyperinflation scenario that seems not just possible but likely. Although we hold fast to a prediction that deflation will run its course, bankrupting tens of millions of Americans, before relief comes to debtors, we believe, at some point, the U.S. will throw the switch to hyperinflate. Even so, we believe the attendant collapse of the dollar will play out far more quickly than did the German mark during the Weimar hyperinflation of 1922-23.

A contributor to the Rick's Picks forum disagreed—mainly, he said, because there is no precedent for so swift a collapse of a sovereign currency. Following is his argument, and after, our response.

"The idea that a hyperinflation would come and go in a few days or weeks has no precedent, and, as such I give it little credence. However, the question for those owning [precious metals] concerning what to 'transfer' one's 'profits' into, is very relevant. Furthermore, there is the issue of taxes on what could be, at least nominally, outsized profits. So, while leaving the question of what to buy momentarily behind, let me offer that arranging some sort of barter might be the way forward for [precious-metal] holders. . .here are some of the choices. . .that may be possible:
  1. Raw Land
  2. Food
  3. Currency
  4. Developed Property—commercial and/or residential
  5. Precious gemstones
  6. Objects d'art
  7. 'Services' unspecified
  8. Other commodities
  9. Heavy equipment
  10. Businesses unspecified
  11. Stocks
  12. Bonds
"I haven't done much research on this question yet, but I imagine that bartering [precious metals] for raw gemstones might be worthwhile."

When we try to guess how long it will take for the dollar to collapse, why should precedent matter? History almost never repeats itself in a way that can be easily predicted. There's always a twist, and in this case the speed of the collapse is exactly what we might expect to undo even those who profess to be "ready." Bear in mind that the dollar is already a fundamentally valueless IOU, not money, and it is therefore only mere perceptions that need change to make this so in practice. That could happen—globally—in the time it takes to air the evening news.

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