Economic Collapse: Could it happen?
What is the current situation?
It does not look good right now. To curb inflation the Fed will need to raise interest rates which is not guaranteed to fix inflation and will also slow down the money supply(which can be a good thing) but it will cause the economy to recede with possible “stagflation”. For those of you who are not familiar with “stagflation”, it is when the economy is in a recession and with high inflation. That is something that we have not seen since the 70’s.
“The Conference Board forecasts that economic weakness will intensify and spread more broadly throughout the US economy in the second half of 2022, and expects a recession to begin before the end of the year. This outlook is associated with persistent inflation and rising hawkishness by the Federal Reserve. We forecast that 2022 Real GDP growth will come in at 1.4 percent year-over-year and that 2023 growth will slow to 0.3 percent year-over-year.” - The Conference Board Economic Forecast for the US Economy, September 14, 2022 | Publication
As we have seen, the U.S. and the world economy is in a fragile state and anything like a war or pandemic can push us further into debt and closer to insolvency as a country. Much like the Roman Empire. And we all know what happened to them.
What has happened in the past?
Speaking of the Roman Empire, they have already shown us a great example of how bad things can get. “By the time Diocletian ascended to the throne in A.D. 284, the Roman coins were nothing more than tin-plated copper or bronze, and inflation (and the Roman populae) was raging… short of funds, Diocletian simply minted vast quantities of new copper and bronze coins and began, once again, debasing the gold and silver coins. All this resulted in the world’s first documented hyperinflation. In Diocletian’s Edict of Prices (a very well preserved copy of which was unearthed in 1970), a pound of gold was worth 50,000 denari in the year A.D. 301, but by mid-century was worth 2.12 billion denari. That means the price of gold rose 42,400 times in fifty or so years. This resulted in all currency-based trade coming to a virtual standstill, and the economic system reverted to a barter system.” - Maloney, cited in “Guide to Investing in Gold & Silver Protect Your Financial Future”,pg. 8-9, 2008.
In Germany, due their indebtedness to the allied countries in Europe after WWI, “A loaf of bread in Berlin that cost around 160 Marks at the end of 1922 cost 200,000,000,000 Marks by late 1923…Agriculture Minister Hans Luther proposed a plan that substituted gold for rye and led to the issuance of the Rentenmark ("mortgage mark"), backed by bonds indexed to the market price of gold.[17] The gold bonds were indexed at the rate of 2,790 gold marks per kilogram of gold, the same as the pre-war gold marks.” - Wikipedia, “Hyperinflation in the Weimar Republic”, 2022
There are several other examples in history of how currency became almost worthless. There are no guarantees that that very thing could not happen again to us. Of all the examples in history that I have found, when a country stuck to a gold or silver standard, they never experienced severe inflation.
What can be done about it?
My personal belief is the best way to weather any storm of inflation that afflicts us is to have “real money” precious metals. If you are just holding on to gold or silver bullion it is not always a high returning investment but it is stable over the long run. You can do even better if you collect rare and unique coins. A man by the name of Harold Bareford started collecting rare and unique gold coins after the U.S. made it illegal in the 1930s through the 1960’s to own gold coins but there was an exception made on rare and unique coins. “Bareford’s gold coin collection was sold by Stack’s in a 242-lot offering that had originally cost the lawyer $13,832.15. The 1978 resale price was an incredible $1.2 millon. Many of the coins have since sold for a lot more.” - Ganz, “The Essential Guide to Investing in Precious Metals” pg. 96, 2011. Also, If you bought an MS70 Silver Eagle coin every month since 1986 you would have a collection that is worth 1.2 million dollars. That ain’t bad for just buying a coin here and there.