What Would Severe Inflation Look Like?
This is conjecture, but let’s spend a little time trying to think about what our physical life will look like if/when the Dollar starts losing value dramatically. We can’t think through every scenario, nor will we paint a perfect picture, but let’s paint one regardless.
The best guess here is that at some point, the Dollar will lower gradually as it has been doing throughout 2009 so far, and that at other times it could make huge moves downward. There could be several instances of this depending on multiple factors, the biggest of which is how the government proceeds with monetary policy. There will probably be times over the next ten years when people think the hard times are over, but then a new round will hit. We won’t address every scenario here, but will paint a picture of how things could be if/when the Dollar takes a dramatic turn for the worse. The stock, bond, and real estate markets will all get hit very, very hard while fluctuating in dramatic fashion. In the end, many of these things will be fine and many will be bankrupt, but either way, the ride will be like that of a terrifying roller coaster. If you hold these investments, make sure that you only stay invested in those that you fully understand and feel good about holding through such a time as this.
With a much lower Dollar all foreign goods will become much more expensive. Most of the items you use everyday are made in part or in whole in foreign countries. These items will become unbearably expensive. Since oil and other commodities have a world market, their prices will be driven up as counted in Dollars and the price of these commodities is factored into the prices of every other item that you use in your day. Almost everything you buy has to be brought to where you buy it by truck. The cost of the oil that fuels that truck will get factored into the higher cost of the item that you buy. Plus, the makers of goods will want to be able to live the life that they did before, so if they are able to, they will raise prices. What this will mean is that non-essential goods will either have to maintain lower prices so that the business owner that makes them will have to make do with less or go out of business. The makers of the most essential items will be able to increase prices because people need what they produce.
We haven’t had huge proportions of hungry people in this country in a long time. There are many overweight homeless people. (This is not to say that there is no one in this country hungry, but for the most part, food is very easy to come by here). They may not have a home, but most are not hurting for food.
These times will change. Many people who get by today and are considered “poor” by the government, will truly be poor. They will have trouble finding the money to eat. Many who are middle class today will feel poor because they will not be able to buy more than the essentials. Even many who are “rich” will be humbled as the treasure that made them feel so secure before evaporates. Everyone will take a step or two downward in worldly wealth and means. Those who used to live extravagantly will pare back to spending their money in more basic ways. So the things that are today “middle of the road” will become the “luxury” items and destinations.
Given enough time, wages will increase and the economy will stabilize, but we expect the situation to go on much longer than anyone not in Christ will find comfortable!
What do you think of this projected scenario? Are we missing anything?
This post is Part 3 in the series A Few Ways to Prepare. To continue with this series, click on Pt 4. To use this as a growth tool to better understand your own calling, you might start by reading Pt 1 and Pt 2.
Photo credit: LonelyBob