Foreign currency can save you from inflation below the hyperinflation level.
Posted by John Reed on
I advocate foreign currency as a hedge against hyperinflation. But it's also a hedge against lower inflation.
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I once tested one of my foreign debit cards in my local supermarket. Inserted it, typed my PIN, done. Same as using US debit card.
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That may be outlawed during hyperinflation, but not yet.
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Inflation is not a problem afflicting American PEOPLE. It only an affliction the US dollar. So stop using the US dollar. How? Open a foreign account in a low inflation country then use your ATM card on that account to buy stuff.
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To the merchant, it looks like you are paying in USD, and you are, but you did so using what is called "just in time" in the inventory-management business. The merchant receives USD, but your account is debited in the foreign currency.
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With currencies where you can have an account, you use their ATM card. Where they will not let Americans have an account, buy the forex from a local forex dealer. Then trade it for USD just in time to make your purchase.
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There are some practical problems. Right now, AUD, CAD, and NZD all have about 4% inflation. Also, in many cases, there is a fee for currency conversion and/or a buy-sell spread.
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I keep saying in hyperinflation they enact capital controls which prohibit your using foreign currency. But today, there are not yet capital controls in the US.
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You could buy a bunch of a currency that does not now have much inflation. Over the months ahead as you used it on a just-in-time basis you will find that each time you sell the foreign currency to buy some USD, you would get more USD to pay the higher gasoline or whatever prices. That was the case with my CHF often since I first bought them in 2011.
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Basic principle, inflation is not a characteristic of where you live. It is a characteristic of which currency you use to store your savings in between your making just-in-time purchases using USD via foreign ATM or by converting foreign cash to USD just before making the purchase.
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Magic. If you are whining about inflation here in the US, you must have your savings in USD. You can keep it in a lower inflation currency instead until you need USD.
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During USD hyperinflation virtually all foreign currencies will explode upward in relation to the USD. At present, the movement is less predictable.
.
I once tested one of my foreign debit cards in my local supermarket. Inserted it, typed my PIN, done. Same as using US debit card.
.
That may be outlawed during hyperinflation, but not yet.
.
Inflation is not a problem afflicting American PEOPLE. It only an affliction the US dollar. So stop using the US dollar. How? Open a foreign account in a low inflation country then use your ATM card on that account to buy stuff.
.
To the merchant, it looks like you are paying in USD, and you are, but you did so using what is called "just in time" in the inventory-management business. The merchant receives USD, but your account is debited in the foreign currency.
.
With currencies where you can have an account, you use their ATM card. Where they will not let Americans have an account, buy the forex from a local forex dealer. Then trade it for USD just in time to make your purchase.
.
There are some practical problems. Right now, AUD, CAD, and NZD all have about 4% inflation. Also, in many cases, there is a fee for currency conversion and/or a buy-sell spread.
.
I keep saying in hyperinflation they enact capital controls which prohibit your using foreign currency. But today, there are not yet capital controls in the US.
.
You could buy a bunch of a currency that does not now have much inflation. Over the months ahead as you used it on a just-in-time basis you will find that each time you sell the foreign currency to buy some USD, you would get more USD to pay the higher gasoline or whatever prices. That was the case with my CHF often since I first bought them in 2011.
.
Basic principle, inflation is not a characteristic of where you live. It is a characteristic of which currency you use to store your savings in between your making just-in-time purchases using USD via foreign ATM or by converting foreign cash to USD just before making the purchase.
.
Magic. If you are whining about inflation here in the US, you must have your savings in USD. You can keep it in a lower inflation currency instead until you need USD.
.
During USD hyperinflation virtually all foreign currencies will explode upward in relation to the USD. At present, the movement is less predictable.
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