How do you think hyperinflation would affect credit cards/banks in general?

[Anonymous]

We were discussing hyperinflation and ways to defend against it as a business if it were to occur to the US dollar. It seems simple to protect yourself as an individual, but large banks say Bank of America would quickly go out of business if it didn't find a way to keep customers it would have to increase credit limits daily and then if a new currency takes over convert to that from the old to keep its customers. Otherwise, we would start over everything from scratch (Though i'm sure a lot of people would like that).

[Gunnar419]

I've thought about this, too, and while I haven't gotten very far in my thinking, it does seem as if banks would not only have to increase CLs, but also interest rates.

I see that happening in the early stages of a hyperinflation, but I expect that once it really gets going, nobody's going to accept credit at all. Cash, precious metals, barter. Nobody will be accepting mere promises to pay. Interesting subject.

[youdontkillmoney]

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@Anonymous wrote:

We were discussing hyperinflation and ways to defend against it as a business if it were to occur to the US dollar. It seems simple to protect yourself as an individual, but large banks say Bank of America would quickly go out of business if it didn't find a way to keep customers it would have to increase credit limits daily and then if a new currency takes over convert to that from the old to keep its customers. Otherwise, we would start over everything from scratch (Though i'm sure a lot of people would like that).

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In the short run I would not worry about inflaton nor hyperinflation, the economy is recovering/stabilzing and inflation is under control according to the Federal Reserve. I would focus on maintaining liquidity and available cash flows instead.

[Gunnar419]

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@youdontkillmoney wrote:

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@Anonymous wrote:

We were discussing hyperinflation and ways to defend against it as a business if it were to occur to the US dollar. It seems simple to protect yourself as an individual, but large banks say Bank of America would quickly go out of business if it didn't find a way to keep customers it would have to increase credit limits daily and then if a new currency takes over convert to that from the old to keep its customers. Otherwise, we would start over everything from scratch (Though i'm sure a lot of people would like that).

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In the short run I would not worry about inflaton nor hyperinflation, the economy is recovering/stabilzing and inflation is under control according to the Federal Reserve. I would focus on maintaining liquidity and available cash flows instead.

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The economy is recovering in a strange way, the stock market is looking like 1987 and 2000, and the federal reserve lies about inflation. I don't think we'll have a catastrophic hyperinflation but things change quickly and the underlying health of the economy looks bad. Liquidity and available cash is good but we need to be thinking about things like what happens when the economy goes south again before it's really recovered.

[youdontkillmoney]

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@Gunnar419 wrote:

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@youdontkillmoney wrote:

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@Anonymous wrote:

We were discussing hyperinflation and ways to defend against it as a business if it were to occur to the US dollar. It seems simple to protect yourself as an individual, but large banks say Bank of America would quickly go out of business if it didn't find a way to keep customers it would have to increase credit limits daily and then if a new currency takes over convert to that from the old to keep its customers. Otherwise, we would start over everything from scratch (Though i'm sure a lot of people would like that).

---

In the short run I would not worry about inflaton nor hyperinflation, the economy is recovering/stabilzing and inflation is under control according to the Federal Reserve. I would focus on maintaining liquidity and available cash flows instead.

---

The economy is recovering in a strange way, the stock market is looking like 1987 and 2000, and the federal reserve lies about inflation. I don't think we'll have a catastrophic hyperinflation but things change quickly and the underlying health of the economy looks bad. Liquidity and available cash is good but we need to be thinking about things like what happens when the economy goes south again before it's really recovered.

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^^^

And this is one of the reasons for stating "cash is king" in the final analysis (though people disagree). Because when the economy goes south and the banks turn off the faucet of liquidity and credit (because they themselves know cash is king and hoard it), you may not rely on credit (ask the small businesses during the last recession, they know their credit lines were cut as the credit market were not working), so if you have $50,000 cash in your home safe or in the bank, you don't rely on credit during these times, in fact, you yourself can become a lender and earn interest.

[pipeguy]

Having lived through the Carter administration where a very GOOD mortgage was 10 or 12 percent and basic loan rates were 20 percent plus, I can say that today the Fed won't allow for hyper-inflation, but wage and price controls along with "prime+plus percent" rates could hit 25-30 percent (although some sub-prime and store cards are already in this range).

The biggest issue with this is the national debt, currently at over $17 trillion which costs $245 billion just in interest payments at very low bond rates. If bond payments were allowed to float to actual rates those interest payments would be $750-$800 billion per year just to service the current debt. The real problem is Congress and the administration has ZERO interest in reducing spending which continues to spend $700 billion or more in every year over income. CBO estimates Federal debt at $21 trillion in 5 years - serving the nation debt is the biggest threat to our financial health and its a very real problem.

No one is willing to cut back programs or spending - No one wants to see taxes go up a lot.