Hyper Inflation - what happens to money in the bank

Ipv6Ready

Ipv6Ready

Well-Known Member
Silver Stacker
During Hyper inflation, say Venezuela what would you do, keep your money in the bank or take it out for cash.

Of course inflation is front running, but interest rates follow.....

Is it better to keep money in the bank if you have more than enough to survive for the month?

The moment you have cash it is depreciating at 2000% where as money in the bank is only depreciating at 800%

ie

Say one have 1,000,000,000,000,000 bolivars and interest rate is 1200% and the inflation rate 2000%

If you only need 1,000,000,000 bolivars for the month, surely it is better to keep the money in the bank.
 
doesnt matter, money still deflates at the same rate if its in the bank or out, by design of the fiat system.
 
Gold and American Dollars combination is very safe. If the Dollar depreciates, gold appreciates and vice versa.
 
Presumably it is too late by the time most realise it. Also using hard currency from all reports is not easy, as any change is given back to them in Bolivars.

For the average Venezuelan, if they want to buy foreign currency they have to pay ridiculous rate than when they spend it they can change in much less valuable.

Gold or Silver is much the same.
 
sgbuyer said:
Gold and American Dollars combination is very safe. If the Dollar depreciates, gold appreciates and vice versa.
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But that is looking in from the outside, from what I gather if you needed to spend 50c of the dollar, the shops would pay the change in Bolivars at official rates which means hard currency wouldn't be used in shops.

I recall, Cypriots in the last GFC 12 months into the crisis suddenly realising the banks was going to be nationalised and withdrawals limited.

For example, when we see media reports of Venezuelan drama, we see long queues of people waiting in line to withdraw cash or carrying backpack full of cash to buy 1kg of rice, but in actual life most transactions are done electronically.
 
Ipv6Ready said:
But that is looking in from the outside, from what I gather if you needed to spend 50c of the dollar, the shops would pay the change in Bolivars at official rates which means hard currency wouldn't be used in shops.
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Yes, this will happen if there are state imposed capital controls, which happens in places like China, Turkey and Iran.

If I'm living in China or Turkey or Iran, I'll be worried about further capital controls, and the only sure solution is to secretly buy dollars and smuggle cash out of China. The Chinese elites have mastered the art, that's how they could buy properties worth millions in dollars in Melbourne, Vancover and New York when the maximum a person can bring out is only in the tens of thousands of dollars a year.

In North Korea, surprisingly, they use hard currencies so there is an underground market that does the conversion. When there's capital controls, there are means to circumvent it although they would be illegal.

Ipv6Ready said:
I recall, Cypriots in the last GFC 12 months into the crisis suddenly realising the banks was going to be nationalised and withdrawals limited.
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Just like Cyprus, Singapore is a regional financial centre and tax haven so if there's sudden pull out of foreign funds, or massive loan defaults (some crisis happens in China), capital controls could be imposed to limit funds withdrawal.

But I believe there will be sufficient time (hope I'm not wrong) to pull out the funds out as a banking crisis won't happen overnight. The biggest problem is even before withdrawals are limited, all the retail gold, silver and greenback notes maybe bought up by the rich - there are no shortage of wealthy people in Singapore that can do that.

For small guys like us, we must buy before the crisis happens.

Ipv6Ready said:
If you only need 1,000,000,000 bolivars for the month, surely it is better to keep the money in the bank.
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Perhaps one way is to purchase local stocks that can be easily sold and converted into local currency without a major penalty. I believe this is what they do in Venuezula.
 
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stack up all the food that can last,
eg rice, grains beans etc
can food etc paper in toilet
bottled water, fuel,...

empty the account and spend it on gold, land, house etc

then whatever is left in the bank, the zero will be taken away
 
The original post was a little vague, I meant what to do ten years into the crisis, if for some reason one didnt get out.

There are many reason why one wouldn’t leave, some because of family, medical, some because they can’t get a visa or what ever.

Their might be few here who might have enough hard currency or metal stack to last ten years, but I’d doubt many.
 
in the case of venezuela, bolivar has been swapped for bitcoin for those preserving value. moving cash made little to no difference.
 
What happens to my debt in the bank?

If the value of my debt drops can I just pop into the bank with a bag of silver and pay off my mortgage or will they put the interest rate up to match the inflation rate?
 
There is no escape. The banks readjust your debt to before inflation. Likely the banks would be closed so no playing with the figures. That's up to the Cartel.
 
Ipv6Ready said:
...
If you only need 1,000,000,000 bolivars for the month, surely it is better to keep the money in the bank.
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There are a lot of assumptions built into that statement.

You assume that you will have access to withdraw/use your bolivars when you want to. History shows that banks/govcos can and will impose capital controls limiting access to deposits during a crisis. Banks can also just outright close or shut down for days at a time ("bank holidays").

My relatives in Argentina reported during the height of the most recent currency crisis down there that thieves (ie. organized gangs) would target and follow people leaving banks to rob them of their withdrawals. You went to the bank at your own personal/physical risk.

Keeping the money in the bank is also a vote of confidence that govco will salvage the currency. Buying a hard asset (whether gold/silver, something useful like non-power grid dependent tools, fuel or even alcohol) will preserve the value of your money in the case of a currency devaluation/reset or even worse - if bartering becomes the only way to survive.
 
dozerz said:
doesnt matter, money still deflates at the same rate if its in the bank or out, by design of the fiat system.
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Ipv6Ready said:
... it is too late by the time most realise it...
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Correct. ^^^
Savers and fixed income ppl are doomed with inflation and debtors rejoice. This is why major companies carry at least some debt and expand or buy other companies... instead of just purely buying bonds and building up cash reserve with their profits. They are playing all sides: inflation/deflation, good/bad economy. They win regardless.

Working people and companies do with ok with inflation since their wages or prices can just rise. The retired people are the ones really smashed.

As was said, money being in the bank or under a mattress doesn't matter much, though... it all loses substantial buying power in a hurry during inflationary times. If inflation or hyper occured, you would want to spend any currency you had asap ("cash is trash") for non-perishables or something that will enhance your productivity and future earning power or something that can preserve the buying power. By the time most ppl realize that, it is usually too late, though. Good luck buying gold once at a fair price in that currency once inflation is rockin and rollin.

...That is what I kinda view gold (and to a lesser extent, silver) as: basically a world money and store of wealth. I imagine my gold as a big mixed pile of various countries' paper currency that also keeps up with inflation (over time, but not necessarily day-to-day). You can sell a gold coin or bar in basically any region of the world for fair value, and that is pretty damn nice. It is interesting to consider your gold's value not so much in paper numbers... but in buying power. How many ounces of gold to buy a decent car? To buy a house? To buy a year's groceries? Those figures tend to hold up, and they aren't affected too much by inflation.
 
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