Coronavirus & Property – HyperInflation – Wheelbarrows to buy Bread?

You may have seen the pics of people carrying cash in wheelbarrows, Could we be heading for this type of future? Hyper-inflation, is it possible, what is it and how to overcome it?

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Video Transcription:

Hey, guys so welcome to coronavirus and property investments today. I'm Brett Alegre Wood and we today we are going to cover hyperinflation and could we all be you know to wheel around wheelbarrows full of money I'm sure we've all seen the images of that sort of thing from Zimbabwe and various places that have had hyperinflation.

To start off with before you get really worried about what when I talk about and that sorts of things I don't think that we're heading for that I don't think we're heading for that on any level I think it would require because the world is so to be fair Venezuela right now is in hyperinflation they're struggling to get on top of that obvious there's a lot of external influences and there's a lot of things going on there. And you know there's a lot of people leaving the country because of you know they can't afford to stay but you know it really is I mean we talk about depression which is a long time you know that's the thing hyperinflation can also be for a long time too. It's a little bit different we're in depression everything is depressed air prices are depressed everything is going down nothing's moving high unemployment whereas hyperinflation you will have high unemployment because not a lot happening but you're also going to have massive rises in prices and what does hyperinflation it's 50% or more increase in prices in one month. If you imagine whatever your wage is today you know it's worth half as much the next month you know if you like you know I mean it's just you know to live through that would be incredible.

Let's so let's get started with it and we'll sort of guide through. Look I think you know for me this is you know this is sort of the frame but we'll get into the coronavirus. I've got 10 days left on my clock we started from 30 down to 10 so that's looking like we might have to extend it a bit. I mean the UK has been locked down they said for 21 days the great days left so it potentially it could be you know maybe another week added on to that but let's see what happens because actually a lot can happen it as we've seen in one week okay. And seventy days for you know to get back into things but 2020 I think is most definitely cancelled you know I don't think there's going to be much happening yeah I think we'll be back to relatively normal life in 2020 absolutely but we shall see you know it's an evolving thing. So you know 1.348 million people with the cases right now 75,000 deaths are still skyrocketing in in the USA you know, the UK is also getting hammered as well you know lots of deaths there. It's interesting with the deaths and why that is but I haven't looked into that it might be worth looking into. It is amazing that is you know those numbers go all the way back to effectively a week ago Monday so you know you've actually got a week and two days and we're half that, you know so it's amazing how quickly it does increase. If we're tracking the recovery side you know 361,000 of those 1.348 she recovered which is great news 200 I'm sorry I have outcomes there's obviously there's a number of deaths which is 74,000 and then 286,000 have recovered so 79% so far all the outcomes have recovered okay so you know that's just some good news I'd rather focus a little bit positive and the negative.

Interestingly so let's get into the hyperinflation or whether many of you guys know but um back in 2004 I was actually a trillionaire all right and in fact not just a trillionaire a hundred trillion dollars that was. Now they were Zimbabwean dollars, okay one of our clients was from Zim and actually it was over buying property funnily enough in the UK. They were based in the UK anyway but they had some Zim dollars from when they went across there and so I exchanged them, I actually exchanged 50 pounds for a whole range of notes. So I got a million note, a hundred trillion it was amazing to get and have a look at this and basically what they said to me was the money is actually worthless. You know but you know I had 50 bucks and that's the only change I had in the thing so I gave them 50 bucks said here we go and so I got that so for a while there I was actually a trillionaire but albeit in Zimbabwe.

The reason I say that is because this is a really good example of hyperinflation. We look at the pound a trillion-dollar pound note now doesn't exist of course and in fact it didn't exist before hyperinflation they had it between 2004 and 2009 and you know in that time now there was a lot of political issues happening then.  I have forgotten the guys name anyway McGarvie and you know but basically they never had this they had to print it and it was a real issue because what actually happened was that you had Zibabbwean dollars and you had the US dollars and most people prefer to trade in US dollars because they weren't being inflated away. This currency is worth nothing so that is pretty more and more money and we'll talk through why that causes hyperinflation and what it actually means.

So look you know the case for hyperinflation I shouldn't have a smiley face here cuz hyperinflation it's not really smiling back like that ya need to turn that smile upside down. But no look bottom line is how hyperinflation comes about is this first of all the supply of money okay this is the first wave of that hyperinflation kicks is generally which is the government prints more money loads of it. Well, that's actually happening right now and yeah you could say that you know government prints more prices start to rise because there's so much money liquidity in the market being pumped in okay but the government keeps printing and they keep printing more and more and more and more. Whether that pays their bills or obviously in hyperinflation setting one thing that happens is any debts are inflated away to nothing. If you've got to fix that at fifty thousand pounds and that's a week's wage one week you can pay that off the challenge is at the same time what's going to happen is your groceries are going to go up to your staples and all that sort of stuff is going to go.

So phase one okay of hyperinflation is the government prints masses amount of money, okay and that's where you see people with wheelbarrows in there to go by I hear you know a bag of you know a loaf of bread or whatever. The second phase is this because there is so much hyperinflation everybody goes well actually, I'm not gonna buy my usual shopping for this week and then I'll come next week what they're gonna do is they're gonna go and buy as much as they can possibly afford with the money they have and they're going to hoard everything. So this is where you've seen toilet paper and things like this in a similar sort of setting where people go and buy so much toilet paper that there's a demand-pull all right. Demand-pull is simply that there's so much demand for things that they run out and that drives prices up even further because the shopkeepers they're going hold on a sec if I sell today not tomorrow and I don't have more stock coming in I'm getting issues so I'm gonna put the prices up. So now we have two things acting it and generally, the government keeps printing money, keeps printing money and that's the issue that we have here. And the bottom line is you've got the demand-pull you've got the QE all that you know quantitative easing the liquidity being pumped in the printing of money in the circulation but then on top of that you know cash is worthless. Because you know today it's worth this tomorrow it's worth half as much or whatever it is yes and the poor really suffer for that because the poor generally have the cash they don't have assets. If you've got assets and you've got debt against those assets well you know in no time you're a hundred thousand mortgage becomes you know a loaf of bread mortgage you know and that's the reality of hyperinflation. Obviously gonna be able to survive and all that stuff but the currency plummets as well.

So this is kind of a third thing that happened well because the currencies gone down now in value against other currencies outside goods become so much more expensive. So you've got this massive different thing where they're just sitting and presents a major problem. The other thing you know where has it happened before because it has happened course all right you know US Civil War you know now they weren't tracking the actual figures there but there was massive hyperinflation because what they were doing is up printing so much money to be able to pay for the war. So and this is one of the problems in times of war often times they print so much money now in Germany they had it after World War I where actually they were able to calculate that it was 20.9% per day, per day yeah now you compound that that is a massive amount. You know Venezuela 2013 - current still happening yeah in 2019 the inflation rate was 3497 % yeah that's pretty full-on Zimbabwe 2004 to 2009 in a 98% per day here which means basically in hey just imagine living under those conditions it's just almost impossible to think about. But that's the reality of hyperinflation.

so I hope that gives you broad strikes and you know we don't need to go into too much detail as I said my take on this is we're not heading for this. But I think it's good to put that to the side so you feel more comfortable you understand it one and number two is that you realize why we're not going to head into that and I'll see if I can build a bit of a compelling case for that now. But it's not certain you know there is it could happen I'm you know part of me making it saying I don't think will happen half of me is the economics of it and looking at you know the history and how often does happen and generally the circumstances it needs to be prevalent. The other half is oh shit I hope not you know it's that hope and I guess you know that that's how it's gonna be.

Look you know and guys if you have any questions about this you know you can pop it into the comments section I can answer them.

Look why won't it happen? okay so let's have a look at that so the bottom line is you know if you look at the Fed, the Reserve Bank of Canada, Australia all the central bank's a reserve Reserve Bank I just put Reserve Bank twice I mean the Bank of England they're you know their job is to stop it and control inflation. And really you know much the money that they control isn't in circulation. Now, these other sides of this coin which might say well hold on a sec the US dollar being the reserve currency the Fed controls all of that well no they don't actually control all of that and the argument is that in actual fact the Eurodollar is becoming the reserve currency because of so many derivatives that may be in Euro sorry in US dollars but aren't controlled by the Fed so there's a number of aspects which I just I mean there to bigger concepts and talk about out here. It's not a foregone conclusion and people saying that you're the Fed controls at all and they're you know they can control in inflation. No, that's not the case anymore you know totally there is a massive element of that that is correct, yeah but look most the hyperinflation happens most in times of political upheaval where the system collapses. Now you might be sitting there and watching some of these you know conspiracy theories and 5Gs and all these sorts of you know things about coronavirus and you know and vaccinations and you know all this thing missing in wow you know that the system is collapsing that's what's happening. Well, you know what this system has been like this and you can go back to the news and you can watch the news and see how the system's been collapsing for so many years you would think that it would have collapsed by now. It hasn't yeah it actually has been quite a robust system for us to grow into yes, you know disadvantages of the poor advantages of wealthy 1% all that sort of stuff that is part of the system you know but the reality is it is a reasonably stable system albeit not fair nobody's saying it's fair but you know the reality is of that it is you know a stable system.

We've got through look at the Great Depression was there we learned some lessons from that we didn't forget about them largely but you know we've had 2008 I think we're very different than 2008 and as a property investor 2008 was about the property you know the market the mortgage crisis so the funds are dried up you know. Now it's not so much about that it's about coronavirus and it's about the whole system you know I mean it has been press pause you know that every country 2/3 of the world's population are on the pause button now you know. A very little movement is happening right now but there is still movement I mean I went to the shops today and we were in M&S and M&S I said how busy you and I said no we're actually pretty steady you know I'm thinking hold on we're in lockdown first day of lockdown here in Singapore and M&S is still busy. You know it wasn't as busy as that and they had social distancing rules that sort of thing but you know I've seen things where Sainsbury's you know have one in one out sort of thing where they've got a limited amount of people and that so there's still movement there's still the economy hasn't wanted to say pause you know the property market is paused but in actual fact, the property market is still what this is one of the surprising things is that there's still enquiries from that perspective.

But look the big things for if we hit hyperinflation if you worried about it and you don't you know you're not convinced that the system is relatively stable and robust and yes it's gonna go through changes and there will be changes you know throughout and there'll be massive changes over the next few years with you know AI and robotics and all that sort of stuff and the way people work. And you know but in national fact, coronavirus has probably enhanced that and sped that up now because we're all used to zoom we're all used to you know virtual meetings now. I mean I've got drinks with the boys on Friday virtually that's gonna be quite interesting to do that but um but you know it's we're doing that why not look we can't be together so let's, uh you know let's catch up you know you know you know in our office.

But anyway so look how do we can't overcome this so the bottom line is cash becomes useless and because cash is useless you can't just walk into a shop and go that. So then you're a little bartering yeah so do you have anything that can be bartered and whether that be you barter with them who bothers with them for something you want you to know you you'll find communities will get together and final actually we need a bag of rice and you've got this and I've got that so if you put that together that's a bag of rice you know bartering. You know so that's where you gotta be a bit creative and you know if you don't know your neighbour yet maybe you should speak to your neighbour and get to know them because it may well be that you have a better barter group you know if this was to happen.

But you know what you tend to find and what you'll find like is in Zimbabwe which is one of the ones I know a fair bit about was in Zimbabwe all of a sudden the Zimbabwe dollar was going massively inflation but the US dollar become the currency now it was outlawed but people just ignored the outlawed and they just kept bartering under it. So you can look at that now you can get him to gold you're getting the silver and Alaska stuff but the reality is is you know that's all probably more advanced for this and you know if you haven't got it already then it's probably the wrong time to jump into these things if you don't really know what they're doing and you don't know what they are because there are upsides and there are downsides to everything like that.

But you know the gold and silver things like hard you know assets jewellery you know you can you know if you got a gold watch or you can potentially use that because that's a store of value you know I mean the other thing is you know to get your passport to make sure your passports current because if you need to when it gets so bad that you've got to leave I mean sit with funny in Venezuela you know is you've got so many Venezuela's leaving to go across to various places you know and they're effectively migrating so have your passport ready because if you've got to leave and go you want that you know you need that ability that ID document to move. You know that's the worst-case do I think that's gonna happen no I don't you know I think we're pretty safe from hyperinflation it's more likely to be inflation become out of this or deflation you know but I think more likely right now it's inflation but not hyperinflation.

So hopefully that gives you a bit of an insight guys you know into hyperinflation I don't think we're gonna be walking around with wheelbarrows, first of all, we're a cashless society largely cashless society if anything in a move is closer to being a cashless society you know and that's what the powers that be want. You know but I think you know it's I thought it was something to look into it's more to discount it so you don't have to worry about it I think really you don't have to worry about it. There are plenty of people out there that'll say oh yes you know that could happen I don't see it happening not in this not in the circumstances that around there.

Alright, guys so hopefully uh gives you a bit of an idea have a great day stay safe, stay healthy and stay at home right now. Alright, we'll see you again tomorrow at 9:00 a.m. London time or was it 4:00 p.m. Singapore time all right guys see you later bye have a great day

Brett Alegre-Wood
April 7, 2020

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