Hi Len, I’ve been reading your blog for close to a year now and love it! Do you think traditional pension payments will increase in some way during hyperinflation? While anything can certainly happen in the financial chaos, it seems there would be some sort of increase to keep the basics afloat for seniors and others dependent on such income. Any guidance would be greatly appreciated. Thanks for your time and keep up the good work! — Trent
Thank you, Trent. I’m so glad you are enjoying the blog!
Hyperinflation is not a monetary phenomenon; it is a psychological one that results when confidence is lost in a nation’s currency. Because the US dollar’s last connection to gold was completely severed in 1971 — the only thing backing those green pieces of paper in your wallet today is faith. Therefore, if the dollar experiences hyperinflation, those pensions will become worthless if only because, by definition, they’re denominated in paper currency that no longer has any value.
Here’s what my very cloudy crystal ball tells me: Those with private pensions will be completely out of luck. On the other hand, after a new currency is established, I can envision a scenario where public pensions might be restored to some degree, if only because the government has the power to levy taxes. However, I suspect those payouts would be, at best, a mere pittance compared to what was originally promised — after all, anything more than that would most likely bring out the torches and pitchforks from a financially devastated public who would be forced to pick up the tab. As for Social Security, my crystal ball says it will carry on in some form for those who were already collecting it — again, most likely at mere subsistence levels for everyone. I think the rest of us will be out of luck.
The moral of the story is this: The only person you should be relying on for your retirement is you! Not the government — and not your private employer. That means putting at least a portion of your long-term savings into physical precious metals, and investing in skills and real assets that can provide you with a steady income stream even after you retire.
While having been continuously employed through more than 14 years with no internal upward opportunities I’ve decided to change careers in my late 40s. I’ve been accepted into an accredited accelerated one year BSN program and would like to become a Nurse Practitioner. Funds have been set aside to cover the tuition, six-month emergency fund and my living expenses. I will not touch my 401k savings and have no dependents. In this economic environment do you think it is an unwise move to give up my steady income and study for a year? I’m concerned that if I stay at my current job I’ll become unmarketable at some point, which is why I started working on my back up plan: preparing for nursing school and saving. What do you think? — Luke
Congratulations on being accepted into a nursing program! Since you already have your tuition, living expenses, and emergency fund in hand, there is minimal financial risk while you’re getting your BSN. Of course, registered nurses are in high demand. In fact, the US Bureau of Labor projects almost 225,000 additional RNs will be needed between now and 2029, so your risk of being unable to find future employment is low too. To top it all off, the median wage for an RN in 2020 was $75,330.
Based upon what you told me, it seems as if the potential risks of staying in your current job are much higher than the risks of quitting your job to expand your skills and improve your future marketability. In short, Luke, I think your decision to become a nurse is sound. Best of luck to you!
If you have a question you’d like me to take a crack at answering, send it to: Len@LenPenzo.com — and please be sure to put “Mailbag” in the subject line.
Photo Credit: gajman
It’s hard to imagine a world where the Yen, Euro, and Renminbi aren’t also going out of control while ours is hyper-inflating. Maybe the CHF can keep it together….
Because public pensions largely invest in gov’t bonds and because in this scenario, gov’t bonds would need to offer higher returns to make up for the new uncertainty. I suppose it also depends on which big chunk of the budget we treat as untouchable — who knows how we’ll feel about spending half the discretionary budget on defense amid hyperinflation.
Fun thought exercise!
Len Penzo says
I think it’s all going to go up almost simultaneously, Mario. Once one domino falls, the rest will quickly follow.
Hyper inflation is fascinating. Germany, Brazil, and most recently Zimbabwe.
When you’re racing from your bank to the store to buy something, anything, before you can becomes worthless, it creates a market dynamic where anything is possible.
God forbid it ever happens in the US. But we’ve been in the danger zone since Nixon and ’71 and the latest crop of central bankers is only throwing gasoline on the fire.
As the curse says, we’re living in interesting times…
Len Penzo says
That we are, Jack. I think if/when the US dollar finally collapses, it will be a very quick event that will happen in a matter of days. In other words, I don’t think this will be a long drawn out process like Weimar, Brazil and Zimbabwe where people will be walking around with wheelbarrows full of cash because the buck will die almost instantly.
The government will most likely force us into a cashless society.
Len Penzo says
They’re definitely working in that direction. Let’s hope they fail.
Hyperinflation is a psychological phenomenon that is triggered by monetary carelessness on the part of decision makers.
Provided a nation’s monetary policies and fiscal policies are continually being made by competent, level headed individuals, then there shouldn’t be any fear of hyperinflation. The US for one is far from a hyperinflation.
Len Penzo says
Thanks for your comment, Emmanuel.
However, with all due respect, if you think US monetary policy (solely determined by the private Federal Reserve bank) is being determined by “competent, level-headed individuals,” well … I’ve got some beach front property in Kansas to sell you.
Every fiat currency has throughout time and space, it is a system that is completely unsustainable no matter how smart the people in charge. It is simple as this, you cannot create something out of nothing. The US dollar will hyperinflate/collapse it is just a question of when not if.
The problem with government pensions is the government spends every penny the employee puts into it, and doesn’t put a penny in itself. Basically, they have robbed the pension funds just like they have Social Security.
As far as the public goes, many of them want everything for free. They want public employees to make chump change, and bend over backwards for the public.
The bigger danger is the government taking control of all you have stashed in 401k’s and IRA’s. It will give them control of a lot of publicly traded companies in the USA.
Mark Tilley says
This is the great fear of many thousands, if not millions of people Bill, that the government is going to “bail in” and rob our IRAs and 401ks. Many are faced with the dilemma of whether to take the tax and or early withdrawal penalties in order to get the money out of institutional control and get it into personal possession. In my opinion, 63 % out of a 100 (or whatever your tax rate is) is better than what the government will give us, probably in a digital cashless currency. Take it out and put it into things that are collapse proof, before you can’t. If you don’t hold it you don’t own it.
Hey, Len. Love this site! So, I have a lot invested in rare musical instruments. My potential return investment has tripled and climbing. My question is, in the event of a coming collapse, what should I do with collectables that can currently be sold for top dollar? Sell now and buy PMs? Will my collection be worthless after the collapse? Will it restore value in a new monetary system? My gut tells me that maybe I should sell most of it and invest in gold & silver. My intention was to divide collection between my kids when I’m gone because I don’t have any savings and I can enjoy my investment while I am here while value increases. I am perplexed and time is running out. I need to make a move…..thanks!!
Len Penzo says
As the owner of a couple of older collectible electric guitars myself, I understand your concern!
Keep in mind that gold and silver aren’t the only ways to store value over long time periods; true collectibles (as opposed to fads such as beanie babies and most baseball cards) that are proven to hold their value over long time periods do too. Some of the best examples of these collectibles are fine art, classic automobiles … and even musical instruments.
The only drawback to collectibles is that when you need to convert that wealth into something else (other goods and services or currency), they tend to be less liquid than precious metals.
If you believe a dollar collapse will result in a Mad Max world, then I think it makes more sense to sell the instruments and buy precious metals (and rice, beans, guns and ammo).
On the other hand, if you believe as I do that the fabric of society will remain intact and people will simply move on to a new currency — as it has every other time in human history — then you can hold on to your instruments. As long as society doesn’t disintegrate, their ultimate purchasing power will remain the same, regardless of whatever follow-on currency ultimately replaces the hyper-inflated US dollar.