Dear EVERYONE, especially VENEZUELIANS
I've been following several youtube channels about issues related to current situation in Venezuela. And I believe most people understand by now that this country suffer huge inflation, which destroyed all lifesavings of pretty one everyone who had cash / savings in the bank.
One thing that interests me the most, is the answer to two questions:
- How would you prepare yourself ...
for upcoming situation if you would be at potentaially early stage of hyperinflation (as South Africa may just be).
What would you do then? If you were living 5 years earlier and you would anticipate future events?
- A bit more economic based question:
from my understanding hyperinflation can "reset" debt very easily. So those who owned money to the bank then year later those debts would be very easily be paid off. Is that correct?
And I'm even more interested with morgtages (long term loans we take to buy housing property). How does it work in the country hit by hyperinflation? ANYONE KNOWS?
Now perhaps someone here could help me out and find the answer to those two questions?
Yours
Piotr
My response to this crisis using cryptos in Venezuela:
There should be crypto-merchants that can handle transactions in all acceptable cryptocurrencies payments of every goods. More like a private-individual cryptobank. It could be a group of people, or a business establishment or something. Building a micro economy/or it will be called-black market, running in cryptocurrencies.
Is this already in place, or people trying this kind of thing.?
This will help, people around the world to funnel money/help to Venezuelans slowly and safely.
Hope my idea/question make sense.
This is very difficult to happen, although it is true that the crypts are more stable than the currency of Venezuela, as a common Venezuelan does to get the crypts and be able to live on that? In Venezuela there are establishments that accept BTC LTC ETH and some others but almost nobody has to earn them, so almost nobody pays with crypts
Do you know Faircoin and its coop?
Mathematically it seems to make sense that if you owed someone $100K (say for what's left of your mortgage) but $100K become as if nothing due to hyper inflation, they you would seem to owe not so much..
But the real killer is that the bread that costs you say 3 bux now costs 10,000 bux. Or rather, it seems that way, since the 3 bux are now like 3 cents and you have to come up with something akin to this new price of bread.. and you make nothing because everyday what you 'made' working yesterday is now worth nothing..
As long as there is government and banks they will try to ensure they collect on the debt in some way... However, when money's worth nothing, confidence in the civil structures of society fail, and people flee, or there is enough unrest that worrying about food and shelter becomes more important than worrying about debt..
And fleeing, still 'costs' something to the people who transport you. They want some kind of exchange for services..
I remember there were issues that I tired to follow a few years back with Zimbabwe. I imagine if you look into the effects from that historic example, you can get an idea of what's to come for us all if/when economic systems in a country collapse.. I am sure there are probably tons of academic articles about just such a thing..
However every situation would be somewhat unique, as systems involving humans typically morph and change to accommodate human interactions and reactions to situations... (i.e. I have read but not explored the idea that some economic indicators that were used to measure the health of an economy are no longer valid because investors used them/reacted to them and the markets adapted to compensate. I have not explored this idea in any way, and the articles I read about it are probably staledated by now)
Thank you for your amazing comment @darrenfj
I'm only trying to figure out how hyperinflation can affect those with debts. I do completly agree on everything you said.
I remember hearing from Polish older generation, that when strong inflation hit out country (back in the days) then most lost their savings but many got weatlhy because money they borrowed to start up businesses.
Or got a morgage, which they could pay off a year or two later pretty much fully (assuming that they survived financial crisis somehow).
So Im really wondering, how does it work with debts during hyperinflation?
Yours
Piotr
Hi @crypto.piotr
Typically banks do not have a clause in its mortgage document dealing with inflation (hyper or otherwise). Therefore regardless of the value of the money being depreciated you still pay the same amount to the bank, usually, monthly. Whilst the price of essential goods and services like food, transport etc goes up in accordance with the inflation, your mortgage repayment remains the same. Meanwhile it is likely that your salary also goes up somewhat to keep pace with inflation. This makes it much easier to pay off the mortgage, provided there is no default in payment of the mortgage because typically banks do reserve a right to vary the interest rates in the event of a default.
As for preparing yourself 5 years in advance, I would think that you would have to look at inflation beating investments like gold, real estate, and possibly depository receipts for investments in securities in countries with low inflation. Although cryptocurrencies (in particular Bitcoin) have been mooted as a possible alternative for gold in the event of a crash in share market etc., it has not come to pass; Recent events have shown that cryptocurrencies tend to follow the share market trend. This could change in the future, especially if the price of gold shoots up astronomically.
I am not an economist and therefore the above in a layman's view to your questions.
Dear @devann
What an amazing comment. Thanks again for taking the time to write it all down.
Very informative. Appreciate it a lot.
Whats your profession if you don't mind me asking? Your knowledge is mindlowing.
Yours
Piotr
I am trained in law and insurance. My specialty lies in insurance law.
Dear @devann
Would you consider your job market threatened by developing technology? Like AI?
Yours
Piotr
Dear @crypto.piotr,
If we speak of developing technologies, there are many: 3dp, ai, ar, vr, kdd, iot, self-healing materials, BCI (BMI), Nuclear Energy using thorium, 2d materials like graphene etc.
Many of these technologies are being experimented and are being developed and in a decade or so we should see them put to use in unimaginable applications. Many of these applications will utilize a combinations of these technologies. For instance, we can expect ai, iot and kdd technologies to combine to produce numerous applications. Likewise, we can expect 3dp and graphene combine to produce numerous applications.
Even if we take just one of the above technologies, say, 2d materials, currently the research efforts are concentrated only on one 2d material called graphene. It is reckoned that most of the elements in the periodic table are capable of producing a unique 2 d material of its own, with very unique qualities which can be put to use in numerous imagined and unimaginable industrial applications in the future.
Our lives revolves around risks. As a business and as individuals we are always managing risks, at work, at home and everywhere else, even if we care not to admit it. We can pass some of these risks (which are called insurable risks) to insurance companies. Others, we have to manage it ourselves.
What these new technologies will do is that they will, in some cases, either reduce or completely eliminate the existing risks and in some other cases, they will create new risks. For instance, for autonomous vehicles, you may soon find that motor vehicles insurance may become redundant. However, the same autonomous vehicle, which relies on data, may be subject to the risk of data corruption and the consequent risks arising from it, which in itself may create additional types of insurance, yet not thought of. This line of reasoning can be applied to all the other technologies.
Insofar as ai is concerned I foresee, for certain, a lot of jobs of repetitive nature losing ground to robots. But ai relies on data, big data, which originates from activities, be it from human or otherwise. These knowledge derived from data is no replacement for intuitive knowledge like that readily exhibited by Einstein, Stephen Hawkins, Srinivasa Ramanujan and all the other great scientists, which does not originate from data but from certain level of consciousness. All of us are capable of exhibiting intuitive knowledge at varying degrees, although not as readily as Einstein or Stephen Hawkins. That is an abstruse subject reserved for another day!
So my argument is: Life will go on, and if you keep up with the technology and constantly upgrade yourself you have nothing to fear. Those who don't keep up, will likely suffer in every conceivable way you can think of.
Wow @devann
What an amazing comment!
Very well said.
Good point. I can already imagine that you will need to insure yourself from hacking to your vehicles ;)
ps.
Would you mind sending me short email to [email protected]? I would love to be able to keep in touch and support each other on Steemit.
I wish there would be more advanced PM/notification system developed by steemit.
No pressure of course :)
Cheers, Piotr
I wonder if there's any documentation on what happened on the debt load in Zimbabwe at that time?
Very unlikely @darrenfj :(
Without being a financial expert, it seems that people take out loans with the idea that inflation will make the loan cheaper and cheaper with time. I know that in the US, yearly inflation is built into the system and many work on that principal - borrowing money since it is cheaper in the long run. Unless the government puts measures in place to not allow loans to be paid off, people should be able to get debt free - even though they might be starving at the same time since food is super expensive.
My parents went through an inflation and basically, those that had property did okay after when everyone got the same amount of money to start out anew.
And farmers did okay because they had food.
Thank you for your amazing answer @mariannewest
You mind sharing with me when did they go through inflation? And in which country? Just curious.
Yours
Piotr
My parents were born right around the time of the first inflation in Germany and then, went through another one after the War and a complete change in currency. Everyone started out with the same amount of cash - ergo, the ones with property were way ahead of the game...
Hi @mariannewest
Thank you again for your reply. This is quite fascinating to me to learn about history I've never heard of.
Yours
Piotr
You are welcome 😀
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@crypto.piotr Germany did and Holland did and I assume more European countries after the 2nd World War (so 1945). That is really not that long ago and look where these countries are standing now. They are seen as the richest countries in Europe, they carry the EU ballast on their shoulders. Holland is at place 4 of the most crowded countries in the world. Everybody seems to think it is the paradise, no need to work, you get everything for free.
To rebuild a country you need people, strong people, people willing to rebuild it, helping each other out. The crooks who did come out of the war rich, suddenly had nothing. Had to start at zero too.
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Thank you for your reply. I didn't know that Holland went throught hyperinflation. I'm wondering if europe would sort of their economical problems without help from US.
I am a Venezuela living in the country and can tell that económics it's in worst case, hyperinflayion is still in the raise, every month products cost twice the price han before. No so our salares. It's very dificult to buy food or anything to cover básicos needs.
The inflation 1000000% anually acording to economics experts getting into tje worst levels in the world.
I don't know there is hope, the currency has almost no.value, because of that mostró peple.use dollars por criptocurrency as an alternative
We have the potencial recover of hyperonflation history has shown many countries has done ir before. What se need is freedom in order to acomplish the económica recovery of Venezuela.
Regards.
Hi @slwzl
I don't think we ever had a chance to meet each other. Thank you for your kind comment.
Can people use usd to pay for goods?
ps.
God bless Venezuela.
Yours,
Piotr
Yes. It is not legal according to the government regime, but everything is charged in dollars.
Nice to meet you. I know about you by @Belkisa758
Thanks for all that you do.
Hi @crypto.piotr, i searched for your query in google. I am unsure if it answers your query, but still gave a try.
https://www.quora.com/What-happens-to-a-mortgage-when-hyperinflation-in-a-specific-country-hits
Thank you for that link dear @marvyinnovation
Appreciate. Piotr
It is really difficult to answer this question, the most sensible thing I think it would be to leave the country and prepare to give support from outside. Here inside you not only have the problem of hyperinflation, situation to which you could have prepared by investing in Bitcoin in time. Crime and extortion by the authorities are also part of our daily lives and even if I had enough money I wouldn't have a quality of life.
This is true, but not all citizens have the possibility of receiving a loan, especially the most vulnerable classes who cannot collect the necessary documentation, for example in my case, I already have half a year of unemployment and I can not apply for any kind of credit.
Thank you very much for taking care of our country and for supporting these publications @crypto.piotr.
hi @darthgexe
That's exactly my way of thinking. Some people would consider me a "rat" for running from drowning country.
Thank you again for your kind comment. And hope to "see you" in 2019 :)
I presume that you're also from Venezuela? Caracass or some smaller place? Hope you dont mind me asking.
Yours
Piotr
I am from Ciudad Guayana, Bolívar state, in the south of the country.
@crypto.piotr How can a country be rebuild if everbody runs out? Once gone those people will never return. They need to build a new life. Besides of the fact there is no way to rebuild it from the outside. This is a government issue and they need to restart the whole system. What is lost cannot be given back so those who saved have the biggest lost. Some security for later is gone. Debts are still there, but with a new restart they are gone. Everybody has to start at zero and with 1000$. Everybody this includes directors, presidents as well. All banks have to restart too with a new system. To start without giving loans and making a sky high income on that and ripping people off.
No debts, new start to safe. New prices should be made for bread, milk, cigarettes, taking the bus etc.
Prices should be everywhere the same (the task is to rebuild the country not to make 9 people extremely rich and the resteven suffer more).
Education should be free, since it is needed or just a small amount needed for the teacher to live.
I really would like to have a peep into the safe of some people over there. Cryptocurrencies will not solve the problem. There might be a way to pay a bread with it, but that will never be possible for everyone plus it will not bring a healthy economic either to the country. I assume it needs import and export too to get stronger.
If the country is stronger it can have a new coin of it's own, but to start with it is better to use one that has proved itself, is worldwide accepted and with a good value.
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Dear @wakeupkitty
You need those who will runs out and those who will stay. I remember that I left to Dublin the moment when Poland joined european union.
Stream of money from Polish people working abroad gaved a huge "kick" to economy. Especially in construction and property market sector.
Those people will return. Most of them. Or they will be forced to return. Colombia and Brazil are taking huge amount of them but as far as I know they are only accepting migrants for period of 2 years.
Apart of that I fully agree with you. Again: some people will run, some people will stay. Im runner and Im not proud of it. But I never like to be around any political tornado.
Thank you for your great comment,
piotr
To answer your questions: I prepare by saving, but not only in my homecountry. There is land to grow food and keep chickens etc plus property so my kids can be safe and will always have a home.
Holland is already rebuild after 1945 and it is broken down now by the government and EU.
The biggest part of all the immigrants will never work. Their country is a mess, our country and houses they get for free are too. Since they are our "future", need to work and pay the sky high taxes we pay now to keep our "social security system" alive and they will never do so, it is not hard to guess what our country will look like in future.
Since two of my children live abroad and have their education there as well, they will likely build their lives over there. It is not more as normal to help the country that gave you a home, a good education and a chance to live a good life.
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Hi @crypto.piotr. Another question could be how to identify early signs of hyperinflation. This may help:
https://www.quora.com/What-were-the-factors-that-led-to-very-high-inflation-in-Argentina-during-the-late-1980s
https://www.quora.com/What-causes-hyperinflation-in-Venezuela
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dear @caribehub
Thank you for sharing those 2 links with me.
Yours
Piotr
Thanks again @caribehub
Just read those posts and I found them very valuable. Appreciate.
Yours
Piotr
Thanks for reading my article appreciated friend @crypto.piotr
As for mortgages: the government regime with its totalitarian character sets the interest rates for banks, drowning them too.
This is true. The amounts of the debts become minimum amounts.
so at least debts are not a real issue for those affected hyperinflation?
The point is that credit cards limits are ridicoulosly low and banks usually don't adjust to the inflation, also i think the Banks are finding ways to stole your money, for example I used my debit card and the commerce gave me the ticket wich said the card didn't pass then the Bank actually charged me that ammount and never responds when you send proofs to their emails or call..the same has happened to family and friends that's sad
Omg. That's already awful @jenina619 :/
These things happen everywhere. A friend from the USA was staying with us in Holland. His bankaccount was robbed in Texas (does not live there), he could prove where he was but no refund. Banks are there to steal, get rich, not there to help you out.
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Hyperinflation in my country might be a possibility in the future however have no defence against it just yet maybe saving dollars and crypto instead of local currency might be a good start
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Would you mind sharing with us where are you from @khussan?
cheers, Piotr
Maldives
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