Why do people buy gold to prepare for hyperinflation?
Joshua asked:
I know gold has been established as a means of exchange in Zimbabwe. However gold is not readily available in most areas. Wouldn’t it be more likely a barter system would be set up in a hyperinflationary environment?
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I know gold has been established as a means of exchange in Zimbabwe. However gold is not readily available in most areas. Wouldn’t it be more likely a barter system would be set up in a hyperinflationary environment?
September 1st, 2009 at 4:18 am
Hyperinflation means that commodity prices rise extremely fast. Gold is a commodity.
September 3rd, 2009 at 5:40 am
because prices of everything go up in a hyperinflation especially gold with the value of standard issue tender plummets
oh yeah technically prices don’t change but the value of a dollar (yin euro) is what decreases meaning you need more to purchase something however gold is traded everywhere and its value almost never changes.
September 4th, 2009 at 6:18 am
They don’t. They buy it to take advantage of other gold investors who fear hyperinflation. Conversely, there is a limit to the amount of gold in existence, but cash can continue to be printed which dilutes its value.
Regardless of trillions of USD being printing , Zimbabwe’s economy doesn’t compare to the USA or the products and services America exports to the world.
September 5th, 2009 at 8:28 pm
I believe in your scenario that a barter system would be the more likely approach. Gold would be the ultimate currency of choice, but if it is not readily available some other substitute would have to be found. In the past pack of cigarettes have been used, chocolate bars, alcoholic beverages, copper, silver, rice, wheat. Also gold has a rather high value so it does not work well for every day exchange. If however one has a lot of assets that one wishes to protect and gold is available, gold is generally chosen as the means of conversion for those assets. Diamonds are sometimes chosen but they are very difficult to judge the true value of. They are however much more portable than gold and able to store a larger value in a smaller space.