Property hedge against hyperinflation

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MKultra101
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I am putting this hypothesis here to test it before I consider putting it forward for consideration to add o an organisation's risk framework.

Hypothesis: Hyperinflation will occur after the current period of deflation. Property is a poor hedge against hyperinflation.

The current period of deflation is a precursor to hyperinflation. The commentary about inflation is usually related to money supply but it often fails to take into account other significant dimensions including the velocity of money and real output from the economy.

The worst period of hyperinflation in the Weimar Republic was preceded by deflation because with a high burden of state and private debt, deflation causes a loss of confidence in the nations currency by shrinking the economy and making the level of debt appear unsustainable. Therefore people convert money into physical goods at in increased rate leading to an increased velocity of money and therefore hyperinflation.

Clearly in general physical assets are a hedge against hyperinflation. Property is a poor hedge against hyperinflation because it is not easy to sell in times of crisis due to its relatively high value, people will not take it as payment as it does not fit the properties of money e.g. Divisibility and people often need to borrow to buy it which may not be possible in such a scenario.







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MatureStudent36
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Another end of the world post.
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Quady
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(Original post by MKultra101)
I am putting this hypothesis here to test it before I consider putting it forward for consideration to add o an organisation's risk framework.

Hypothesis: Hyperinflation will occur after the current period of deflation. Property is a poor hedge against hyperinflation.

The current period of deflation is a precursor to hyperinflation. The commentary about inflation is usually related to money supply but it often fails to take into account other significant dimensions including the velocity of money and real output from the economy.

The worst period of hyperinflation in the Weimar Republic was preceded by deflation because with a high burden of state and private debt, deflation causes a loss of confidence in the nations currency by shrinking the economy and making the level of debt appear unsustainable. Therefore people convert money into physical goods at in increased rate leading to an increased velocity of money and therefore hyperinflation.

Clearly in general physical assets are a hedge against hyperinflation. Property is a poor hedge against hyperinflation because it is not easy to sell in times of crisis due to its relatively high value, people will not take it as payment as it does not fit the properties of money e.g. Divisibility and people often need to borrow to buy it which may not be possible in such a scenario.







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Mortgaged property is a goo hedge against inflation/hyper inflation.

Your prediction of hyperinflation was very badly explained.
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MKultra101
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(Original post by Quady)
Mortgaged property is a goo hedge against inflation/hyper inflation.

Your prediction of hyperinflation was very badly explained.
That's hedging something with a uncontrollable variable, therefore against the principles of a hedge.

Let's no say it's a prediction, let's call it a scenario. The scenario is that the money supply remains relatively constant but people start spending their money very quickly after they get it so the turnover / turnaround of money is much faster (velocity of money).


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