Many people get really confused about what exactly hyper inflation is and how it will affect the housing industry but, hopefully I can make it a bit easier to understand.

First off, hyperinflation is when inflation is very high or just out of control. What this specifically means is, in general prices for goods and services rise to really high levels. When prices rise, then you as a consumer get less and less for the same amount of money. This is known as a loss of purchasing power. A rudimentary way of explaining this is by asking you a question, do you remember when gas was less than a dollar a gallon? Many of us most likely do however, in this example, it’s not so much hyper inflation as it just is inflation. Hyper inflation would be if we went to bed tonight with gas at $2.35 a gallon and tomorrow morning we woke up with it at $5.00 a gallon. The $2.35 you paid yesterday for a gallon now won’t buy that same gallon and you as the consumer have lost out. This is hyperinflation in a nut shell.

Now, how does hyperinflation come about, well….truthfully, we don’t completely know. That may sound a bit strange but, we really don’t have a good understanding that anyone think causes hyperinflation however, we do know that something must happen before hyperinflation becomes certain.

One of the most noticeable fundamental causes of hyperinflation is when governments increase the money supply drastically. Many people don’t realize why a government would do this intentionally but, it’s actually fairly simple to explain. The government is trying to debase the currency. Basically, the government knows if they print more and more money, ultimately, it loses its value and inflation increases. This inflation is used by the government to pay off government bonds. Ok…..I know that got really confusing but, think of it this way. If everyone and their mother has dollars……and it’s not hard to get them, you don’t have to do much for them, then they are worthless and in return, prices will rise because it takes more and more dollars to get that same gallon of gas that you bought yesterday for $2.35 vs. today it will cost $5.00. By the government reducing the power of the dollar, they can make more and more dollars with less and that allows them to pay off government debts however, this process lowers the standard of living for the people by destroying our purchase power.

Now, why is this important to understand now?

Most likely, you haven’t been paying attention to government bonds and our currency standing in the world but, because our government is debt spending, we are ultimately printing and printing and printing more money than we have. In fact, we are doing this at unprecedented rates. It just so happens that in the first term of President Obama, this country has spent more money than all the previous 10 Presidents combined. My point is, our Government has drastically spent money….drastically. This has had a negative impact on our currency’s value and we are seeing this exemplified in our currencies fall in value against foreign currencies.

This will debasement will cause prices to skyrocket very quickly. My example may be a bit drastic but, make no mistake, hyper inflation is a real concern for many economist and now with even more spending coming with the HealthCare reform, along with a lack of job recovery, continued bank failures, ever increasing toxic assets held by Fannie Mae and Freddie Mac, along with stimulus after stimulus, it would not surprise me to see our economy make a correction on its own and we could find ourselves in a very bad situation very quickly.

To explain to you just how serious this is and just how bad this could get, remember when the credit markets froze and people were telling President Bush, towards the end of his term he better act or the banking sector was going to fail……..well, what do you think they were talking about? We are leaning over the edge of an economic catastrophe and our government hasn’t done anything to correct the problem. I heard one government official say something to the effect that the fundamentals of our economy that caused the problems in the first place haven’t been fixed and all we are doing is spending as much as possible to cover it up. He also mentioned that when the proverbial doo-doo hits the fan it will be much worse because we are drastically debase our currency more than we ever have.

How does this affect the housing market?

Well, when a loaf of bread cost you $150.00 dollars, not because it’s packaged in gold but because a dollar isn’t worth anything….imagine what happens to a house.

E-mail me when people leave their comments –

Jesse Gonzalez is a highly accomplished and respected real estate professional with a wealth of experience in the industry. With a career over 15 years, Jesse has established himself as a leading real estate sales and marketing expert.

As a licensed real estate agent since 2005 and a broker since 2008, Jesse has a comprehensive understanding of the complexities of the market. In 2013, he founded his firm, Liberty House Realty, LLC demonstrating his entrepreneurial spirit and commitment to delivering exceptional service to his clients.

Jesse's expertise extends beyond traditional real estate transactions. He obtained his Registered Appraisal Trainee in 2019, providing him with valuable insights into property valuation and market analysis. Although he decided to focus primarily on sales, his appraisal background gives him a unique advantage in understanding the intricacies of property values and trends.

With a dedication to excellence, Jesse consistently achieves outstanding results for his clients. Last year alone, he closed over $20 million in sales and received the prestigious Sapphire Award from his local association, recognizing his exceptional achievements in the industry.

Beyond his successful career in real estate, Jesse is passionate about education and personal growth. He is completing his undergraduate degree in Forensic Psychology, with plans to attend Law School in the fall of 2024. Jesse's ambition is to become a real estate litigator, focusing on real estate consumer protection law and advocating for the rights and interests of homebuyers and sellers.

As the owner/operator of the nation's largest social network for REO professionals, <a href="http://www.REOProNetwork.com">www.REOProNetwork.com</a>, Jesse has positioned himself as a thought leader and industry influencer. Through this platform, he fosters collaboration and knowledge-sharing among REO agents, attorneys, asset management firms, and other professionals in the field.

With a commitment to professionalism, integrity, and providing a personalized experience for his clients, Jesse Gonzalez is a trusted advisor and a driving force in the real estate industry. Whether assisting clients with buying or selling properties, he consistently goes above and beyond to exceed expectations and ensure successful outcomes.

You need to be a member of REO Pro Network to add comments!

Join REO Pro Network

Comments

  • Unfortunately, during the last depression, most people owned their house outright AND experienced inflation during that cycle. Few own their homes outright now, there are tent cities, people walking away from homes and unable to find employment. I'm so sad at the thugs that have hijacked the government and what they've done to our country. The more they print money, the less valuable that money is. Our currency is not backed by gold, just the paper it's printed on. I guess if you followed the money, the inflation would allow todays government debts to be paid off with tomorrows cheap dollars but where does that leave the rest of us..?
  • Many of the lawmakers in Washington are just focused on the short term, not long term.
  • Robert T. Kiyosaki talked about this happening years ago. Does the government really not know what they are doing or do they just not care about the outcome?
This reply was deleted.