Why Massive Inflation is Still a Threat to Rich Countries

Some countries are privileged to have stable currencies.

As the reserve currency of the world, the U.S. dollar has enjoyed an enviable position that most countries would die to have.

Except for the 1970s stagflation scare, the U.S. has cruised along without many inflationary hiccups in its recent history.

Some countries haven’t been so lucky.

At one point Venezuela was one of Latin America’s wealthiest countries.

In fact, its wealth was so impressive that by the 1950s it became a magnet for migration from countries like Italy, Portugal, and Spain.

Oil was its primary export, but it had a growing steel and mining industry as well.

Its currency, the Bolívar was one of the strongest currencies in Latin America. In this regard, Venezuela was indeed exceptional because Latin American currencies tended to be very volatile.

However, in the 1970s, Venezuela’s economic model began to change.

In the middle of that decade its oil industry was nationalized. From there, the Venezuelan state began to embark on massive spending ventures.

The Venezuelan state relied on high oil prices to finance such largesse.

But when oil prices plummeted, economic realities set in.

Government programs do not come cheap. Eventually someone must pay the bill.

In 1983, the Bolívar underwent its most significant devaluation to date, ending a relatively unblemished track record for the nation’s currency.

Although many believed that this was a temporary setback, things never went back to normal in Venezuela.

Towards the end of the 1980s and the early 1990s, the country attempted a series of market-based reforms with limited degrees of success.

That said, the government could never contain the inflation beast.

In 1989, inflation stood at 84%. Poverty was growing and the Venezuelan populace was growing restless.

Eventually, they took to the streets, with some protestors resorting to acts of violence.

The government response was rather brutal, leaving hundreds of people dead.

Known as the Caracazo (1989), this crackdown was a major turning point in modern Venezuelan history.

Venezuela’s otherwise robust democracy started to be called into question. To make matters worse, a rising Lieutenant Colonel by the name of Hugo Chávez launched two failed coup attempts against the government in 1992.

Although Chávez was imprisoned for his actions, the damage was already done.

On top of that, none of the country’s structural economic problems such as inflation were ever really addressed. Inflation reached near triple digits — 100% in 1996 — and continued eating away at everyday Venezuelans’ savings.

By 1998, when Chávez threw his hat in the country’s presidential race, Venezuelans were completely infuriated at the political system and pulled the lever for the former Lieutenant Colonel, who marketed himself as the anti-system candidate at the time.

Unfortunately, Chávez’s rule did not fundamentally address Venezuela’s economic problems. In fact, his administration arguably made the situation worse, especially with regards to inflation.

This goes to show that there is strong institutional inertia in politics, and even when so-called “reformers” come onto the scene, they’re unable to roll back the policies their predecessors put in motion.

Chávez’s successor Nicolás Maduro has also failed to tame the country’s inflation scourge.

According to recent figures from the statistics website Statista, Venezuela’s current inflation rate is hovering around 2,300% to 6,000%, which is considered hyperinflationary.

From a big picture view, inflation has been a hallmark of the Venezuelan economy for the past few decades.

Here’s some perspective: The last time inflation was below double digits was in 1983.

In effect, the average Venezuelan millennial has never witnessed a year with inflation below 10%.

Here’s the thing about economic upheavals.

They can wreck even the best of nations.

And they usually can’t be controlled regardless of who is in charge.

There’s a lesson here.

You can’t control the political or economic elements.

But you can take advantage of crises and benefit from them.

While I doubt that inflation will reach Venezuelan heights, you should always remain vigilant about the U.S.’s economic climate.

Currently, there are debates about whether the U.S’.s inflationary spell will be transitory or more durable.

I tend to believe in the latter.

Nevertheless, you should never lose your cool and think the whole world is doomed.

To the contrary, inflationary moments provide a host of new opportunities for real estate investors to thrive in.

And they can do so by using my favorite four-letter word: Debt.

In this case, I’m referring to mortgage, not consumer debt. Consumer debt is a big no-no in my book.

But taking on a mortgage is a different story.

You see, this kind of debt is an asset when inflation hits.

First, you acquire an income property.

Then, you rent it out to a tenant.

In doing so, the tenant picks up the carrying cost of the mortgage……

Meanwhile, the mortgage’s real value depreciates due to inflation.

This infuriates the banks but makes debtors like you jump for joy.

This secret is one of the many game-changing strategies that the team at The Collective Mastermind will share with you.

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The elite individuals you’ll be meeting at The Collective Mastermind have a wealth of experience and contacts that they’re willing to share with you.

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To your wealth,

Jason Hartman