Jordan is the host of The Peaceful Way Podcast, in which he explores the concepts, ideas, and strategies behind making a more peaceful and nonviolent world.
The SARS-Cov-2 pandemic has skyrocketed international government spending and stimulus to unimaginable proportions. Dwarfing the 2008 financial crises, worldwide government debt soared orders of magnitude higher in 2020 and shows no signs of slowing down in 2021. Nearly 24% of all dollars in existence in the US were printed in the year 2020 alone, while many other countries are well over that 20% mark. Fears over a sovereign debt crisis loom, while there is very little political appetite for austerity measures.
Anecdotally, I see evidence of the economic chickens already coming home to roost. All sorts of general consumer goods from groceries to textiles are rapidly rising in price, the stock market appears to be a stimulus fuelled bubble, and stores of value like real estate and bitcoin are witnessing record levels of trading volume. Inflation, unlike the west has ever seen before, seems highly probable if not inevitable. Central banks globally are rushing to inject liquidity to artificially prop up the economy until it can become productive once again. As the meme lords so eloquently put it: “money printer go brrrr”.
So the question is, how do you protect yourself against it? Well, what I want to do here is create a comprehensive and routinely updated list of products, services, and ideas that can protect your financial situation from being eaten away by the falling value of your dollar. To be clear, this is not investment advice, simply a reference/resource and there is certainly no silver bullet to protecting against inflation.
A disclaimer, this may not help you in a total economic collapse, in that case you will need guns, lots of guns. Furthermore, for every example of an inflation hedge I give, there will always be an exception to the rule, and like everything in life you are taking a risk.
Let’s start with the most obvious hedges against inflation, precious metals. I am not covering every metal, but rather the most prominent ones.
Gold: The gold standard in stores of value, literally. Used as currency for 5000+ years of civilization, it is hard to go wrong with the shiny yellow metal. It‘s difficult to imagine a future where gold would not hold its value, and if you have decades long time horizon there are potential profits to be made.
Pros: -Low volatility, -Valuable everywhere on earth, -has industrial uses, -a very small amount of gold can be very valuable making it easy to store and transport, -privacy
Cons: -not easily divisible, -you need to spend money on securing your gold either through a personal vault or holding it at a financial institution,
Silver: The little brother to gold, silver has been a humanity mainstay in terms of value for millennia. Industrial uses for the metal have skyrocketed over the last few years as well, only adding to its demand and value. Many believe that the value of silver will leap frog gold in terms of percentages over the next few years.
Pros: -Low volatility, -valuable everywhere on earth, -much more affordable than gold but has similar upside, -industrial uses
Cons: -Not easily divisible, -money spent on securing your silver, -can get heavy and difficult to transport with even a modest investment, -holds value everywhere
Copper: Though neglected by many precious metal collectors, the price of copper has nearly doubled in the last year, not only that, being the primary material used in electrical wiring, it’s here to stay. Commercial real estate landlords have even had problems with copper thief's pulling copper wiring out of their buildings in recent years.
Pros: -high industrial use, -affordable, -global demand is on the rise which means its price could be on the rise
Cons: -Heavy and difficult to store and transport substantial amounts
Platinum: A bit cheaper than gold, platinum bullion is available to collect and use as a hedge against inflation. Platinum is a far more rare metal than gold or silver but also has fewer industrial uses. Primarily used in engines.
Pros: -low volatility, -rare, -a small amount can be very valuable making it easier to store and transport
Cons: -Difficult to find retail vendors due to low trading volume, -costs associated with security, -fewer industrial uses than other precious metals
Like precious metals, real estate is as close to a sure thing as you can get in terms of parking your money. Though there can be large market pull backs every decade or two in the real estate market, it has always remained one of the most liquid markets in the world. For the purposes of this article, real estate is a longer term hold, not house flipping or trying to buy low and sell high. You may not make a substantial profit in real estate, but on a long enough time horizon, you most likely aren't going to lose money like you would to inflation. Though there are many categories of real estate, I am only going to cover two very broad ones:
Residential: People will always need a place to live. Residential real estate, particularly in big cities, tends to be a pretty safe bet. The other benefit is that you can live in and use your investment, so I like owning a home for the pure practicality of it.
Pros: -You can live in it, -you can use it as an income property, -statistically very good at retaining value
Cons: -upkeep can be costly in terms of time and money, -Can be a rather large commitment, -is not a very flexible investment
Commercial: Though a lot more risky than residential, commercial real estate can have huge upsides. The trick is picking an industry that will remain relatively stable for the long term, retailers and shopping malls are probably a bad bet. However, some commercial investments like RV parking and storage lots show a lot of future promise and has been a booming industry for years.
Pros: -potentially a high income earning asset, -has some flexibility in terms of what kind of business can be operated (E.g. the old Kmart gets converted into a trampoline park)
Cons: -More volatile than residential, -upkeep can be costly in terms of time and money
If you haven’t been paying attention, the digital financial revolution is happening right under your nose. Starting in 2009, and in response to the 2008 financial crises, the bitcoin white paper was unleashed into the world. A peer to peer permissionless currency that cannot be controlled by a cabal of central banks, governmental, and corporate interests. Whether or not BTC ends up the dominant blockchain token in the end remains to be seen, but what is a near certainty is that cryptocurrency is here to stay. As institutional investors pile on, the value continues to rise to new all time highs. Some even believe Bitcoin to be replacing gold as a store of value. Though I doubt it will replace gold, it will certainly compete with it in that regard. 2020/21 seems to be an indicator of where people are putting their cash to protect against an onslaught of inflation. Though there are still detractors claiming it to be a scam, they will most likely be forgotten in the dustbin of history, there is no putting this cat back in the bag.
I will not be covering specific crypto’s here (as there are thousands of them), I would recommend learning about Bitcoin, Ethereum, Litecoin, Bitcoin Cash and XRP if you are new to the topic.
Pros: -Open distributed ledger making it impossible to forge or fudge numbers, -Massive potential across hundreds of industries, -easy to store on a computer or hardware wallet
Cons: -Highly volatile, -can be easy to lose your assets on a computer or hard drive
A too often ignored aspect of fighting off the debasement of the currency is you. Building your own human capital can be one of the most effective tools to avoid the worst effects of a high inflationary environment. The way I like to define HC: it is the combination of your skills and knowledge, having both a theoretical and practical component to it. What you know, and what you know how to do can be invaluable assets in bad economic times. There will always be some service or knowledge that other people will need and are willing to pay for that you can provide. It’s also never been easier to grow your human capital. You can learn how to change your oil by watching a youtube video, day trading through a Udemy.com class, and there are all kinds of online forums and communities that can give you free and usable advice on almost any topic or problem you can imagine. For me personally, I try to constantly be reading as well as a goal to do one online class a month.
I would also add that physical and mental health are very important in terms of protecting your human capital. If you are sick or having a mental breakdown during a crisis, the problems from the economy can be made exponentially worse for yourself and your family from your poor health.
Pros: -relatively cheap, -time flexibility (you can work on it at your own pace and convenience), -high upside, -knowledge and skill goes everywhere with you
Cons: There is almost no downside to building human capital. The only word of caution would be to not put all your eggs in one basket in terms of what you can do and what you know. Spending your time learning to be a long haul trucker, for example, may be a bad time investment due to automation.
Okay, so now that we have covered the big ones, let’s talk about some more obscure stores of value that may not have immediately crossed your mind.
Guns & Ammo
It’s time to put a *pew pew* into that inflation killing your monetary gains. Firearms can be an excellent store of value and with a little bit of love and care they can potentially be fully operational for decades and even centuries. Guns also track like a can of coke with inflation. They can also be fun toys and useful tools. Whether it’s for shooting at a range, hunting, or personal defence, there will always be a demand for guns.
The market for ammo fluctuates pretty drastically every few years and a lot of private citizens will even stockpile ammo while its cheap and sell it when demand picks up. However ammunition does not have the same shelf life as guns and can be damaged by rust or oxidization if not stored properly. They will still degrade even in the best of environments, though it could take years, it is going to be a much shorter time period than a fire arm.
A final point on guns and ammo, depending on where you live there can be extremely onerous regulations. This can make it very difficult, and in some cases impossible, to own guns. If your jurisdiction allows you to keep non-registered fire arms, there is far less risk to losing them because of gun laws, though the financial risk is mitigated as most countries will do gun buybacks in the event of a ban.
Pros: -Can last a very long time, -always in demand, -low volatility
Cons: -difficult to store and transport (Depending on where you live there are storage requirement laws), -risk of being regulated
Honourable mentions: Compact bows, cross bows, and knives
This category is vast, and somewhat complicated in regards to being a hedge. Many collectibles fall in and out of favour over the years, and if they become really popular like sports cards in the 90s, they get so mass produced and plentiful that when demand dries up they aren’t even worth the paper they are printed on. If you want to get into collectibles you have to have very specific knowledge of the niche in which you are collecting, lukewarm investors will spend too much money on items that don’t have any long term value. However, if you know what to look for, it can be extremely lucrative. Generally when collecting, you are looking for pieces that have historical significance like a signed Jackie Robinson card or a first issue of Action Comics.
Here is a list of examples of collectibles:
-retro video games
-antiques (furniture, glass ware, books etc)
-sports memorabilia (signed ball, jerseys etc)
Pros: -fun and interesting for hobbyists, -Great for displaying, -preserves history/culture
Cons: -risky investment with low information, -many collectibles require expensive restoration or protection, -vulnerable to theft, fire, and flood
I got my first guitar when I was 14; a cherry red, Fender Strat made in Mexico. It was purchased for under $500 CDN 18 years ago and now retails for anywhere between $750–$1000 tracking close with inflation. If kept in good condition, instruments of all kinds, from brass to wood to string, have great resale value. If you take care of them properly they can easily last for decades and it’s actually relatively simple to repair minor damage. Anytime I have had to get a guitar repaired it always costed me under $100.
If you already play and love music, this one is a no brainer, but may not work for the non-musically inclined. As with all of these ideas, it’s optimal to find an inflation hedge that you can use and enjoy rather than just leave it to collect dust in an attic. And let’s not forget gear like pedals, cases, straps. These items can also solidly retain their value.
A caveat to this is old stand up pianos. These instruments are hard to give away for free for the simple fact that they are abundant, hard to move, and take up a lot of space. Grand pianos and a Nord-Stage are safer bets.
Pros: -low volatility, -high utility for musicians, -minimal maintenance, -stable demand
Cons: -they take up space and may require storage, -vulnerable to rapid climate changes and humidity levels, -vulnerable to theft, fire, and flood
I thought about including this in the Musical Instruments section, but honestly this mic is in a category all its own. If there was a fictional universe in which musicians controlled the monetary system, they would most definitely make the Shure SM58 Dynamic Microphone the reserve currency of the world. All your dollars would be backed by SM 58’s and for good reason. This mic has hardly changed since its inception in the 60’s because there’s literally no reason to. It’s affordable, durable, and gives quality vocal and instrumental recording. I personally use SM 58’s for all podcasting and vocal needs. Is it the greatest mic in the world? No, but it does not need to be. You can find it in virtually every professional recording studio around the world and almost all touring musicians have it in their repertoire. They last forever and are easy to repair. There are youtube videos of people using the mic as a hammer, baton, and even dropping it in water then using it with no issues. Purchase 20 of these mics, leave them in your basement for 30 years and they will most certainly work perfectly. Not only that, you will be able to sell them for nearly what you bought them for (adjusted for inflation), try looking for them in used markets and they are 10% less than retail at most.
Even if you know nothing about instruments or microphones, take it from me, you would not go wrong purchasing an SM 58.
Pros: -Always in demand, -very durable, -easy to maintain
Cons: -Heavy, -requires storage space
This may be obscure, but power tools, and tools in general, hold their value exceptionally well. To be fair, you are probably never going to resell a tool and get what you paid for it, but as inflation rises consumer goods like power tools will rise in price with them, so if you are looking to get rid of some extra cash this is not a bad option. If you use or need tools, now may be a good time to invest in that table saw you have been himming and hawing about. If you get a good brand, it can last for years, perhaps even decades and they can often take a beating. The motors in power tools are also fairly easy to fix, and they use simple electrical schemes making soldering severed wires a relatively simple job.
It should be noted, I am talking about household tools, not work tools. The amount of mileage put on work tools will wear them out much faster. However, you will most likely use home tools a fraction of the amount you would use work tools and therefor they should last orders of magnitude longer. A hammer you bought for ten dollars twenty years ago is probably as good as new and would cost you 20–30 dollars today. It will pay in the long run to spend a few hundred dollars getting high quality tools that you would generally use around the house.
Pros: -always handy and useful, -low volatility, -a lot of upside and there is always a market for used tools if you ever needed to offload them
Cons: -Electric tools may not last more than 10 years, -storage space required, -theft risk, -tools degrade faster in humid environments
As with many items on this list, this may not be for everyone, however if you have an acreage or even a large enough yard, livestock hold their value very well and there is always demand for them, or you can use them for your own consumption. Cattle and horses may be for more experienced ranchers and can be more expensive, but animals like sheep, goats, chicken, and even rabbits are relatively easy to raise and maintain. You can use their eggs, meat, milk, and fur. Depending on municipal regulations, you can sometimes get away with raising small game like chicken or rabbits.
Pros: -recurring resource, -high utility, -can be lucrative
Cons: -High upfront costs in building habitat and purchasing animals, -costs for food and medicine/veterinarian, -high commitment
This may not be the first thing to come to mind when you think about hedging against inflation, however it shouldn’t be ignored. But lets preface first by saying that the vast majority of attire will have zero re-sell value and will degrade very fast, ergo we are not talking about the $10 shirt from H&M.
What I am talking about, however, is long lasting, high quality linens, and brand names. As it happens outdoor clothing tends to be a really good investment, even if it seems like a high price, they are going to last decades if you properly care for and wash them. Many outdoor clothing brands also have very robust warranties, some being lifelong. Biting the bullet and spending a little more can often mean spending less in the long term as your clothes will last really long and have the added benefit of utility. Some good outdoor brands to look out for would be Arcteryx, The North Face, Patagonia, and Canada Goose.
Another genre of clothing to consider is suits and dress clothes. And again, the more you spend, the higher quality and longer lasting. However dress clothes can be really hard to resell as many of them are customized to the original wearer.
A word of caution would be to not buy anything particularly flamboyant as it may fall out of style 20 years from now where you wont be able to sell it and will be too embarrassed to wear it. I enjoy trendy clothing as much as the next person, but I only buy them in low quality as they may fall out of favour very fast. When buying expensive clothing, it’s best to go with more bland, evergreen styles.
Pros: -high utility, -lightweight, -can have resell value depending on the brand (but it’s a gamble as brands can fall out of favour)
Cons: -Though lightweight people tend to accumulate too much clothing and find it to be cumbersome, -Risky resell value