Lessons on Inflation & Fiat from Eastern Europe

Hi Leo Finance! I’ve recently joined Hive…and I’m blown away by the whole potential of this platform and community. I wanted to contribute a piece of content, some conclusions I’ve made from living out in the East of the world for quite a few years, where the local currencies are not to be trusted.

(Where beds are preferred to banks as far as saving goes....)

I might have double-posted this, so apologies about that…I hit publish and everything just disappeared, including some final edits I’d made.

Lessons on Inflation & Fiat from Eastern Europe

I’ve seen a lot of posts and content about inflation, and the imminent fall of fiat currencies (namely the Euro and USD) around here.

I wanted to share a little bit of insight into what countries that are less developed typically do. I believe that their actions when their own currency falls can give a reasonable indicator as to what can potentially come in the future for the more-developed countries.

I am a Westerner who has spent nearly the last decade of my life out here in EE, living amongst the locals and making a life out here for myself.

Simply put, the further east you go, the deeper the distrust of banks, government, and local currencies goes…

Reason why is simple:

Their local currencies hold the “shitcoin” status of fiat currencies. They aren’t backed by anything. They’re all tied to the dollar. Nobody believes in them. No one can trust the bank - because there’s been run on the banks before. Or the banks have just…closed up shop, and said, “Goodbye and Good Luck”.

Their money has been locked up.

Unable to access it.

The currency falls further and further every day.

It's not uncommon to see 7-10% interest rates out here to entice people to save their money in the banks. Most of them still don't do it.

So what do the locals out here do?

Cash Is King

Well, first, they don’t keep much, if any, actual money in the actual bank to begin with.

Certainly not much.

Maybe a certain percentage just for day-to-day card/contactless payment convenience, but certainly not any sort of “life savings”. Hell, even savings for small stuff like a trip to Egypt or Thailand is usually done by locking cash (USD or EUR, not the local currency) in the safe, in the garage, or simply under the couch pillows.

The local currencies are considered acceptable to be used in day-to-day use, but nothing to be saved or held in the long-term.

How can this be used to predict what might happen in Western countries if things continue going this way?

Well, first off, the banks will shut down if it gets out of control. There will be a limit on how much cash can be withdrawn. People will run and flock to the banks. In this time, cash should still retain it’s value. It can still be bought and sold with.

It’ll be tough to get your own cash out of the bank. Maybe impossible.

And your 401k, IRA, or really, anything deep within the banking system will be totally untouchable.

(Not to mention how difficult it is to withdraw from those, even during good times…)

For a short amount of time, the cash will still be the king. People won’t switch to a new system of bartering and trading goods until there’s even more significant problems with inflation. When you start needing to haul a pick-up truck bed of cash to buy a sandwich, you obviously won’t be using much cash anymore.

After that, I’d reckon the system will go towards trading physical goods for other goods and services. Who knows. Maybe all that hoarded toilet paper will have some serious value.

Of course, this also comes with significant risk. If people know you have lots and lots of physical necessities, it makes you a glaring target.

Sure, your neighbors may seem like nice people now. But what happens when push comes to shove, when they’re desperate to wipe their butt or to feed their children?

Are you prepared for that?

This will also be amplified in countries and cities that have a diverse range of demographics. People will naturally “team up” with people of similar desperation levels. It’s important that you have people around you with resources and that you all take care and protect each other if it comes to it. This means that EVERYBODY must be prepared — not just YOU.

In Conclusion

Inflation is being pushed as a “normal” and “good” thing for people. We can debate whether this is “planned” or incompetence another time, but for the time being, it’s here to stay.

Simply put, looking at other countries, such as Argentina and Venezuela, and the collapse of the Soviet Union as a whole give us great insight as to what could happen if things continue down this road.

Posted Using LeoFinance ^Beta