This Is What Happens To Gold In A Hyperinflationary Currency Crisis: Ukraine Edition

Tyler Durden's picture

As Ukraine's socio-economic situation goes from wost to worst-er, today's announcement by President Poroshenko that the government will take actions to stabilize the currency (which as we previously noted, appears to be heading for hyperinflation) has Ukrainians rushing for the exits into precious metals... with only one goal in mind - wealth preservation.

 

 

This is what gold does in a fiat-currency crisis. Now if only Ukraine actually still had some gold...

Furthermore, according to RIA, on Tuesday, Ukrainian television channel Ukraina announced that with the new exchange rate, the minimum wage in Ukraine stands at around $42.90 per month, which according to the channel, is lower than in Ghana or Zambia.

There are currently no plans to raise the minimum wage until December.

Behold hyperinflation:

"Food prices among producers rose 57.1 percent, with the price for grains and vegetables rising 91 percent from January 2014 to January 2015, while the official inflation rate over the period totaled 28.5 percent.

 

Meanwhile, Ukrainian consumers responded to economic difficulties by cutting their spending in hryvnias by 22.6 percent, which amounts to an almost 40 percent decrease in real consumption."

Nothing to fear though: we are sure all that hard-earned US taxpayer-lent money will be safe and sound.

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Soul Glow's picture

Gold has dominated many currency as of late.  Euros, yen, rubles, the list goes on.

Gold bitchez

cigarEngineer's picture

Nothing beats leveraged IPOs. Start a company, borrow money, IPO it, cash out. Rise, repeat. Join the dark side.

semperfi's picture

the Dark Side is winning, hands down - Satan rules !

PartysOver's picture

Satan does not rule.  OK, maybe influences.

The BTFD'ers rule.  The morning US Stock Indices dip was right on schedule.  Step up and get ya some.

Liberal's picture

As a staunch liberal, I am staunchly against gold and silver and strongerly believe they should be outlawed.  The US does not need precious metals because our economy is just too strong.  TOO strong.  As in creating millions of new jobs every single day thanks to our Supreme Leader Obama.  Plus we can't track gold and silver which means our beloved government won't be able to collect taxes and redistribute it to its people who don't want to work.  Working is not a right.  But collecting welfare is a human right.

SamAdams's picture

Textbook Weimar.  People have lost confidence in the government, revolution is on, here comes hyper-inflation.

Vampyroteuthis infernalis's picture

Nothing to fear though: we are sure all that hard-earned US taxpayer-lent money will be safe and sound.

Never fear, the Fed will break out the printers and magically watch the loses vanish!

Latina Lover's picture

Exactly 1 year after the USSA sponsored Kiev Coup:

-tens of thousands killed in a civil war

-currency destroyed

-unemployment more than doubled

-millions of Ukie refugees in Russia

-central bank is bankrupt

-fascist oligarchs get even richer while the poorest earn less than most africans

-fracking and rampant GMO production, ruining the best farmland in europe.

Mission Accomplished!

Four chan's picture

paper vs gold is like bieber vs joe lewis.

Nafets93's picture

Jesus Christ, imagine how gold's gonna pop when the world finnnnnally realizes what a ponzi scheme the petrodollar is!!

neidermeyer's picture

I'm going to absolutely love buying a low mileage Lotus or Porsche for one eagle... and have the poor bastard kiss my ass for it. It might take 2 eagles to pay off that Jumbo mortgage though...

General Decline's picture

That graph is a barbarous relic.

nailgunnin4you's picture

Gold surges 400%!! 

 

 

 

 

 

 

 

 

 

(In Hryvnia)

 

Keep holding that bag of gold for Tyler zerohedgers! And go short!!

palmdetroit's picture

Yes this is what happens to some fiat which servers no purpose, unfortunately, if you do your maths in dollars, the exact opposite happens.. just like before, good thing we got cryptos

wee-weed up's picture

 

 

Unfortunately, won't happen here until the dollar loses its "cleanest dirty shirt" status.

But it's coming...

GetZeeGold's picture

 

 

Who the fuck down voted me?

 

I tried to up vote you....but I missed.

 

Sorry amigo...

RaceToTheBottom's picture

The neighbors of Ukraine should batten down the hatches.  

 

People can move and will move....

pendragon's picture

so it went from 15 to 40. it's still better quality toilet paper than the ruble

Never One Roach's picture

"The Ukraine is not Zimbabwe!"

 

My guess is the politburo in Kiev never miss a 7-course dinner ....

 

 

 

bwh1214's picture

I'm a big fan of gold but the chart looks the same for the cross with the dollar and euro too.  I understand the point but the point was pounded home on here with the ruble drop. 

 

Interesting stuff on this article though: http://debtcrash.blogspot.com/2015/02/history-and-introduction.html  Great overview of how we got here. 

Max Steel's picture

WHAT A STUPID CUNT YOU ARE . PRESENT AMERICAN GENERATION .

John_Coltrane's picture

Graph wouldn't look very impressive if the y axis started at 0 as it should.  You can make any change look impressive if you plot over a narrow enough range.  That's why climate change alarmist always plot the "anomoly"  (difference from an arbitrary baseline) rather than the actual measured temperatures, where you wouldn't be able to detect any variation outside the noise through the last 100 years.

e_goldstein's picture

It's gonna take 4 eagles to put gas in the car.

90's Child's picture

Anyone have an idea how "poor mans gold" is fairing in Ukraine?

Financial it's easier for me to obtain then gold.

But if there isn't a market in a hyper inflation world I may have to start saving more for gold.

Tall Tom's picture

My belief is that Silver is performing wonderfully, being used as the Grey Market currency. Any Gold left in that Nation, at this point, is not being sold at any price in Ukraine.

 

(Why sell today when tomorrow's price will be higher?)

 

Now as to any Empirical Data...that would be nice to have.

90's Child's picture

Thanks Tom,

I like most here just wanna make sure I'm hedging wisely.

ATM's picture

That's not going to happen. 

It's called relativity. Gold will rise in price relative to a currency but so will other hard assets like a Lotus or Porsche.

What it doesn't do is rise in value. It retains value.

Bro of the Sorrowful Figure's picture

youre missing one thing. gold and silver have been profoundly manipulated downward for years, whereas the govt has inflated many other "hard assets" like cars and houses through subsisidies. gold, relative to these hard assets, is relatively (extremely) underpriced. the debt that props up the prices of houses, buildings, cars, college, food blah blah blah, once wiped out, will lead to a dramatic fall in the price of those things relative to gold.

Bro of the Sorrowful Figure's picture

youre missing one thing. gold and silver have been profoundly manipulated downward for years, whereas the govt has inflated many other "hard assets" like cars and houses through subsisidies. gold, relative to these hard assets, is relatively (extremely) underpriced. the debt that props up the prices of houses, buildings, cars, college, food blah blah blah, once wiped out, will lead to a dramatic fall in the price of those things relative to gold.

Tall Tom's picture

The upheaval cannot be put into words. It is beyond most anything of what the vast majorty of this audience has ever experienced and, as a result, way beyond their comprehension.

 

Famine will RETURN to America. There is no social collective memory of famine for most. It exists is some parts of the USA currently and will be widespread before this debacle is over. In fact if there was not EBT currently we would have widespread famine in America.

 

The resultant political and social upheaval will be revolutionary.

 

Be a Scout. Be prepared. Keep watch and prepare for the unexpected.

Calmyourself's picture

Here is the problem we are the source for most of the printed money credit, that means we have the ultimate seignorage and will enjoy the benefits the longest. We also have multiple carrier task groups and thousands of nukes.  The PTB in America do not seem to be preparing much maybe I am missing it but it looks like we have years on this path.  It will all go down no doubt but its probably years out..

Tall Tom's picture

It will all go down no doubt but its probably years out..

 

It already has been years out...Forty Four of them...

 

When the Dollar was decoupled from Gold that signed the Death Warrant of the currency and the empire.

 

The economy, our economy, is a structure. Yes the structure will fail, as all Human constructs do, in time. One cannot defy entropy.

 

The economy is somewhat like a Physical Bridge. A Bridge begins to fail before the construction is even completed. But it fails and it fails slowly over time.

 

Now when you watch the momentous collapse that is when most people will believe that the failure has happened. But the underlying truth is that it has been failing all along. The rate of failure can be expressed as an exponential function.

 

Likewise the economy is like an organism. It is after all an organized economy with such a degree of organization that we now can enjoy the fruits thereof. But like any organism it is subject to death.

 

The truth is that you have been dying ever since the day you were first conceived. The Death Genes are what caused your digits to form in your mother's womb. After you were born your growth rate exceeded the rate of dying by magnitudes of order. Eventually you stopped growing and then the rate of organ failure, the rate at which you are currently dying began to become the predominant factor.

 

Most people believe that it is when a person suffers from massive organ failure is the process called dying. Well organism death can also be expressed as an exponential function.

 

It is likewise with both our Empire and our Economy. And when it happens the collapse will be surprising to most.

 

As Ernest Hemingway said, and I paraphrase as I do not remember the exact quote, in a response to how he went bankrupt.

 

It started slowly at first and then it happened all at once.

 

And that is how our Economy and our Empire will perish.

 

And I am sorry that the prognosis is terminal. I am sorry that the Bridge is unsafe to cross and needs to be condemned.

 

WHILEST I TOTALLY AGREE THAT THE USA IS THE LAST DOMINO...

 

And there are so many instances of organ failure currently happening that I cannot project a long future for our economy. Thus we need best be getting our affairs in order and be prepared for the inevitable, dontcha think?

Tall Tom's picture

Hard Goods really DEFLATE in VALUE during the resultant hunger from the famine and lack in a hyperinflation.. The are huge disruptions and imbalances which are created during a hyperinflationary inferno. There will be no stability in finances or politics, and there will be total and complete social upheaval. It is a Hell on Earth.

 

In Weimar Republic Germany there were Grand Pianos traded for a 50lbs sack of potatoes. An entire City Block of Prime Real Estate in downtown Berlin was purchased for ONE OUNCE OF GOLD....which a wealthy man had proffered as a tip to a Hotel Bellboy during the war.

 

There is a marked difference in PRICE and VALUE. A FOOL will know the PRICE of many things and knows the VALUE of NONE OF THEM. A wise man, on the other hand, knows the VALUE of most things and the price is rather of secondary concern.

 

Wise men KNOW this difference as they have the terms DIFFERENTIATED and WELL DEFINED.

 

So what is VALUE? Value means UTILITY. Personally if I cannot use it then it has absolutely no value to me. (However it may be valuable to someone else.) In like manner if nobody can use it then it lacks any value whatsoever.

 

You really need to read some HISTORY about hyperinflationary infernos before commenting. Although past performance does not in any way, shape, manner, or form, guarantee future performance it generally is a very accurate indicator of what happens.

 

You impress me as the FOOL as you believe that everything just simply adjusts in PRICE, at the same rate, without considering the VALUE of any item in question.

 

Gold is saved until the very end. It is USED in the aftermath, after the upheaval subsides, and after the currency fails. That is when the VALUE of the Gold is realized as it can be used to acquire PRODUCTIVE INCOME PRODUCING ASSETS.

 

(...and not a Lotus which is rather useless.)

Thirst Mutilator's picture

+1 TT

 

The 'wise' man is more likely to be spending his EAGLE on a warehouse or farm equipment than a Lotus.

 

Actually ~ the 'wise man' is, as we speak, spending his fiats on both of those things in the hopes that he'll never have to arrive to the point where he is forced to spend his EAGLE.

delacroix's picture

the bellboy with the gold coin  bought the hotel he worked in.   the city block was purchased with what was described as a handful of gold coins.

Tall Tom's picture

Damn. My memory is that faulty too?

 

Time to read that book again.

Calmyourself's picture

Here is the Porsche of its time...  Apparently the guy cannot eat it..  Must be made of gold..

http://i.dailymail.co.uk/i/pix/2011/02/18/article-1358483-0041617C000002...

DanDaley's picture

Thanks, Tom, that was perfect.  Both of my parents went through the depression as adults, having been born in 1907, and told me of the severe hunger among so many friends and neighbors, helping people here and there with a box of cereal or whatever they could spare. People have absolutely no idea...NO IDEA that all of this false financial facade will be ripped away to expose the brutal, harsh reality that lies beneath. Talk about welcome to the jungle, baby. 

MsCreant's picture

Your comment and this chart...

Technically we are not seeing gold pop so much as we are seeing the death of fiat. Soon no number of fiatskis will buy gold. 

I have an add in my dohick for AnaJet printers. Looks like Analjet. It has an orange button that says START PRINTING TODAY. What should I make of that?

Thirst Mutilator's picture

Just imagine how people are gonna feel when they come to the realization that they're actually more stupid than Kim Kardashian.

Thirst Mutilator's picture

 "paper vs gold is like bieber vs joe lewis."

 

Correction ~ paper vs gold is like Beiber vs. Joe Louis [with the Vegas line set at 1000-1], and Joe Louis taking a dive because Arnold Rothstein stuffed some cash in his shorts.