The Globe & Mail presented a contemporary example of hyperinflation in article by Frank Jack Daniel: “Trying to survive inflation? Ask Venezuelans“. One point stood out to me:
Over the past 25 years, its citizens have developed all sorts of techniques for stretching their money and offsetting price rises. The main rule is get rid of cash fast.
“There’s no point leaving it in the bank, it’s better to invest. I bought this car for example,” said Caracas town hall official Jorge Juarez, who leaves home at 4 a.m. to beat the snarled traffic and uses his 2007 Fiat as a taxi after work.
Mr. Juarez is in many ways a typical middle-class Venezuelan. Through a mix of hard work and shrewdness he has kept up his family’s living standard even as his salary’s buying power shrinks.
Cars are a good investment in the Caribbean nation, where gasoline is subsidized to the point of being almost free and demand for vehicles far outstrips supply. As such, they increase in value as they age, faster than consumer prices.
Cars were seen as a good investment during hyperinflation in Chili, according to Gonzalo Lira, as I mentioned in an earlier post about why I was buying Toyota RAV4 on 0% 36 month financing. If gold is the measure of real estate, then real estate is suffering in price even while here in Canada it is experiencing phenomenal nominal gains. This too accords with what happened in Chili according to Lira.
NB: this post is part of a series on Jeet kune do investing, named after Bruce Lee’s martial arts, a style which is no style.