How ordinary people can hedge against the risk of currency depreciation

At the end of the article on September 26, a reader left the following message:

I am the first type of person in this article. I still have some spare money and I am not going to invest in the A-share market. My question is: after the massive release of money, cash will definitely depreciate. If I don’t invest in the A-share market, I dare not take on real estate. The cryptocurrency market is so depressed. As a small investor, what strategy can I adopt? How can I preserve the value of the little life-saving cash that I have worked so hard to accumulate?

"After a massive money printing, cash will definitely depreciate"---it depends on the perspective from which you look at this statement.

First of all, I believe that the central government will definitely take various measures to stabilize various risks and protect various bottom lines. Of course, we will not consider whether they can stabilize or protect the bottom line. What we are considering is what will happen if these measures can really protect the bottom line.

It is obvious that after taking these measures, money will inevitably spill over to certain areas.

At this point, several situations may occur:

The first type is direct spillover to daily necessities, raw materials, basic supplies, etc.

The second type is spillover to places where the economy is in real need, such as companies in urgent need of relief, businesses lacking liquidity, etc.

The third is the spillover to markets with financial attributes.

Among these three situations, the first is direct inflation, in which case cash will definitely depreciate significantly.

This is certainly not what the central government wants to see, but the final outcome is not determined by subjective will.

I think this situation is possible, but I can't say how likely it is.

What if it really happened?

As ordinary people, the methods we can currently use to fight inflation are actually very limited: basically, they include buying precious metals, buying investment products in niche areas, and buying real estate.

Among these ways to fight inflation, buying precious metals can be a good way to do some planning, but it is only symbolic and the actual effect is not great because:

- Precious metals (including gold and silver) are no longer cheap now, and the risks involved must be weighed before buying.

- Of course, the industry predicts that gold is likely to reach $3,000 by the end of the year or next year. But even if this prediction is true, from the current $2,700 to $3,000, it is only a 10% increase. This 10% increase will almost negligibly protect ordinary people from real inflation.

Buying real estate was effective in the past, but I don’t believe it can resist inflation now or in the foreseeable future. Although the country has introduced many measures and may introduce more measures in the future, it is already quite remarkable that all these measures can stabilize housing prices and prevent them from falling further. It is unlikely to reverse the trend and make it rise to a level that can resist inflation.

The fact that the real estate market as a whole could appreciate and resist inflation is a thing of the past in our country.

Investment products in niche areas are meaningless and unfeasible to the general public, so I won’t go into details here.

Therefore, when we really encounter severe inflation, for ordinary people, if they do not have their own investment methods, apart from investing some precious metals, the only option left is to put their money in the bank.

Although it seems that this is allowing money to depreciate, it is more reliable than investing recklessly in an attempt to so-called "preserve value".

I guess many readers will find it difficult to accept this conclusion, but this is actually the cruel truth.

In this situation, everyone is sinking collectively, competing to see who can hold on to the end and who can live longer. Living one more day than others will give you a glimmer of hope.

The second situation is what the country most wants to see.

If this situation happens, ordinary people don’t have to worry too much. Our future situation will get better and better, so there is no need to worry too much about the depreciation of money. It is better to wait optimistically and wait for the arrival of new hope that belongs to you.

But I don't know how likely this situation is to happen.

The third scenario is also more likely to happen in my opinion. It is not as good as the second scenario, but it is definitely better than the first scenario, and it is also a scenario that the country can accept within a certain period of time.

If this happens, then looking at all the fields with financial attributes across the country, which field can absorb so much money released by the country?

I don't think it's possible in the real estate market.

It is also impossible for this money to flow into overseas markets on a large scale (the RMB is not freely convertible).

What other areas remain is left for the readers to think about.

"The cryptocurrency market is in such a slump again." It depends on how you look at it.

It’s hard to say in the short term, but I’ve always been optimistic about the long term and have never doubted it. When Ethereum was below $2,500 some time ago, I was still investing regularly.