Thought Exercise: Purchasing foreign stocks pre-US inflation wave.

[The Grinning Maniac]

Initial disclaimer: I'm just a college student who's only asset is being a little clever and obsessive, and reading a lot. That and I'm a mean sculptor.

Ok, I have a few thousand to invest and having already devoted a sizeable amount of money to physical PM in the past, have considered investing in stocks...very carefully... to get some dividends. But recently, the thought occurred to me that if the horrible economic future we all fear comes to pass, stocks will probably take a beating. So now...I'm thinking overseas stocks. In Asia perhaps. Though I want to really look into things carefully before making a jump.

But now this thought occurs to me, and this is the point of the exercise... if someone in America purchases foreign stocks and America experiences the good old times of Weimar Germany:

1) Would the stocks increase or decrease in value here due to the decline in the dollar? Meaning, if one buys 100 shares before the doom-doom-doom...and the dollar drops by half, would selling them at that point mean you double your money in real terms, all else being equal?

Which leads to the next question...

2) How likely is it that battered American consumption could cause Asian stocks to plummet?

3) Could a good outcome for #1 cancel out the effects of a bad outcome in #2?


Tapping collective knowledge is fun. Have at it.

[cubical]

If there was an inflationary crisis and the dollars value collapses then the price of your stock would rise. If your stock doubled, you would not have twice the purchasing power you had before because prices all around you would be rising. While prices are rising, the value of your stock should rise faster. There will be deflationary pressure when measured in hard assets and probably foreign currencies(assuming they don't follow our lead). I think gold/silver are the safest investments in a situation like that.

If the US cut imports from China dramatically, then the Chinese will switch over to consuming their own goods. It would cause them some growing pains, but they will be better off in the long run. I assume they would have depegged their currency before this happens. The Chinese will be able to sweep in and buy American assets are rock bottom prices when valued in Yuan.

Of course there are a million variables such as what exactly the fed and other central banks do, what the government does, how bad the inflation becomes before people act etc. American stock prices might go down, who knows. It just matters how bad in inflation is. Some people even think we will get deflation before it happens, but I feel like the time for deflation has passed unless the fed sends us into a depression.