Woodwell said some investors are not skeptical enough to question the legitimacy of some seemingly questionable investment opportunities, despite the red flags that may be present. While countries may decide to issue new currency when their economy begins to expand rapidly to avoid hyper-inflation, they basically exchange the old bills at the old value, so investors are typically left with devalued currency, he said.
“There has not been any kind of revaluation of the currency,” Woodwell said. “It’s happened in several countries in Africa (and Mexico) where they have had hyper-inflation.
“There is no conceivable way that people are going to make money off of this because they are buying the physical currency at an inflated rate to start with,” he explained. “So even if the currency (increases) a little bit because the economy goes up in that country, because you are buying it at an inflated exchange rate, you are not going to be able to sell it for what you bought it for.”
Businesses today are selling those currencies at huge markups over what is typically charged on the open market, said Scott Stone, senior vice president and foreign exchange manager for Zions Bank.
People will also buy them from banks, which is better because the exchange rate is less, but they will still never recoup their initial investment, Stone said.
“You should never buy paper bank note currency as an investment,” he said. “If it’s truly an investment, there are other ways to go about it than buying a stack of currency and putting in a shoebox under your bed and waiting for that currency to revalue.”
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