It seems that everywhere you look these days there is someone telling you to “Stock up on gold and silver, that’s the only real money!”
Oh really…
Look, anybody with half a brain knows what governments around the world are doing - printing money as fast as they can to devalue their currencies against the others in an attempt to inflate their way out of their debts. Thus, the spike in gold and silver prices. According to inflation figures, gold and silver haven’t gone up that much in value, it’s just that a dollar buys less and less of everything every day. And it’s not going to be long if governments keep this up that we are going to see worldwide hyperinflation of Zimbabwean proportions. Those little green slips of paper aren’t going to look so good…and won’t buy much, if anything at all.
All the while the pundits and analysts and individuals who make a percentage on the spot price keep up the chorus – “Buy gold and silver!”
As I see it, it’s the biggest scam going today. Money can be anything that two parties entering into a transaction agree it is.
Now I’ll admit that I’ve got some gold and silver stashed. Not a lot but enough to trade for essentials while it’s still worth something. But that’s the rub, if it gets as bad as I see it getting, other things are going to be MUCH more important…and valuable.
Like food…or the ability to grow food. When things go bad, the grocery store shelves will empty rapidly. Like ammunition and firearms. Even little things that you wouldn’t think of like toilet paper, batteries, disposable lighters, waterproof matches, water purifiers and the list goes on and on. Those are the types of things that are going to be in demand in the aftermath and if you’ve amassed a pile of this type of stuff, you’ll be able to accumulate all the gold you could want.
But why would you want to?
Just an example, you’ve got a pile of food stashed and the ability to defend it (I’ll discuss more about this later in this article). Someone you know comes to you and asks to trade an ounce of his stashed gold for some of your food. He just happens to be a mechanic and you need some work on one of your tractors. What are you going to want more, that ounce of gold or help repairing a piece of your equipment. Since you need that equipment to feed yourself and your family, you’re going to make a counter-offer – some of his knowledge and labor for some of your food (or whatever else you agree to). I know, maybe a bad example for the majority of people out there, but I own a farm so it makes sense to me.
From what I’m seeing, there’s going to be a HUGE shift in priorities among people when this period in our history is complete. And even though gold and silver will probably be one of the mediums of exchange, it’s not going to be the most important one. Knowledge of how to do things will be the currency of choice during the dark times. If you know how to fix a roof, dig a well, grow food, hunt and fish, weld or repair a vehicle amongst myriads of other things, you will be in incredible demand and will be able to name your own price because so few people these days know how to do any of these things.
But all of these skills aren’t going to do you a bit of good unless you can get out of the suburban and urban areas. In these areas, when the grocery store shelves go bare, the food stamp cards don’t work or won’t pay for food because of inflation and the welfare checks dry up, what we saw in London is going to look like a state fair in comparison. In that situation, if you were stuck in one of these areas, what would you rather have – a pile of gold or an AK-47 and a few thousand rounds of ammo? Personally, I’ll take the AK-47 every time. Even though I’m bugging out (waaay out) to a rural area, the survivors of the initial carnage are going to be roaming in packs, looking to steal anything they can get their hands on. Give me guns over gold anytime in the urban meat grinder.
Speaking of that scenario, once the hordes leave the urban and suburban areas decimated and start to spread out over the countryside hoping to pillage everywhere else, there is going to be a bloodbath of epic proportions. They won’t know what hit them. There is a huge pent-up well of anger in this country and our minority and white trash problems will quickly be taken care of. The same goes if the government tries to disarm the law-abiding during these times. Don’t say I didn’t warn you…
So why the steady drumbeat of individuals trying to persuade you to buy gold and silver? It’s all about trying to squeeze more loot out of you than they already have. It means they’re hoping you’re stupid enough to be one of the unfortunates hoarding gold and silver when the bottom falls out. If you really believe in this collapse of society stuff and I do, what are you going to want more during the inevitable fallout; a big pile of gold or some food and weaponry? You’ll probably want to go with the latter.
What it breaks down to is that the value of gold is just as arbitrary as paper money. If you want something to trade after TEOTWAWKI, stockpile food, cigarettes, bullets and toilet paper. Bling will not be a priority when the barbarian hordes come…
Originally published at Veritas Aculeus and Apocalypse Cometh on August 15, 2011.
{ 25 comments… read them below or add one }
I’ve been saying this for years.
everyone who says that gold will be the currency if SHTF always fails to realize that if things are that bad, people will be using guns to get what they need.
gold is a fear investment. When people are scared, they buy gold.
Dilbert made that point recently – he was stocking up on food, silver, gold, etc. and his co-worker Alice was ready too; she had his home address and knew he couldn’t defend his stash.
Guns and ammunition have been pretty good inflation hedges from what I can tell, and you can use them to protect yourself. You can also hunt with many firearms. The most that precious metals will do protection-wise is if you stuff them in a sock to use as a sap, and they won’t feed you at all.
Precious metals don’t matter in a complete collapse scenario, but do you really think we’re headed for Mad Max or The Road? As long as there is some shred of civilization left (and especially during its rebuilding), people will use money in place of direct trade for goods. The most likely money to replace collapsing paper currencies is gold and silver. If you are smart/lucky/hardworking enough to build wealth in excess of your needs, and have already stocked up for emergencies, then precious metals are currently the best commodities to hold your wealth.
Not convinced. Of course, our civilization is in decline. Of course, the euro and the dollar are doomed. But there will not be a catastrophic scenario like the one you are describing and people going back to barter.
The euro and the dollar will be devalued so everybody will lose most of his purchasing money (that is, their money in real terms). Everybody will be much poorer. USA and Europe will become third-world countries.
As someone who has lived the last 11 years in a third-world country, things don’t get that bad. There is a lot of violence and business must have private security (a guy with a machine gun at the entrance). But supermarkets have food and water for those who are able to buy them. For those who are not able, there are markets with low quality basic products at an affordable price. There is not this apocalyptic scenario you are explaining.
The difference between gold and paper money is that you can’t print gold so you devalue its value through inflation. Gold is scarce and the reserves of gold in the world can’t be augmented at will. This is why Nixon ended with the gold pattern. With it, it is was impossible to increase the monetary supply.
Having said that, I don’t have enough data to say that buying gold is a good idea. I haven’s studied the topic enough. But if the reason not to buy gold is to buy food to stock pile at home and defend with guns, this is silly.
American people like to imagine apocalyptic scenarios. The same apocalypse was said about the Year 2000 problem (http://en.wikipedia.org/wiki/Year_2000_problem) and nothing happened. But months before the year 2000, you could found lots of web pages devoted to give advice about stockpiling food and building refuges for the apocalypse who was about to happen.
I remember an American consultant coming to our developping country to give a conference about the Y2K problem, when I was still young.
Consultant: But, with the Y2K problem, the power supply CAN’T STOP and this could be the END!!!!!
Local people: No problem. Here the power supply is stopping all the time.
Consultant: And water supply will be interrupted. This will be CATASTROPHIC.
Local people: Yawn. Here water supply is interrupted several times a day. Some neighborhoods don’t have water supply for weeks.
At the end, nothing happened. You American have watched too many Mad Max movies.
I meant: the power supply CAN stop. Sorry.
I own Gold and an AK. Covered. Don’t tell Chavez Gold isn’t worth anything. He just got better.
lol imnobody is damn right. its not going to go straight into mad max style scenario, gold will be a medium of exchange for a while yet. though i would definitely agree, if you have access to farmland, and made the sensible though difficult decision to use natural fertiliser (we all know the peak oil catastrophe, fuel makes fertiliser, lack of infrastructure means no transport, no oil and most soil is nothing but a bed for these chemicals to grow crops on because nobody believes in crop rotation, due to unsustainable population growth ((mass death is going to happen anyway)) ) then collect your shit together like the article says, weapons, base tradeable skills you name it.
if not, the best you can hope for is making connections, and contacts, a system of favours etc to get things you want, bug out to some poor ass developing country that has big aggro and pay people to cultivate farmland you own while you live like a king. but dont expect people to obey property rights for long, hence the need for workers and guns.
for more info see mugabe and the white african
Yes but if other people value gold/silver, then you well be able to use it as a medium of exchange instead of the (obviously manipulated) world currencies.
Your right, wealth does not come from having stock piles of dollars or silver, it comes from having the means to produce. A man stranded on a desert island with nothing but 4 trillion pounds of silver is poorer then a hiker in Alaska with a bow and bunch of arrows.
The point is that once the world currencies fail as means of exchange, you use silver in their place. Thats all money ever was in the first place.. a means of exchange.
Angree and disagree… if the worst situation developes (i.e. “The Mad Max Scenario”) you are totally on the money… if not gold and silver will be a good move. Either way I advocate not putting all your eggs in one basket… I think there still may be a little time to see which way the wind is blowing but not much… Great article.
Another medium of exchange would be alcohol. It comes in various denominations and will be very much in demand.
Even in Mad Max style chaos you’ll get local warlords who take over towns and have masses of troops who need to be pay. Will barter rule the day? Yes – but barter is a voluntary exchange mechanism which will very quickly evolve to want some easily portable store of value. Just like in history you’ll have my ten cans of beans for your young goat but gold, silver, even copper will quickly come into the mix. With active rioting your best metal investment is lead capable of traveling at +500 FPS but there is a whole lot of living that needs to be done after this assuming you survive it. To say that precious metals that have been in existence and considered valuable since the days of cavemen will suddenly be shunned I believe is incorrect. That local warlord will be happy to take your gold coin in exchange for a “house” in his domain and one silver coin per month thereafter. Could he simply take it all from you? Sure, but if you are armed it might cost him henchmen and future loyalty of those who survive robbing you. It is much easier for him to slowly shake the money tree and tax you over the course of months/years.
America isn’t the world.
Other nations will be excepting gold and silver long after all of America has descended into chaos.
The only way we get to a Mad Max situation is if a group of jihadis detonates a few nukes in several American cities. That would simply unleash pure chaos upon the survivors, and the dislocations in the economy would be catastrophic, even with the government trying to impose martial law. And if America goes, the rest of the global economy goes with it.
A purely economic meltdown won’t have this effect. Sure, from a materialistic perspective, our lives will get a lot shittier, especially over the short-to-mid run, but life goes on, as when Argentina defaulted on its debt not that long ago.
FerFAL, the guy who has actually walked the walk as opposed to simply talking the talk:
http://ferfal.blogspot.com/2008/10/thoughts-on-urban-survival-2005.html
I know that nobody here is going to agree with me on this, but the reason gold is shooting up in price is due to fears of deflation not inflation. Gold is a safe haven currency and people and governments are hoarding gold for the same reason they are hoarding cash, because they expect the economy to go to shit.
If gold were rising due to hyperinflation fears you would also see bond yields rising and TIPS spreads reflecting inflation not deflation expectations.
There was an amusing exchange on twitter today between Nouriel Roubini and the goldbugs at Zero Hedge.
Precious metals are a store of value.
They are useless if you are unable to liberate that value by selling them to someone, which would be nearly impossible in an economic collapse situation.
If it has no utility value, why bother with it?
Ten year bonds are now yielding 2.08% and five year bonds yielding 0.87%. Do you think that implies high inflation or low inflation?
“They are useless if you are unable to liberate that value by selling them to someone, which would be nearly impossible in an economic collapse situation.”
The concept of economic collapse is a bit dramatic here. Even when the Roman Empire collapsed there was enough economic activity for gold to retain its value. Too many people are confusing an economic collapse with a zombie attack.
Lol! Yup, people have been saying gold was going to collapse since it was at $500. It’s worthless, it’s barbaric…
You don’t actually buy gold to “trade.” You buy gold as a vehicle to “get you through to the other side.” You buy silver to trade.
You are correct that, in the event of an economic collapse, gold and silver won’t do you much good – for the first while. In historical events where this happened, neither did you much good for the first while. BUT, transactions DO re-instate themselves. Yes, guns and butter and matches will be valuable, but the direct barter system generally only lasts for about a month or two in an economic collapse until the black market asserts itself – then it is silver that becomes the medium of exchange. The reason you buy gold, is so that if you have $250,000 today, you store your gold for five or ten years until the shit is over and some form of fiat has re-established itself, then you trade your gold back into what ever fiat arises in the future, and have the equivalent purchasing power. (In Weimar Germany, when people couldn’t get their hands on gold, they bought pianos – sometimes seven or eight of them, and later sold them used). But, silver is generally what has been used historically when the shit hits the fan – after a semi-civilization re-asserts itself, usually after about a month or two of chaos. Anyone who thinks humans will stay at basic bartering level is just a fool. A medium of exchange will reassert itself, and every single time so far it has been silver – and then later, your gold reserves will preserve your wealth once the shit has passed.
Lol! I don’t want to be another one of those guys who says he’s been buying gold (and silver) since before it was $600, but… it’s now tripled in price, (although I’ve been layering in since then) while fiat still hasn’t 1/3′rded its purchasing power in the past five years. So… keep up the good financial advice you’ve been dishing out.
Agree with the people supporting gold and silver.
The idea of worthless gold and silver after an economic/political collapse is silly.
Sure, in the mids of a riot a gun will be valued much more than a kg of gold, but you will not be inside Mad Max or The Survivors for long.
Unless the human population of the nation is nearly exterminated in a very short time (like hours/days) the market (the free exchange of goods and services) will not stop. There could be localized places without a law, but generally communities will reorganize spontaneously. Why? Because the need of organize labor and specialize it.
Do you think the civilization will go back 3.000 years, like it was at the time of Moses? Or more, like at the time of Abraham? Gold and silver were used at the time, if you look at the Bible. And they were shepherds, peasants and hunters no much better than cavemen.
I thought the point of buying PM was that they protect you during currency reform. I don’t think the idea is that you spend them, but that you use them to store your excess wealth during a limited period of hyperinflation, and can then exchange them for the new currency.
I have a bit, but not much. Doesn’t seem much point to it. I spent most of the money making the house more energy-efficient and moving off the grid.
I have written about the stupidity of holding PMs when SHTF before. However, right BEFORE SHTF, one can expect PM prices to rise dramatically, and when that happens, PMs should be unloaded and exchanged for necessities. That’s why I still hold a small amount of physical PMs.
@Alte
PM are good to protect your purchase power from inflations of fiat money, artificial low interest rate (FED, ECB, JCB) and economic depression and recession likes during long terms (2.000-today and tomorrow). It is obviously useful to have them during hyperinflation.
Essentially gold is sound money keeping its purchase power.
You sell your gold (or silver) only to invest in something that will return you more purchasing power in the future or to consume.
Your investments to make your house energy efficient are a good example of a sound investment. If you put 1000$ in improving your home/car/whatever and it return a saving of 300$/year it is a profitable investment. Better than the same quantity of gold in the long run.
@Dali
This make more sense.
WHEN SHTF Gold and Silver are not useful without the means to protect them and yourself. But before and after they will be very useful.
If the SHTF in some way not catastrophic they will keep their usefulness.
If SHTF in a Mad Max, Nuclear Holocaust (total nuclear war between all nuclear power), alien invasion (like ID4), then weapons and other stuff will be useful for people able to use them.
It all depend on how you define SHTF. I would suggest people make a list of possible scenarios of SHTF and refer to them when they give suggestion.
If the SHTF and you are in Alaska wildernesses things will evolve differently than if you are in South Los Angeles.
He who has the strongest tribe and biggest guns, wins.
Agree with you Rob.
And I don’t think of a huge Mad Max rioting scenario , on a massive enough scale to concern daily life.
I do believe there will be a massive transfer of wealth from paper holders to metal holders. For the most parts everything will look the same, just that the wealth has switched to other people.
Bond yields and their associated interest rates have lately been affected by two factors . One, is the algo and black box funds , and conditioning on the part of investors; to run to bonds as “safety” when the stock market starts crashing.
Two is the utilization of Interest Rate Swaps Derivatives to drive down rates artificially. It’s a monetary slight-of-hand the few observe.
40 years is a long life for a fiat currency. From the minute they are created they are born to die under their own inherent flaws.
{ 1 trackback }