This page has been archived and commenting is disabled.
Rethinking Money As The Greater Depression Deepens
Submitted by Doug Casey via InternationalMan.com,
We talk a lot in these pages about what to do with one’s money, but I question whether most subscribers (forget about the public at large) have an adequate grasp of the basics. Without it, much of what we say may seem capricious or outlandish, crazy ideas readers tolerate only because we’ve been so right about the big trends. But the basics in speculating and investing are like the basics in martial arts: Just remembering them isn't enough; they need to be second nature. That means reviewing and practicing over and over.
It's not an accident that we usually make good investment calls; the selections arise from a constant awareness of the basics. So I want to briefly review those fundamentals. Let’s start with gold. We’re very gold-oriented around here.
You undoubtedly have a good position in gold. Many of your friends are aware that you’re a gold bug, and more than a few of them question your wisdom. Are you able to give them a succinct and cogent explanation not just for why gold is cyclically a good speculation, but why it’s money? I’ll wager the answer in many cases is, “No.”
I say that because when I give a speech, I often offer a prize to the audience member who can tell me the five classical reasons gold is the best money. Quickly now; what are they? Can’t recall them? Read on, and this time, burn them into your memory.
Money
If you can’t define a word precisely, clearly, and quickly, that's proof you don’t understand what you’re talking about as well as you might. Here, we talk a lot about money, so it only makes sense to know the subject completely. So, what is money? The proper definition of money is: Something that functions as 1) a medium of exchange and 2) a store of value.
Government fiat currencies can, and currently do, function as money. But they are far from ideal. What, then, are the characteristics of a good money? Aristotle listed them in the 4th century BCE. A good money must be all of the following:
- Durable: A good money shouldn’t fall apart in your pocket nor evaporate when you aren’t looking. It should be indestructible. This is why we don’t use fruit for money.
- Divisible: A good money needs to be convertible into larger and smaller pieces without losing its value, to fit a transaction of any size. This is why we don’t use things like porcelain for money; half a Ming vase isn’t worth much.
- Consistent: A good money is something that always looks the same, so that it's easy to recognize, each piece identical to the next. This is why we don’t use things like oil paintings for money; each painting, even by the same artist, of the same size and composed of the same materials, is unique.
- Convenient: A good money packs a lot of value into a small package and is highly portable. This is why we don’t use water for money, as essential as it is. Just imagine how much you’d have to deliver to pay for a new house, not to mention all the problems you’d have with the escrow.
- Intrinsically valuable: A good money is something many people want or can use. This is critical to money functioning as a means of exchange; even if I'm not a jeweler, I know that someone, somewhere wants gold and will take it in exchange for something else of value to me. This is why we don’t, or shouldn’t, use things like scraps of paper for money, no matter how impressive the inscriptions upon them might be.
Gold is uniquely well qualified for use as money. No other substance meets those five characteristics so well. Gold’s main use, contrary to the belief of some, isn't in jewelry or dentistry, although those uses are important. Its main use has almost always been as money. But gold's ancillary uses are growing in importance, because, given its physical characteristics, it’s a high-tech metal. Of the 92 naturally occurring elements, it’s the most resistant to chemical reaction, the most ductile, and the most malleable of all the elements. It's also highly reflective, and an exceptional conductor of both heat and electricity.
There are lots of other advantages to gold as money. It’s by far the most private kind of money; gold coins, unlike paper currency, don't even carry serial numbers. That makes it truly untraceable. At current prices, it's more portable than cash, even in the form of $100 bills. It doesn’t retain traces of drugs, as does currency, which makes it less liable to arbitrary confiscation. Although efforts have been made to counterfeit gold bars, with tungsten filler and such, it’s much easier to authenticate than currency.
And it’s becoming increasingly apparent to all the world that paper currencies are nothing but floating abstractions; they will not hold value. Paradoxically, gold is now far more useful as money than it was at $35, and becoming more useful than $100 bills. That will be even truer as it goes to $5,000 (my current guess) in terms of today’s dollars.
Until quite recently, 90% of the world’s people were either flat-out prohibited from owning gold (Russia, China and the rest of the ex-communist world) or simply too poor to consider it (most Indians and other residents of the Third World). But these people are now allowed to own gold and have a fast-increasing ability to buy it. And they’re rapidly doing so. Their cultures have long histories with the metal and recent histories of living in a police state; they understand the value of real money. Although common people are now the biggest gold buyers, many governments and central banks are accumulating it as well.
I expect that gold will soon become the preferred medium of exchange for many. Early adopters will include dealers in drugs, armaments, and other prescribed merchandise; these folks are very security conscious. They will be joined by all manner of people who just want to do business below government radar. And in the years to come, paper currency is gradually going to be eliminated by governments in favor of debit cards, credit cards, and other media of electronic transfer. Governments prefer these things, for obvious reasons; they make anything you buy or sell a matter of permanent record. People, therefore, are going to need a private way to trade when paper cash is unavailable.
It’s not just that cash will be harder to come by and harder to use. People won’t want to hold it as inflation gets serious; as U.S. dollars are increasingly viewed as hot potatoes, people around the world will gradually go to gold. In 100 or so countries, the dollar is already the de facto currency for large purchases and long-term saving. What will people in these countries do as the dollar starts losing value rapidly? They won’t go back to their untrustworthy local currencies; their only reasonable alternative is gold. All these things will add to demand for the metal. This is good news for those who own gold in size now.
The downside, of course, is that these same things will draw more attention to gold from the state, which doesn’t like to see competition to its currency. Will they, therefore, attempt to outlaw gold again? Or, more likely, regulate its use; perhaps by requiring all gold owners to register it and/or store it in approved facilities? Anything is possible.
Right now, you can still move coins across most borders with relatively little risk or aggravation. There’s the $10,000 declaration rule, of course. But U.S. Eagles, for instance, have a $50 face value, and 200 of them are worth several hundred thousand dollars; although I don't suggest you carry anything like that with you for lots of reasons, even though it may be technically within the law. My guess is the rules will soon be modified to encompass market value and will be more strictly enforced. Already you can find jump-suited imperial troopers on the jetways of many international flights, ready to interrogate you and search your carry-on luggage for violations.
You may be thinking to yourself, “I already know this stuff; I don’t need to hear it again.” That would be missing the point. Almost everybody, even gold bugs, has far too little gold to buy more. Most people have none at all. Pity the poor fools. Gold is going to be reinstituted as money within our lifetimes, simply out of necessity. But that can only happen at higher prices, since only about six billion ounces exist above ground in the entire world.
Here’s the bottom line: Forget those ridiculous nostrums about having 5% of your portfolio in physical gold, for insurance. I’d say, have a very significant portion of your net worth in gold. And if you can manage it, keep most of it outside your home country. And get working on it as soon as you finish reading this.
Debt
Now that we’ve defined what money is, let me further define what money is not: Debt. All U.S. dollars, which is to say Federal Reserve Notes, are debt. They are neither redeemable for anything by their issuer, nor is there a limit on how many can be created. They represent only a vague claim against the “good faith and credit” of the United States government, which is to say the government's ability to extract taxes from its subjects. But Uncle Sam has shown himself to be remarkably lacking in good faith and is currently embarked on a course to destroy his credit.
Remember that the dollar is literally an “IOU nothing.” It’s true that your grocer and your barber have to accept the dollar because of “legal tender” laws, and because they currently wouldn’t know what else to take in payment. But that’s not true of foreigners, who own something like $10 trillion; they’re starting to look at them more and more as “trading sardines.”
That’s a simple fact, and it has economic and investment implications we’ve written about extensively. Other currencies are no better; most are worse, and many of them are backed largely by dollars. Most countries’ currencies have only very little value outside of their issuer’s borders. Be glad you don’t have too many Zambian kwacha or Burmese kyat…
Governments, however, are not the only ones who think that debt is money. It seems that many people who get a bunch of credit cards, enabling them to spend beyond their means, imagine that they have money. And they also think that owning the debt of others, like government bonds, means they have money. A bank deposit isn’t really cash; it’s a debt of the bank. There are several trillion dollars in money market funds; 100% of that money is invested in the short-term debt of banks, corporations and governments. I would be very leery of these things. Debt is not always repaid. Money, which is to say gold, simply “is.” That distinction is lost on almost everyone. Don’t be among them.
Here, I want to emphasize something else you certainly know but may not have acted on. You not only want to own gold, you want to “short” the dollar. But trying to trade currencies and interest rate futures is not the way to do it; that approach is risky and entirely too focused on the short term.
Here’s the smartest thing you can do with debt: Take out the largest, longest-term, fixed-rate mortgage you can on your home, especially with rates near all-time lows. You’ll win as the dollar is destroyed, and you’ll win as interest rates eventually go to the moon. And you’ll win as the asset you place the proceeds in appreciates.
This last part is critical. Borrowing $500,000 and then frittering it away will only leave you renting in a trailer park. Take the money and buy gold. Or, perhaps, just leave it in secure short-term instruments that will earn the high interest rates that are always the companion of high inflation. That money also will be safest in a foreign jurisdiction, but if you keep it in the U.S., consider keeping it in an IRA or other tax-sheltered vehicle.
Yes, I know it’s a comfort living in a debt-free home. But even if it appears debt-free, your ownership is no more than an ambiguity. Try not paying the property taxes, and you’ll find out who really owns it. The bottom line is that, in a few years, as interest rates and inflation go up, you’ll see that mortgage as a gift.
This relates to the issue of “cash” in dollars. There’s something to be said for being very liquid today and holding dollars, even though the dollars are a ticking bomb. But that’s simply because almost everything else in the world is overpriced.
That sounds paradoxical, or perhaps even metaphysically impossible. How can “everything” be overpriced? It’s happening because trillions of currency units have been created all over the world in the last few years, and other asset bubbles are in process of inflation. People are holding dollars only because they’re liquid and they see no bargains elsewhere.
Large, successful corporations, like Intel, Apple, Microsoft, and Exxon, each has scores of billions of dollars. The cash holdings of U.S. corporations are in the trillions. When the dollar starts losing value rapidly, the people running those corporations will panic and look for a place to hide from inflation. Many will buy their own stock, try to take over other companies, or buy raw materials for their own business. Others will just be deer in the headlights. (I don’t want to get into a discussion of where the stock market is going; there are titanic forces pulling it down as well as pushing it up. That’s a subject for a future article.)
Let me reemphasize that the Greater Depression is still in its early stages. The low interest rates and relatively low inflation rates we’ve had recently aren’t going to last. They will soon be replaced by wildly fluctuating markets and rapidly depreciating currencies. We could have a catastrophic deflation, where trillions of currency units are wiped out. Or we could have a hyperinflation, as governments create trillions more of them. Or both phenomena in sequence.
But, as bad as they are, those are just financial phenomena; what will be much, much more serious are things looming on the political, economic, social, and military fronts of the Greater Depression. These things are why I suggest you own more gold, even though it runs counter to my instincts as a bottom fisher to buy something that’s no longer cheap.
The bottom line is that you want to get out of the dollar before everyone else does. Now is an excellent time to short the dollar with a long-term, fixed-rate mortgage. And put the proceeds in gold.
* * *
Editor’s Note: Most people have no idea what really happens when a currency collapses, let alone how to prepare…
Owning gold is essential.
But there’s more to do to make sure your wealth doesn’t get wiped out in the coming financial tidal wave.
How will you protect your savings in the event of a currency crisis?
This video we just released will show you exactly how. Click here to watch it now.
»
- 606 reads
- Printer-friendly version
- Send to friend
- advertisements -
Lemme see ... rethinking money .... yeah .... I think I could use gobs and gobs, oodles and oodles more.
"Gold is the money of kings, silver is the money of gentlemen, barter is the money of peasants, and debt is the money of slaves!" - Norm Franz
FRNs and all debt based currencies force you into a form of slavery!
A coin with no value is slavery debt or not. You are still trading you fruits for a variable. The real value without force is what matters.
The only way I see society getting there is the stall and a right turn into Barter Town.
Barter only works if both parties have goods or services that the other party desires. For example, if you have eggs that I want. But I am a bee keeper and you don't want any honey. That's where money comes into play. I could give you money, so that we can make an exchange and you could store your wealth for a later transaction and obtain something that you actually want/need.
Of course, a major characteristic of money is it to be a store of value.
Thats not really true. A general trading store can fill that gap extreamly well. Both the Bee keeper and the egg folks will need lots of other things from lots of other folks. So thats a kind of hollow argument. The need for trade is not whats busted. Its the way trade is done with a 0 value coin is thats messed up.
A general store is just a middle man. And that would only work if you produce a good. What if I were trying to exchange a service that the general store owner did not want?
Silver has had value going back to the book of Genesis. It will be valuable long after our great grandkids pass.
Metals will still play a roll in a barter system simply because they have a real value. They are another form of barter. The top of the barter value stack.
I dont see what the beef is with the values being connected between metals and other valuables. Golds value vs labors value should be teathered by any and all means. Using metals only is a trap I would prefer to avoid.
Yes, I'm all for valueing metals with what it can buy. I'm all for competing currencies. If the two parties agree upon the terms thats all that matters.
I know I'd prefer to get paid in gold and silver.
Agreed. It comes down to free choice. The force thing tends to turn out badly every time for honest folks.
Beyond the aforementioned qualities of money, money must also be politically neutral and cannot be blocked as teh SWIFT/Dollar system can. This is only part of teh reason that Bitcoin will conquer teh world.
Says Casey, but then predicates the entire article and all of his advice on exactly the opposite. What a dick.
there will be no deflation. deflation equals system error.
noone in my country has or wants gold. i dobt care. why? because in other countries people and governments do.
if noone wants my local currency i know gor certain people in other countries still will trade their good for gold.
how much goods they will give me for 1 oz gold or silver is a different story. but im quite certain it will never reach 0 value.
gold has no third party risk, so if your a little worried your government has spent a little beyond their means, it might be a good idea to own some solid metal rock money. Money that you hold in your hand along with some cash, so when the bank doors close and they tell you you cant have your money, they "need" it, you are prepared.
The US Dollar carry trade has to unwind before the US Dollar can crash. That is a US$9 Trillion short that overhangs the market. The US Dollar will strengthen chronically as that gets unwound. The banks are going to need your money when that is happening so some cash under the mattress is going to be a most valuable thing to have.
Gold will be worth having for the reconstruction that comes after the paper money is no longer worth anything. Use some of the paper money under the mattress to buy a surpluss of toilet paper while the banks are closed. That will be the black market number 1 item judging by the Zimbabwe experience.
Ding! Ding! Ding! We have a winner! You nailed it Jafo!
I am amazed at how few ZHers understand this simple concept:
When the next crisis comes, credit growth will slow or possibly even cease. No credit growth means substantially-reduced spending. Cascading defaults will render most debt unpayable and likely also unserviceable. There will be a scramble for 'currency' to pay debts and buy necessities (I call this the "Hunt for Liquidity"). Asset values will collapse in a deflationary spiral. Since credit will be unavailable to the average citizen (since they hold more debt than assets, and actually have a negative net worth) cash will be King and in VERY short supply.
Of course, the hyper-inflation will only come later as the fed scrambles to bury the economy in an ocean of liquidity. But, until the 'final solution' people holding FRN's will be in the drivers seat, and those holding Gold will be hedged against the ultimate collapse of the world's fiat currencies...
Who needs toilet paper...
A bucket of water and a sponge on a stick worked for the Romans
A service that is not wanted by anyone? Find another line of work? We wont be needing economists or theater arts majors much.
What about if I am a car mechanic? How would your general store utopia work?
I couldn't fix Fred's car, becuase I didn't want his milk. There's now way for me to exchange this service with Fred without using money (which is a medium of exchange).
Fred's wife is hot and she's willing to screw you til the cows come home.
Will you fix his carburetor now?
As a fix shit guy the local wrench turners will be taking all manner of barter goods and services if they are worth having. Why not? And just guessing Fred might get a better deal from you for some Ribeye steaks or some cheese. Just saying food bartering wont be very hard. Food for labor works both ways well.
A 0 value coin is ok. Having a single entity control the quantity of the coin is not ok.
That general trading store would have to stock every good made anywhere by anyone including every service provided anywhere by anyone to be as effective as money is at identifying and enabling value-creating exchanges. Money is that general trading store. In distributed form.
Rubbish. Any high turnover item would work. Rice,diesel fuel, cheese,booze, wood, tires so long as it has a real marketable value.
exactly gold/silver is the commodity that acts as the place holder or variable that makes trade work. What it represents, hard evidence of work performed, is a very important part of the equation. Very simple, but very reliable and private form of trade. Freedom.
"....... Take out the largest, longest-term, fixed-rate mortgage you can on your home, especially with rates near all-time lows. You’ll win as the dollar is destroyed, and you’ll win as interest rates eventually go to the moon. And you’ll win as the asset you place the proceeds in appreciates"
Sorry Doug... If the interest rates go to the moon, the asset will not necessarily go to the moon as very few will be able to get a mortgage at these rates especially if the hyperinflation destroys purchasing power.
rates even close to the treetops will result in system error so dont worry about that. however they cold raise rates 1-2% which certainly would stop price expansion
Casey is right, as usual. I thought about borrowing against the compound and buying silver at 9 FeRNs an ounce in 2008, but knew the wife would freak out. Had I done it and sold at f50, I would have an extra million FeRNs right now. Paying off the loan with inflated worth-less FeRNs would increase my profit. It seems like a good time to do it right now.
I take this to mean that, with fixed rates, your expense remains the same, meanwhile inflation doubles you salary every year, so no worries.
This is basically what happened in the 70's, crazy inflation made crazy payrise. (UK anyway)
If you converrt your mortgage money into gold, you effectively negate inflation entirely whilst your mortgage goes to nothing.
So how much has your salary increased over the last 10 yrs with double digit yearly reallife inflation?
Sorry, but it just doesn't work like that in the new normal.
Our current state of money was brought into its current catastrophic condition by those who created the FED. Who are they you ask? How the Ashkenazi Jews Conquered the West => http://wp.me/p4OZ4v-2mp
Sad. All those words about gold. Don't you think an intelligent being would understand the difference between an indestructible ounce of physical gold, and a bunch of paper promises to pay them an ounce of gold? The problem is that BOTH are called "money." And those who have never handled a piece of gold can hardly be blamed for NOT knowing the difference. That's what the financial sociopaths use in order to lie and steal from the 99%.
Dry humping BitDog's in 3-2-1...
Absolutely beautiful explanation of money. Very refreshing. Thank You!
Doug Casey "Many of your friends know you are a Gold Bug".
BULLSHIT.
The first rule of owning phyz PM's: KEEP YOUR MOUTH SHUT ABOUT YOUR GOLD AND SILVER.
Dougie is either a fan of paper gold and silver, or he is really that stupid. I'll let you decide...
Your damn skippy!
Gold will be useless when people are rationing food and stores of goods that people will need when the entire system implodes in upon itself like WTCs #1, #2, and building #7. As soon as you attempt to pay for anything with gold you will be mugged for your gold in your possession by some other starving poor SOB. And you can't eat gold or buy food with gold if all food is being rationed. Once the food distribution hubs break down it will be a matter of weeks before whole populations start to run out of food. Hoarders are far and few between in society, but once their hoarded loot is discovered it will be depleted immediately upon discovery by all the other starving emaciated ZOMBIES.
Buy gold, yeah right.
You must not move to the country where people grow and raise food.
Only ZOMBIES there as well.
Have fun feeding the zombies.
Yezzz, of course...because anyone using gold money wouldn't have the firearms to defend themselves against "zombie muggers" on the way to the "food distribution hubs" setup by the destuctors of skyscrapers even after having outlived the very same zombies by eating all of "their hoarded loot".
Is it even possible to garble this Keynesian-statist-collectivist world view being attempted here?
I don't think so ;-)
I did not say 'on the way to the "food distribution hubs", and that's where your gun toting imagination filled in and fabricated what you want to project, nmewn.
good luck with that, eh.
Oh, so the theft will happen AT the "food distribution hubs" cuz only food can be gotten AT "food distribution hubs" where das goobermint is in control.
So now we've established you live in the concrete jungle called a city and NEED a "food distribution hub" to survive.
You're gonna need a bigger window sill flower pot there buddy roh ;-)
Project much, nmewn?
If anyones "projecting" around here it's you.
So, the MASTER OF UNIVERSE doesn't live in a city?...lol.
Okay, I will admit that rural folks will be able to hold out with their guns n' ammo until they can't. And yes I live in a 900k city that will be fucked in the long run of possible events that will unfold. I plan on going fishing in Northern Ontario, or Quebec, when bug out time hits. My Bullwinkle killing fishing buddy has a hunting licence and all the hunting garb one would ever really want in case of emergency. I will survive on Moose burgers & fish until I can't anymore just like most in a rural location.
Princeton did an analysis of the best possible strategic locations to survive societal breakdown, and an economic collapse, and they determined that the Rocky Mountains was likely the best place to survive long term. You won't be in the Rocky Mountains when SHTF.
lol...well, it's nice that your buddy has a "hunting licence" because that will be absolutely critical when TSHTF...lmao!...and yes, you're correct, I won't be in the Rocky Mountains where Princeton did some analysis of where you or I should be.
I can guarantee that ;-)
I mentioned the hunting licence because we can't accumulate guns n' ammo in CANADA unless one has a hunting licence. In the USA I think you guys can still buy guns at hunting shows, and WalMart, without a licence, correct? If it were not for the licence I would buy a turkey n' duck 12 gage just in case. I have to pay something like $400 plus for a hunting licence course, and the paperwork to get the licence at the ministry. If I wait till SHTF I can borrow from my fishing buddy instead and I won't have to bother with the licence.
kids.. real men have it all. guns tools foods golds silvers platinums cars that can be started without computers houses that can be heated without electeicity water that can be pumped by hand... and an axe and a big tit woman that he can fuck when the porn shuts down. oh i forgot the tractor and 10000l handpumpable diesel. good night and good luck when the shtf
No offense... $400 CDN for the buy gun pass?
Sounds cheap if your in the woods with no food... in bear country.
No offense... if you have ever been in a life threatening situation... people change. Even buddies.
If you have seen it, you would purchase with singularity in mind. Dependence upon others reliability,... hhhmmmm let me thinks abouts that.
No thanks. Good luck.
According to the last census, West Virginia has a total population of around 1.8 million and most of that is located in a few population centers. It was the only state to lose population since the previous census. It has vast wilderness areas with reasonable winters, abundant game, and great water resources.There was a reason why The Greenbrier was chosen as a bug-out location for the government.
To me, except for a portion of the NW, the Rockies are too dry, too cold, and too high.
A country boy can survive.
West Virginia waterways are polluted from chemicals and coal mining. Reasonable winters?????
Yes, no state is pristine. I will exclude most of the waterways in the southern coalfields and the central Kanawha Valley (chemicals), but the eastern mountains, which includes the Monongahela National Forest, have been virtually untouched since the great clearcut of the early 1900's.
As for what constitutes a "reasonable winter" is a subjective argument, but from all accounts the winters here are much milder than Colorado, Wyoming, and Montana Rocky Mountains.
"Mountaineers are always free."
BWAHAHAHA! F-ing Ivory Tower Idiots have obviously never lived in the Rockies. I can't wait to not live there again. The best place in the USSA to survive any sort of "collapse" is the Sonora Desert. An, umm, "educated" person could get fat living there. (Hint: ants are way more dangerous than scorpions, coyotes, mountain lions ... maybe even more dangerous than humans.)
Neither will I.
yes, just like gold has been useless for the last goodness knows thousands of years. what is happening now is just a pimple on an elephants backside. a mere 40 yearsout of 1000s. the shit thats happening now has happened so many times in so many countries. this will not end differently. buy gold.
This is the classic statist mindset that:
- Presumes most people can't anticipate problems and take all necessary precautions to adequately defend themselves against bad actors and aggressors in situations where a counterparty is unknown or there is risk.
- Presumes most people can't engage in peaceful trade for the benefits it provides without being restrained from just killing each other instead.
- Presumes most people left to their own devices would prefer mayhem, would opt for going around lunging at each other's throats as a chosen way of life.
Sigh.
Well said, herk.
Perhaps we will not need to join the zombies collecting food? Perhaps we will wait until there is no food for the zombies (using our own resources).
The point of being prepared, is so that you do not have to participate in the scramble, just sit it out.
Doug already covered that.
If you are able (and willing) to store all your net worth in water (and food and oil), go for it!
If you have a one ounce coin, and want to buy $10.73 worth of something, what do you do?
you grab some of your silver... duh... Chop off a piece? Thats exactly how its been done for thousands of years.. How do you think people got by all these years? This has been money forever. Man has always been resourceful enough to figure it out.. Until now? People are not very resourceful these days. I dont think one should put everything they have in gold, but I at least understand what it is.
Use a smaller denomination of metal like a 22 caliber piece.
Booze or some other high turnover product will fill that gap well.
Same thing you do now when paying for a $1 item with a $100 bill. You get back change in smaller gold coins and/or silver from the seller who customarily provides a moneychanging service for free to make it easier for you to buy his goods.
Denominational liquidity is a service. If traders can't meet each other's needs for some reason, moneychangers will arise to provide the service. If they can't, coin melters/recasters will arise to create more of smaller or larger denominations as required. The free market rises to solve all problems.
Realistically you'll probably be trading with folks you buy from on a recurring basis. You can ask them to please hold on to the small coins you give them and exchange them for big after they accumulate. You'll quickly build relationships. Before too long, they'll just extend you credit for small purchases so long as you pay with a lump payment at intervals. This is exactly how shopkeepers served their local customers back in the day.
Finally, you'll no doubt be producing some good and selling it yourself, no doubt receiving smaller coins in payment which you can use.
Thats what junk silver is for and 1,5,10 punces silver coins and bars are for. as well as 1/10, 1/4, 1/2 and 1 ounce gold coins. There will be eough loating around that you can buy anythig with he right combination
Keep most of it....OUTSIDE your home country? Excellent article otherwise. I just can't wrap my head around this one point.
Google Executive Order 6102, if you need to understand that advice.
What BS. After defining money then the conclusion is gold is the best money? Money is anything a counterparty will accept as a medium of exchange.
If you're lucky then gold is accepted. If not you're up shit creek
OMFG https://en.wikipedia.org/wiki/John_Exter
It is one of the most liquid forms of money as john exter an ex-member of the Federal Reserve says it forms the base of money.
Here, I have this purty sea shell and seeing as how the internet has been down for like...evah, yeaaawhhh!...meaning, I can't get to my Satoshi BitShit stored in "the cloud" somewhere or get to a Starbucks, would you trade me for some of that rice you have there?
Just don't leave it out in the sun or it will bleach out & lose all it's pretty color & luster ;-)
Bitcoin is not a cloud. It is the opposite of it. Learn your facts mister "I know fuckall but I'll say it anyway."
Leave the haters to hate. They were told about bitcoin on ZH when it was 2 bucks and are they are still bleating out the same old 'can't hold it in your hand' nonsense. Will be the same when it goes to 50k ,... B,B,B,But It's a Ponzi scheme Tulip bulb that was invented by the NSA and it will go down down when they switch off the intenet and the EMP's all go offf. Yawn.
If you feel comfortable with metal badges go get some and if you feel comfortable with eletron-coins go clicking - in the end it really doesnt matter so long as you do what you feel is best for you and your family
It appears he forgot "a store of value".
or did he?
Casey thinks gold is "no longer cheap"??? This old guy has been getting more and more squirrely... after he dumped Ed Steer, I sort of wrote him off... decent points, but I wonder what government is LESS likely to confiscate your gold (and everything else you own) than the liberal shitbags here in the USSA? Hong Kong? Not if the Neocons on both sides get their way and cause a war with Russia and/or China... I think Casey lives in South America somewhere... do you trust THOSE governments?? LOL!!
Moneeyyy moneyyy monehh!
Am I the only one who wants to fucking *scream* when yet another 'writer' bangs loudly on the doom porn drum, and then tells us the answers to all of our prayers is some type of PM? Don't get me wrong, I think gold and silver rock, and everyone should have some, but to keep spewing this nonsense that it will somehow save our lives in the coming financial/social/whatever apocalypse is just so incredibly tiresome any more. You cant eat them, you cant screw them and you cant use them to shoot a neighbor who tries to steal some of your carefully prepped shit. I think there is a veritable laundry list of things you should be thinking about besides PM's, if you really think that its going to hit the fan any time soon, and if these writers of these little agenda bumping gems had any conscience at all, THAT is what they would be talking about...
Its about the psychological war that is going on against gold. its fucking unreal. I agree with you, but when people run their mouths saying gold is not money we need to stop and educate the US. Its important because they dont have a clue. Its not the solution to all problems, but it can help in certain situations that seem more likely with each passing day.
I know that after I survive TSHTF episode and most of the non prepared are dead I will need to join in with the rest of the survivors and trade for goods. I know if they are not willing to take my eggs or wheat they maytake some gold....
Some say "you will have to defend yourself if they find out you have gold"... well gold is easier to conceal than the 2 chickens I traded some gold for. Won't I have to defend my chickens as well on the way home?
"you will have to defend yourself if they find out you have gold".
that's what, um, "less precious metals" are for... ;-)
(& given recent events today may be a good day to procure some and/or practice placing it in small circles at 25-50')
Well said Dog. PM's are only one part of the package. Food, firearms / ammo, and a good store of whiskey are just as important and also a good store of wealth. Hell, if they shrink the rolls anymore, buying pallets of toilet paper may end up being the best "investment" on the planet.,,,
Agree dog. A good way to figure out some of the prep work that needs to be done is to turn off the power, gas, and water for 48 hours. Amazing the things that will be found that need to be addressed.
According to folklore, silver bullets are highly effective against vampires and werewolves, so there's that...
Yep. One foot in this world, one foot in the next. Difficult balance. Some gold, some silver, some cash, some bitcoin even, some food stored, some lead, etc. I dont think it wise to go all in on any one thing.
I remember pulling up to a job in the 1990's when the Club was thing, putting it on my shitty car and a security guard telling me that at thief will cut right through it. I told him, next to the same car without a club it will do it's job.
There is a simlar one about running from bears. Anyway, we should not let the doom/disgust we receive from Zhedge (which I love) stop us from living.
Hedge accordingly.
PS. Casey strikes me as a dick.
Every time I read one of this guy's articles, I wonder what sort of shadow interest he has in various offshore gold repositories.
But he violates the logic of his own point when he states that gold is good as a hedge against state confiscation and then urges you to hold it in a way that positively requires you to entrust it to someone big and state licensed. Think you're going to waltz inside and deliver a claim check in return for a package wrapped in a brown paper bag?
Okay, so you put it in the hands of some under-the-radar guy. Think there's going to be anything other than a tattered old MF Global T-shirt in the office when you come to pick up your stash?
Alright, so you leave it in the hands of your dissolute beachcombing brother. Uh, never mind.
A situation that requires the return to gold as an everyday currency represents a complete collapse of the rule of law. Every bank will be closed or in governmental receivership. Every dealer's stock will have been seized as a last desperate measure by a government. Laws against taking assets out of the country wil be de rigeur, so you might manage to get your gold out of the vault but then find yoruself unable to leave except through nefarious methods which will risk not only your stash but your personal liberty and/or survival as well.
If you are truly convinced that you need to hold assets elsewhere, you need to be sitting on them personally and not letting some honest-seeming internet bloke handle it for you two continents away from where you live.
US dollars are not debt, because debt matures on a specific date and is redeemed in money. We have a "debt-based monetary system" only in the sense that fiat money encourages borrowing and discourages thrift.
That is inorrect. US dollars are loaned into existance , they all exist as debt on a balance sheet somewhere. Once you start compounding the Interest on this debt you see clearly it's actually a massive Ponzi. Negative rates , BTChezzz..
Not really, because it's a debt that the Fed will never attempt to collect. Dollars are gifted, not loaned, into existence. If banks decide to multiply this gift with fractional-reserve lending, the Fed stands ready to "loan" them more money if they get in trouble.
It doesn't matter what anyone thinks what money is. If you think it's the dollar bill in your pocket, so be it. If you think money is gold or silver, so be it. When the shit really hits the fan, we'll all soon find out what the hell real money is. Being the cautious type, I'm not putting all my eggs in one basket - that would be lunacy.
Exactly thats why as much as I hate Shitcoin, I broke down and bought some...and I dont fucking believe in it, but WTF do I know... So I got a little a very little and ill pick away with only money I would be OK losing. I will be very clear ShitCoin goes against my being but Im open so Im trying it. I had to where its open source, I dont think I would if it wasnt. Some of the companies you have to deal with are fucked and anonymous/private is something I would not call Bitcoin. Cash/ Gold/Silver / Shitcoin? (for good measure, Be careful!!! still has to prove itself) foreign currencies, food, guns, ammo, oatmeal, TP, stocks, bonds, miners, etc, etc. etc.
You are dead on. Diversify. Who the hell knows.
For those that understand the Bitcoin protocol it's obvious that bitcoin improves on gold for all of Aristotles measures except intrinsic value. This last quality will come with time as it's currently being built into the very fabric of the internet at all levels. Every Gold bug should have a small % of thier wealth stored as digital gold.
You and I could be standing side by side and if the network goes down we cannot trade with one another, gold or silver on the other hand and we can do some trading. This is one of the problems with bitcoin. A good thing about bitcoin is that it crosses borders without .govs involved.
I like the idea of a bitgold. but again a network is needed.
Gold has no intrinsic value. Gonna eat it? Build a house out it? Fight off an attacker with it?
Gold's only value is providing a store of wealth and trade facilitation service as physical money. And it does a superior job of that than the alternatives.
Bitcoin has no intrinsic value either. Its only value is providing a store of wealth and trade facilitation service as digital money. And it does a superior job of that than the alternatives.
Gold's only value is providing a store of wealth and trade facilitation service as physical money.
Your own words just proved that gold does indeed have intrinsic value: it is money.
No, gold serves as money. There is a difference.
Intrinsic - belonging to the essential nature of a thing : occurring as a natural part of something
Gold may, or may not be chosen by people to provide a money service. In past centuries people have chosen silver, salt, and big round stone wheels (no joke).
When they chose all those other things to serve as money, gold had no value outside of being a nifty, malleable, shiny rock. This demonstrates gold's value is not essential to its nature.
By contrast, food is intrinsically valuable to human life. You can't choose an alternative to food.
Now I don't think people will abandon gold to go back to using salt as money. In my opinion, everyone will almost certainly keep agreeing gold does a better job than any alternative serving as money. But I am cognizant that gold's status as money and thus value will continue to remain dependent on popular consensus.
Gold, silver, digital currencies, cash... I don't care the medium of exchange but if you are using credit cards and the banking services of the too big to fail/jail mega banks you are part of the problem not the solution. For every credit card transaction 2-5% of the cost goes into the pockets of a parasitic banker and now there are many other options. Watch Blythe Masters defend NIRP, bail-ins and the debasement of currencies while bashing bitcoin because she and her cronies will resort to using the force of government regualtions to try to kill it because they cannot control, steal or manipulate something that is distributed and math based...Enjoy...https://www.youtube.com/watch?v=ZiMl2b5O7Ho&feature=youtu.be&t=3h54m54s
Blythe Masters bashes Bitcoin when she mingles with their banking buddies, but I am damn sure she owns it, and quite a lot.
Owning it is a cheap hedge for her (and anyone else who wants to cover themseives in case it does become as ubiquitous as the Internet). See "barbell strateg"
My beanie babies will be better than gold when the shit goes down cuz you can cuddle and hug them to make yourself feel all warm and fuzzy and barter them to others for what you need so they can do the same.
I wish I'd bought Bean Bag Babies.
I stocked up on Giggling Elmos. Now I've got 500 damned Giggling Elmo dolls and their little batteries have leaked so the giggle thing doesn't work. The batttery juice ate through the fucking dolls' stuffing and burned big brown acid holes in their asses. Plus they stink like Hell.
My investments always turn out wrong. At least with Bean Bag Babies I could cut them open and plant the beans.
" But U.S. Eagles, for instance, have a $50 face value, and 200 of them are worth several hundred thousand dollars"
Unfortunately TPTB are already onto that one, and attempting to carry a few hundred gold coins - even 40 or 50 for that matter - will set off immediate red flags.
My neighbor brought me 5 boxes of Israeli 9mm yesterday. I traded him 4 boxes of 12ga birdshot and 9 rounds 12ga buckshot. We were both happy. A mini 'arms deal' took place. BARTER
Fiat money or Fiat dodge...both worthless. Beam me up Scotty!
People should rethink money. Today most people believe that the dollar is the only liquid asset they need to pay their bills. In actuality, people should be very nervous about depending on dollars as their number one liquid asset. I currently fear dollars. Why? Because of the debt situation. The US govt cannot pay its bills without borrowing money. This is not a good thing, and will eventually lead to a devaluation of the dollar. Let me elaborate.
If you cannot pay your monthly bills, and you have no savings or assets to sell, that means you have to use credit or else not pay your bills. This is the situation that the US govt finds itself. Thus, we continue to go deeper and deeper into debt. The average citizen thinks that a US bankruptcy is not possible and that we can always tax citizens and print money to get buy. This is a big fallacy. Govt's go bankrupt all the time. France did it like 5 times in one century.
So, if a default of some type is coming, the dollar is going to be negatively impacted. This is why gold and silver makes sense. They are insurance against a devaluation. Look at what happened recently to the currencies in Cyprus, Russia, Venezuela, and Argentina against gold? Those who held gold did fine.
For those who make the argument that you can't eat gold, consider the fact that gold and silver have held value for thousands of years. Is that really going to end anytime soon? If someone hands you an oz of gold, are you going to toss in the trash? Probably not now, and probably not 20 years from now.
Bankers create money from loans (debt).
This is true of private banks and central banks.
Lincoln and Kennedy wanted to change the system so the Government created money.
They were both assassinated.
Gold interferes with bankers craeting money, it ain't going to happen.
Bankers are a small percentage of the population, easy to exterminate...
They got Greece to capitulate.
Russia and China are buying gold. They want to be free of the dollar or at least hedge their bets.
How do the bankers assassinate Russia and China?
The bankers don't want to get rid of gold. They just want to own it all.
How many fiat currencies survive the test of time?
None
How many civilizations last the test of time?
None
The Dollar and our current civilization might go together.
All those monetarists and gold bugs forget that even value of Gold as currency is determined politically to the benefit of rulers while anybody else’s gain is just a side effect.
The very concept of money is political and related to the social system that ruling elites chose to run and it serves first of all, a purpose to extract labor and resources from society and environment in order to strengthen elite’s rule.
This exactly fits to what FED is doing, propping up abhorrent regimes in the US and elsewhere while disregarding any previously sanctified principles or rules or consequences for the population of their ruthless actions designed to destroy society, needs be i.e. fulfilling the purpose of money as understood by the ruling elite.
More on true meaning of money and its purpose can be found here:
https://contrarianopinion.wordpress.com/2015/04/14/plutus-and-the-myth-o...
No it isn't.
The UN, Fed, IRS, and World Bank want a cashless society.
One assumption that I notice amongst many in the comments section is that when this whole experiment goes to shit (which it EVENTUALLY will) is that we devolve immediately into a Mad Max / zombie apocalypse world.
While we could certainly find ourselves in a world somewhat like that (personally, I doubt so extreme) at some point, we will very likely not get there overnight.
The best thing you can do is be prepared. Have as much PM and bullets as you can afford and pick your points to scale out as the value rises. As things go to shit, PMs will go up.
You can sell some along the way and make MORE preparations according to the current circumstances.
Love your life. Enjoy your children. Buy some land...even a small plot (away from population center). Learn to raise goats and chickens. Grow a garden.
Be prepared....but be happy. The criminal fucks in charge could keep this charade going for longer than we think.
Tick tock...tick tock...
An estimate of how much ammo you'll need to "handle" hungry neighbours during SHTF situation.
https://www.youtube.com/watch?v=ygujCeaSzog
But this advice to take out a large loan at 5% interest to buy gold is high risk. We just saw 5 years of sustained low interest rates and falling gold. Timing is everything for this strategy. Enacting it too soon is murderous. Paying that 5% interest every year absent any gains will crush your wealth.
Ammo, seeds, chickens and long term stored foodstuffs, drinking alcohol, antibiotics, and medical and survival skills..... better cover than gold if it all goes to shit.
We are not in a Depression, we are not in a Depression, We are not in a Depression.................DAMN IT!!!!!
Time for a new point of view.
Money is defined here as being REQUIRED to have ALL functions. What if the functions were spilt?
What if fiat was used only as an easy medium of exchange?
What if gold was used only as a store of value?
This is the future of money. The Euro is already structured to function in this way.
Then it isn't money. It has to have all.
Correct me if I'm wrong, but under the current system of ZIRP there can be neither hyperinflation nor deflation.
For inflation there needs to be enough currency in circulation, plus a means to create it instantaeously and distribute it to wokers to keep up with prices (See Weimar). To have hyperinflation without a fungible means to adjust wages daily would invite massive default on debts as people would be paying (and most likely prepaying) for primary needs first: food, energy and medical before servicing their other bank based debts (CC's, car loans and mortgages). The result would be unsustainable defaults and drops in booked asset vaues.
For deflation, the banking system would have to stand by and watch all of their assets go under water, which they cannot allow and as we saw with the last housing crash they would keep assets afloat and on the books until the Fed could reinflate them somehow which I cannot see how that would work. The result would be unsustainable defaults.
Negative interest rates might work because too few people have savings accounts to complain. Still banks would lose deposits as people sought out cash, daily commodities or PM's. The gov't would have to get out ahead of this with banning cash, commodity hoarding and PM's.
So under the current scenario I understand why the Fed is simply doing nothing and acting like deer in the headlights.
If all you have is a hammer every problem becomes a nail until you run out of nails?
"Are you able to give them a succinct and cogent explanation not just for why gold is cyclically a good speculation, but why it’s money?"
not a direct answer to your question per se but here's reasons I give people for buying ag: yellen can't print it & blankfein can't steal it!
Superbly concise, sensible and compelling answer!
Great idea lets destroy the earth's eco system so we can all have the security that gold provides . Lets all aspire to have a pocket full of Gold a Mcmansion , Yacht , obesity problem , and more gadgets . Forget about Usury , conspicuous consumption , and corruption . Insanity =doing the same thing over and over and expecting different results re: Gold Standard .
http://www.smithsonianmag.com/people-places/the-devastating-costs-of-the...
In the electronic (not to mention the deflationary) age, gold has no little value other than jewlery, dentistry and components.
The modern day hedge is an empty penthouse in NYC, London, Monte Carlo, Hong Kong and Vancouver. Income producing assets spread across the more stable world capitals will protect your wealth.
The era of gold speculation is over.
Says Casey: We could have a catastrophic deflation, where trillions of currency units are wiped out.
WTF? Catastrophic deflation - yes. But wiping out currency makes no sense. Deflation wipes out debt and makes currency more valuable. Until this deflationary cycle runs its course, the dollar is to remain the safe haven of choice - only because all other currencies are worse. Even PM have been falling against the dollar like every other commodity.
That said. I accumulated a substantial amount of PM when it was below today's prices. The whole point of PM is to have an asset that stays under the taxman's radar and avoids counterparty risk. I treat it the same way I treat insurance, as a hedge against uncertainty. Only me and my kids know where it is.
I strongly doubt we'll ever see gold and silver recognized as money ever again. Be that it may, it will always be exchangeable for whatever is recognized as money.
Both gold and silver are accepted in trade today. See my post above for details. To be sure, it does take some time to find purveyors of all types of products who will directly accept gold or silver, but you can. This will become easier as time passes, and more people recognize the insane scam that fiat pieces of paper-debt-bits/notes are.
This article offers some very compelling reasons for owning gold. At least in the abstract. In reality, gold is an awful currency. Quick show of hands, who here has bought a loaf of bread from any store using gold?
Anyone?
No?
Has anyone here bought anything whatsoever from anyone using gold of any kind?
Anyone?
No?
That should tell you something. Gold is a useless currency and history has born out this fact. The Knight's Templar, after all, got rich by holding gold for travellers to the Holy Land. In exchange for their gold, the Knights issued the travellers PAPER PROMISSORY NOTES. Despite all the wonderful reasons for using gold as a currency, people chose to entrust it to others and carry paper promises instead. With all the gold the Knights Templar were holding, they engaged in FRACTIONAL RESERVE lending, which is a business practice of lending promissory notes WELL BEYOND the value of your actual gold holdings. The US was on a gold standard in 1971. In spite of this, they had issued paper currency well in excess of their actual gold reserves. This forced the abandonment of the gold standard when France attempted to convert all of its US bills into gold at one time. The lesson of history is clear. Gold is a terrible currency. It won't keep governments honest and people would rather carry paper.
There are also practical reasons for avoiding gold currency. One, it is ungodly heavy. You will need a forklift to carry any significant amount around with you. Two, people don't want it. Leaving aside the crack dealers who love gold chains, most people would rather have a candy bar than a silver bar, as Mark Dice has demonstrated in his numerous videos on the subject. Average folks on the street don't know the value of gold and don't want it. That belies all the claims of gold having "intrinsic" value. Three, the moment you flash your gold in a public setting, you will be clubbed over the head, robbed and dumped in a ditch. That makes gold a singularly bad currency.
Now all the gold bugs can flame me for citing facts and history and tell me I don't get it, but history will again demonstrate the uselessness of gold. If you value abstraction over reality, then gold is your ideal investment. Just try to ignore the fact that its value keeps falling.
If you want a SHTF currency, you would do much better to buy vintage tractors, heirloom seeds and tools for growing a garden. Just sayin'.
You are suffering from a severe case of normalcy bias. History shows that gold works just fine as a currency.
And if you think gold is "ungodly heavy" to be an effective currency, perhaps you should hit the gym. At the current exchange rate, you can buy a new car with less than 20 troy ounces of the yellow metal at the current exchange rate.
LOL!
It makes me laugh when people say gold is too heavy to carry around...I think, "How much fucking gold do you plan on needing for your day's purchases?"
How many people walk around with even 100 dollars on them? Not too many, but those who do would have to haul around an entire tenth of an ounce of yellow shiny...
Google Yap currency and then complain, little girly-men!
"Has anyone here bought anything whatsoever from anyone using gold of any kind?"
Ummm, I don't know if this counts, but I wear a charm bracelet, with numerous gold charms on it. I have often stopped by my 'gold guy' when I'm short of cash, and within minutes I pop a charm or two off, and get cash in my hand.
It's not a direct transaction, but consider this...You can drop me into virtually any country on the planet, and I will find someone who will gladly exchange some of whatever currency they are using for a couple of my charms. Is your fiat as flexible? Look at how they are trying to control your money, in digital form they have total control. You can't open foreign accounts without going through the hoops...but I can wear my bracelet across any borders without having to get permission, or fill out forms.
Hey, it has worked for me for awhile now, unlike the stock market and all the other "smart" investments.
Yes. I ran an experiment several years ago to find out what percentage of my ongoing expenses I could pay for with gold or silver. My only rule was, I would not pay more for anything just to transact with gold or silver.
At first it was slow going. But with persistence I found place that would accept gold or silver for over 96% of everything (including rent, food, gasoline, etc). So yes, it does take some effort to find individuals or stores willing to accept gold or silver, but you can.
That experiment stopped in 2011 when I converted 90% of my savings (all of which was gold or silver) into a self-sufficient place to live in the southern hemisphere. I have to believe even more individuals, companies and stores are willing to accept gold and silver today. And as the world economy spirals down the tubes, every the terms of most sellers will become more flexible as they become more desperate to make sales.
PS: Also, on some occasions (the exceptions) I traded gold or silver for cash to buy things I couldn't find ways to buy with gold or silver. And most times I was able to get the retail price of the gold or silver bar/coin/round listed on the APMEX website... by showing them the item on the APMEX website. Some folks prefer to get their gold or silver this way, since no paper trail exists. Smart people.
PS: I would not trust the predators-that-be enough to try the "get a huge mortgage" approach. They'll likely multiply property tax by 10x and pass some insane "law" to make everyone pay back in some kind of approximately "inflation adjusted" manner.
Ann I just have to say it. You are way ahead of the curve. Thanks for taking the time to post.
Hi Ann, I admire you for your story.. But can you explain what you mean buy a "self sufficient place to live".
" Already you can find jump-suited imperial troopers on the jetways of many international flights, ready to interrogate you and search your carry-on luggage for violations."
And if you are daft enough to have put your gold in there, it's gone...It should be around your neck, on your wrists, fingers, ears...then after they finish rummaging through your dainties, you pick up your bag and proceed.
So if I take my 401K money and put it all in US Debt Mutual funds, I'm bascially screwing my self?
If so, where the hell do I put it?
Yeah, right. That is a huge bet that the dollar price of gold won't collapse in the near term - which it could if there is a massive global deflation. Gold could drop to the face value of an Eagle - $50. While the dollar price of Au will inevitably go much higher, it may not happen on your timescale - and you may not be able to pay that huge mortgage. You don't know the future better than anyone else. That is why a mix of investments that operate on different timescales is the wiser choice.