[quote=ao]So are you saying you’re opposed to increasing your wealth?[/quote]Well, I wasn’t saying that but I wouldn’t put it that way, anyway. However, it’s irrelevant (though I’m not interested in increasing my wealth) since Chris has said in that past that PMs are a means of maintaining wealth, not increasing it. Which is why I fail to see why he’s pushing it so much now, and touting the potentially fabulous financial gains to be made. In this respect, the site has become an investment advice site, thus watering down the notion that the next 20 years will not be a continuation of the last 20.Yes, I know all inflation rate numbers and all GDP numbers are garbage but since I don’t know what the real numbers are, the official numbers are all I have to go on. If I’m only losing a few percentage points a year, then I’m hardly going to cry about that, especially as the impact goes down each year as I spend my money on preparations.
Now, if deflation takes hold, you might not think me quite as crazy or as suicidal as you do.
The official numbers are lower than actual inflation, so double them and you’ll be close, at least here in CA. Our CD rates are about 1.2%, with stated inflation at about 3%. So CDs are a joke.
You seem to be operating under the assumption that gold/silver will either be near worthless, or difficult to use. However, I believe you’ve already admitted this view has no precedent, so you are COMPLETELY spit-balling by conjuring up a totally baseless scenario, then making preparations as though it were not only LIKELY, but a forgone conclusion. This is insane. Unless you are spending every dime on “preparations”, though I think your statements about CDs prove you are not. That money you placed in CDs has lost value, whereas had you spent it on gold, in any given 1 year period for the last 10, you would have at least neutralized the inflation losses.
If you are unconcerned about this, fine, but don’t drag others down with you. Some of us can’t afford to waste money. Plus, anyone who says they do not care about wasting money has no business commenting on a financial thread.
Here’s a few quotes you may or may not enjoy-
“An almost hysterical antagonism toward the gold standard is one issue which unites statists of all persuasions.”
“In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold.”
"This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard._
-Alan Greenspan
Again, if you have real information that might be adverse to owning gold, I’d be all ears, but so far there’s nothing of substance for that argument.
I certainly think it will be difficult to use, since most people won’t have it nor have equipment to test it. It may eventually have a more prominent place but that will take time.
So far, I haven’t seen any evidence that it will be available for wide use by those who hold it. It simple seems to be a belief but based on presumably some kind of coherent society holding together. Certainly, I wouldn’t want to hold large blocks of gold or silver and I can’t imaging somehow spending even an ounce coin, in 10 years.
But, as I’ve said, if people have extra cash available, by all means buy gold and silver - it’s no worse than anything else. Short term holding may even be of use.
Nope, no evidence. Just thousands of years of history spanning thriving civilizations, collapsing civilizations, war, revolution, societal upheaval, plague, famine, etc. of gold and silver being used as money.
[quote=ao] Nope, no evidence. Just thousands of years of history spanning thriving civilizations, collapsing civilizations, war, revolution, societal upheaval, plague, famine, etc. of gold and silver being used as money.[/quote]Let’s not be hasty; I think sofistek does have at least a tenable argument. We have to remember that we are now dealing with a population that holds very little gold. At this unique moment in history, the majority of citizens have never held a gold coin in their hands.
Several months ago I had a very interesting conversation with user R.US, who experienced the economic collapse in Russia following the dissolution of the Soviet Union. In the USSR the ownership of gold was (surpising to me) not prohibited, and gold and silver coins could be bought easily in the shops.
In the months leading up to the collapse, the prices of gold and silver increased rapidly as the currency began to collapse. However, in the years after the collapse when paper money was worthless, gold was never used as a direct medium of exchange, even though it was plentiful. Instead vodka and packs of cigarettes were the universal currency.
According to Scott, people sold their gold coins at a coin shop in exchange for “money” (vodka and cigarettes):
How could this be? The reason was that after the collapse, enormous quantities of phony gold quickly appeared, and coins that contained a somewhat lesser purity of gold than they should have. The Russian people were not experienced in handling gold or silver coin, and did not feel comfortable taking gold coins from a stranger for fear of being cheated. So gold continued to be bought and sold only through the coin shops and bullion dealers.
But everybody was comfortable with vodka and cigarettes, so they sold their gold coins for money, and immediately purchased vodka and cigarettes. A side-effect was that the price of gold temporarily crashed as everybody tried to unload their gold. As scott put it:
Two years later, after the system stabilized, anybody still holding gold made a handsome profit. But those who had to sell their gold for goods during the two years of crisis suffered a heavy loss.
Given additional time, as people grew familiar with it, maybe gold could have penetrated into the Russian marketplace and become a medium of exchange instead of vodka and cigarettes. But as it happened the U.S. Dollar came to fill that role instead.
I am not saying that over decades and centuries gold isn’t a superior store of value. My point is this: the majority of US citizens – like the people of Russia – are unfamliar with gold and may not accept it until they become comfortable spotting fakes. There is at least a chance that – as in Russia – the familiarization process with gold may take years, during which time anybody attempting to sell would face steep losses.
So…a well-diversified portfolio consisting of gold, vodka, and cigarettes. Any suggestions on how to explain this to the wife?
Thanks, jrf29, for a recent example of why gold may be unlikely to be usable widely as a means of exchange. Unfortunately, it seems to be perceived wisdom that those holding gold would be insulated against a collapse in fiat money, but I don’t recall seeing actual examples of how this will happen or how long it will take for it to happen.
This discussion gets so tiresome. First of all, anyone who would keep ALL of their transactional wealth in PMs is an idiot. That’s self evident. Secondly, as has been said here, again and again ad nauseum on multiple threads, silver would be used for day-to-day exchanges and increasing wealth, gold would be used for storing and preserving wealth. Russia is very different from the U.S. Try using vodka and cigarettes as a medium of exchange in California when the time comes and see how far it gets you. Also, the use of vodka and cigarettes is dependent upon the social circles one frequented and especially, the type of business one transacted. There’s a big difference between an internet discussion with some relatively anonymous user and knowing someone who lived in, travelled around in, and did business in Russia during that time. This person did use gold to bribe favors for business transactions. He said It was largely small time, proletariat transactions that used booze and cigarettes. My guess is that one’s reliance (throughout history and throughout various societies) upon PMs would be somewhat dependent upon one’s net worth. Someone with a lower net worth would not have the luxury on sitting on their PMs while someone with a higher net worth would. You don’t hear of too many people in the ghetto loading up on gold and silver. You do hear of hedge fund managers doing so for their personal assets.
As noted above, day to day transactions in a USD collapse situation would probably be done in silver, particularly junk silver as everyone is familiar with the coins and would be less fearful of fakes. Also, the smaller denominations would be unlikely to be counterfeited, just as you never hear of problems with counterfeit $1 or $5 bills. I think the use of vodka and cigarettes in Russia may be more a reflection of Russians’ apparent penchant for self-destruction than an indication of enduring value. That doesn’t mean alcohol and tobacco won’t have value. After all, addictive drugs always have a market.
As was also noted, the Russian experience was a relatively brief transition period. I don’t think we’re talking on this site of short term events with eventual return to some form of normalcy. We are talking about permanent paradigm shift. The USD was good in Russia because it was a stable world reserve currency, the ultimate store of value at that point in history. That is clearly no longer true. In the absence of a stable fall-back reserve currency, we look about for another store of value. The default position, it seems to me, is a form of money with a long term history.
What oh what might that be? 
Doug
[quote=Doug]As noted above, day to day transactions in a USD collapse situation would probably be done in silver, particularly junk silver as everyone is familiar with the coins and would be less fearful of fakes. Also, the smaller denominations would be unlikely to be counterfeited, just as you never hear of problems with counterfeit $1 or $5 bills. I think the use of vodka and cigarettes in Russia may be more a reflection of Russians’ apparent penchant for self-destruction than an indication of enduring value. That doesn’t mean alcohol and tobacco won’t have value. After all, addictive drugs always have a market.
As was also noted, the Russian experience was a relatively brief transition period. I don’t think we’re talking on this site of short term events with eventual return to some form of normalcy. We are talking about permanent paradigm shift. The USD was good in Russia because it was a stable world reserve currency, the ultimate store of value at that point in history. That is clearly no longer true. In the absence of a stable fall-back reserve currency, we look about for another store of value. The default position, it seems to me, is a form of money with a long term history.
What oh what might that be?
Doug
[/quote]
Is it hot peppers?
ding, ding, ding, give that man a cupie doll!!
I support gold ownership but if you read Dmitri Orlov’s “Reinventing Collapse”, I’m not sure that gold was even mentioned (I read 1st ed in 2008). Functional items such as vodka, cigarettes, food, gasoline…that’s what ran the daily economy. Orlov was there and I trust his judgement. I wouldn’t be so quick to rule them out.
CS
Dogs,
It sounds like you have a serious glycoalkaloid addiction. There’s only one cure. Get rid of all your hot peppers. I’ll be glad to take them off your hands.
So own some gold and junk silver, learn to brew and distill, grow some tobacco along with your other veggies, and you’re all set…
Seriously though, food and gas make perfect sense, but vodka and cigarettes will only work in a society already addicted to them. Here in CA, cigarettes probably won’t get you too far, not sure about the alcohol. I think alcohol and other forms of distraction usually do well in hard times, no?
[quote=ao]Dogs,
It sounds like you have a serious glycoalkaloid addiction. There’s only one cure. Get rid of all your hot peppers. I’ll be glad to take them off your hands.
[/quote]
Live on the edge. More people should eat things from the solanacea family. Nightshade should be a part of everyone’s diet.
I’m not sure I’m addicted, but there is something to be said for a self inflicted capsaicin dose.
I’ll bet you didn’t know capsaicin is dissolved by milk fat or, ahem, alcohol, and not water???
Pass the habaneros and a 12 pack of Sam Adams Noble Pils or Sierra Nevada Glissade…it’s time for another double blind.
[quote=tictac1] Seriously though, food and gas make perfect sense, but vodka and cigarettes will only work in a society already addicted to them.[/quote] I agree. It may not even be possible to tell in advance what the most widely accepted media of exchange will be. But it is worth noting that whatever the medium of exchange is, it is always a luxury item (even a luxury food item), since the demand for necessities is fixed (you can only eat so much food), but the demand for luxury is unlimited. I’m going to come back to this in a second.
I’m not sure that the dynamic for silver coins would be that much different than gold. Even if we assume that certain silver coins are easily recognizable by the populace, there would still have to be a period of price discovery. How much is a silver dime really worth? The paper markets put a number on it today, but if silver were to be used as money, the true value would be much higher. But how much higher? This would take time for the market to sort out.
But setting that aside for the moment, to me the most interesting thing was the almost schizophrenic behavior of gold (and silver, and land, etc.) during the collapse in Russia. Their value temporarily collapsed as well, because as R.US said,
In other words, there was little demand for a luxury good among a population that didn’t have enough to eat. Like a man dying of thirst (or hunger) who will trade a million dollars for a glass of water (or plate of food).
So in Russia, if you sold your gold (or silver) during this two-year crisis period, you would have lost money.
Of course I agree with you, Doug. Long term.
After the crisis period ended, those who managed to hold onto their gold (or silver, or jewels) made out very handsomly. But those who had been forced to sell these assets during the two years of the crisis for essentials such as food, clothing, and fuel suffered heavy losses.
Gold (and silver, land, other commodities) might be superior stores of value over long periods of time, and they might be well suited as media of exchange. But my point is this: no matter how well suited (even perfectly suited) these metals are for use as money, I think Russia gives us some evidence that the transition period during a true crisis could last 2 or more years, and during such a time the value of gold and silver might be lower than one would hope as people scramble for basic necessities such as fuel, clothing and food.
My conclusion is only that holding gold, silver, and other valuable commodities is no substitute for ownership of productive assets that provide a direct source of essential products (productive farmland, woodlots, water, housing, etc.) That’s all I’m saying: that owning gold and silver alone is not enough.
Another issue with Russia…
Normally, hungry people migrate to where food is more plentiful. This by itself causes massive upheaval, but in the USSR, border crossers were shot on sight, according to my friends in Slovakia. I don’t know when this practice officially stopped, but that makes a pretty big difference to your survival tactics. You are trapped within a collapsing empire, regardless of your ability to otherwise vacate.
Sounds like owning arable land and knowing how to work it is worth quite a bit… Being an apartment dweller in a big city in this condition would be a really bad choice, if it is a choice.
For Dogs- “but there is something to be said for a self inflicted capsaicin dose.”
Ever tried the aerosol version?
Your points were well made and valid except that Russia was, is, and always will be, fundamentally different from the US. More importantly though, as I’ve previously stated to Sofistek (and will probably have to repeat), I can’t recall a single post ever made on CM where the poster stated explicitly or implicitly that gold and silver alone was enough. Conversely, to do without PMs completely when one has a significant level of assets strikes me as foolishness. Furthermore, productive assets are most definitely non-portable and for the most part, illiquid, a distinct liability in certain scenarios.
[quote=ao]s I’ve previously stated to Sofistek (and will probably have to repeat), I can’t recall a single post ever made on CM where the poster stated explicitly or implicitly that gold and silver alone was enough. Conversely, to do without PMs completely when one has a significant level of assets strikes me as foolishness. Furthermore, productive assets are most definitely non-portable and for the most part, illiquid, a distinct liability in certain scenarios.[/quote]Well, we agree on one thing, gold and silver is not enough.
Some good recent discussion here. Notwithstanding ao’s belief that there is plenty of evidence that gold and silver will have widespread use as a means of exchange, post collapse, I haven’t actually seen any evidence, though I accept that there is evidence that PMs have had purchasing power at various times throughout civilised history. I think that’s possible again, though I doubt it will happen quickly once widespread collapse. The occurs. The Russia example is good but not perfect, as there was a coherent global society in which Russia could recover. That may not be the case as the dominoes fall.
I still think there is a moral element to this. It seems that some people here look to PMs as a means of retaining (or just having) wealth, post collapse. That is, they want to feel that they still have wealth, as measured by something akin to possessions or money, that is greater than most others. If this view prevails, I don’t think there is any chance that we’ll learn anything from history and a new unequal society will emerge, with haves and have-nots, and power will be bought. No doubt others, including ao, will laugh at that suggestion, as a way of avoiding thinking about it. Given some of the comments here, I’m not too hopeful that humans will start using their much vaunted intelligence once the dust settles on our collapsed civilisation.
But I’m keeping an eye on the debt ceiling situation. I might dip into silver and gold, as a short term measure, if it looks like the US dollar will collapse.