Jager06,
I don’t have time to check out the details but if this is the case I think it is (?Las Vegas area?), the IRS put this guy through hell. You DO NOT want this type of trouble, believe me. Your legal fees will be devastating and the psychological stress will make you old before your time and put an incredible strain on your marriage and family life. I looked into it at one time and not being a masochist, decided against it.
No matter how much physical gold you have, you still have to pay most of your bills in FRNs. Apples and oranges.
Chris, thank-you for your excellent preparation series. It is extremely helpful!
I’ve seen the concept before…it would probably make a small contribution, but considering it would only work 5-8 hours/day on sunny days, my guess is the payback on 2500 bucks is a lot farther out than the 5-7 years they quote. Also, this is an excellent design for a homebuilt, low tech project. The fan they use ( 31watts) has to be quite small ( not much bigger than the fan in a desktop computer ), and one could even use a 12v DC version poweredby a small PV panel on the unit. Looks to me like these could be home made for 500 bucks, or less, if you scrounge materials. Also, by home building it, you could ‘customize’ it to fit your window opening exactly, and such. ( you will need to have double hung windows for these )
Quite true…and you should keep enough FRNs for that purpose.
My point was it does very little good to park a LARGE amount of money in a savings account that pays 1% ( or less ) and be peddling backwards ( when you consider even current, “official” inflation + taxes you have to pay on your “gain” ) and watch gold 30% a year like it has for the last several, and potentially WAY more than that down the road.
Jager:
I believe the “official” price of gold is 42.22/oz, not 35. But in any case, were I to do what you propose, I would use the face value of US eagles, since they are legal tender. That also brings up WHY one should only buy US gold…because they ARE legal tender, whereas maple leaves and kruggerands are not…if you intend to play gold vs FRN games.
The owner of a business, as the guy in Nevada did, pay his employees part or all in gold, at face value. The IRS won’t like it, but as that case pointed out, they have no justification for “intrensic” value basis of gold, for if they did, they would also have to apply that standard to paper FRNs…and it turns out the intrensic value of a piece of paper with ONE dollar printed on it or ONE HUNDRED dollars, is exactly the same ! They can’t have it both ways…ahahahahaaaa…
The advantage to the business owner, and to the employee, is obviously lower FACE amount of income…thus, the business owner would pay less matching SS, unemployment, etc, based on the lesser FACE amount of payment. The employee would also drop in tax bracket, and might save there.
The DIS-advantage is when they decide to SPEND that income. IF they convert it back to FRNs, they are gonna owe tax on the difference in their “basis” ( say you paid them a 1oz Eagle for a week’s work…$50 ) and the price they sold the coin for in FRNs ( say they got 1300FRNs )…they have a tax liability of 1250 FRN gain.
The only solution to this I see is: one, they manage to use the metal coin to buy things directly…which is going to be a VERY limited thing, given most merchants are not set up for real money. The other would be if you simply paid them partially in gold, say a $5 1/10oz eagle per week, in lieu of say, 130FRNs, and they simply save that money, in the hopes someday the IRS and all their ilk are gone, OR the price of gold goes so high ( and the FRN so low ) the taxes become less of a point and the fact they have some ACTUAL money is quite important.
Another problem you’re gonna run into: rising price of gold. Let’s say you started doing this 5 years ago, and gold was 500/oz. Say you agree to pay your employees $5 in gold coin, and 800FRNs a week. 1/10oz eagles were costing you probably 60-65 FRNs then…now, they are 150. Your employees are quite happy…they got a little ‘raise’…but it’s costing you 2 1/2 times the original amount to keep up your end of the bargain. When do you stop ?
This whole deal is fraught with problems, not to mention raising the hackles of the IRS gestapo…you’ll probably find it’s best to just keep paying them in FRNs, and let each person decide what to do from there.
Two other things on this subject. I believe there are tax issues going into Canada with American eagles and not on the Canadian. I read this on the site here about a year ago. Also there are taxes on the gold when sold like around 20% on your gains.
thanks TN
I tried building one of these myself, but I never mounted it to the house. Building the box was pretty easy. I had difficulty getting the plexiglass to seal to the wooden frame I built. im not very construction savy, so Im sure others would be much more effective than me.
Brian
I am expecting gold would go down in price due to deflatiion. And deflation may go for long time. I am in the process to sell.
Any inflation camp goer here?
My opinions are basically from:
http://theautomaticearth.blogspot.com/2010/07/july-22-2010-big-picture-according-to.html
Can anyone tell me why I should not sell? please.
kennyq -
Are your gold holdings a means of insurance against uncertainty or economic disruption, or are they part of a speculative trading opportunity? If it’s for speculative trading then selling now is certainly an option, but if you bought it as insurance or a hedge against economic uncertainty then selling right now would defeat your original purpose of acquiring gold. Unless you have a reasonable expectation you will need that money from the sale of this gold in the near future, you may want to resist the urge to sell.
I have quite a bit of respect for Stoneleigh at Automatic Earth and find her arguments for deflation pretty compelling. However none of us can see the future beyond a doubt, and anything can happen no matter how probable the deflation scenario appears to us now. In fact she could be correct and gold prices go down, but we might find at the same time gold (physical bullion anyway) might be very hard to find any available for sale. This happened before in late 2008 and it may well happen again. Another possibility may be that public and market perception of gold changes to the point where the majority of people and investors see gold as being primarily a form of money rather than a commodity. If that change in perception happens, we could see nasty, long-lasting deflation where gold actually remains steady or increases in price in terms of dollars/euros/yuan. The decision is all up to you, but I would be careful of basing such an important financial transaction on the opinions of any one source, even one as good as Stoneleigh. Take some time and get more information from other sources. There’s no need to rush to make this big of a decision.
TN dancer,
I’m not sure how familiar you are with the gold market but I’ve been trading in gold the past 10 years with a LARGE position placed back in 2001 and smaller trading positions since then. I’m sure you’re familiar with the downsides of gold but just in case you’re a latecomer to the game, you may want to consider liquidity issues that will arise as the endgame approaches. It will be very easy for inexperienced folks to get caught holding the bag. They will be holding it a long, long time. There’s been sufficient warning as of late. Buyer beware.
Kenny,
In the upcoming hyperinflation, people will be looking to get out of assets because the currency will be in the process of failing. They will use that cash to try to buy items that they need, or items that will hold value. Hyperinflation is a process of escaping the currency into something that will hold purchasing power. DO NOT SELL YOUR PM’S because you think Deflation will lower their value. PM’s will not act like other asset classes in a Hyperinflationary crisis.
They will be a store of value; something with the global, historical, and recognizable ability to act as a store of purchasing power. When the Treasury bubble pops, and the flight from Treasuries starts, everyone will be looking for something to put their money into. The obvious answer: PM’s. On that day you will wail and nash your teeth for having dumped your PMs.
Read these two excellent posts for an explanation of this process:
http://gonzalolira.blogspot.com/2010/08/how-hyperinflation-will-happen.html
http://gonzalolira.blogspot.com/2010/08/hyperinflation-part-ii-what-it-will.html
Rector
I second that Rector.
Gold allows you to purchase the next form of currency, if you want to look at it that way. Many countries whose currency was debased due to various reasons, took previous forms of currency, lets say pesos, and recalled them. You would have to turn in your old peso dollars for the new petro dollars. Only you get 1 petro dollar for every 10,000 peso dollars you turn in. Unless you have gold and silver. 1 ounce of gold in peso dollars is $500,000. But in the new petro dollars, 1 ounce of gold is $200.
In this case by changing your money from peso dollars to petro dollars you lose $175 petro dollar value in terms of gold. If you buy the new currency with your stored gold and silver, you make $175 MORE than the official exchange rate alone, not counting the increase in value compared to the previous currency that you used to buy it with.
I hope that makes sense. Precious metals have several ways to win in my mind. Fiat currencies always lose.
Thanks for the welcome…I’m more of a lurker than a newbie at this point. 
I knew that Krugers have a bit more other metals that make them harder and a little duller than other coins but, still…they contain an oz of gold.
I guess I consider PMs absolutely fungible…maybe I"ll have to reconsider.
Rector,
Thank you for the links. Great articles.
Hi Brian,
I worked as a solar installer in New Mexico in the early 80’s, installing a similar type of collector for a company called Solar Age. They worked very well there. I think the main concern I would have is what is the loss from a system like this on days that are not sunny enough to get to 110+ degrees F. Also, in order to install this you will need to put a break in the envelope of you home. If it’s not sealed well, you could have leaks that seriously reduce the efficiency. In order to have it fully automatic, you may not be able to provide a good seal for low solar days. The benefits of a system like this is it will work on a cloudy day (like solar hot water heaters), but you don’t have to deal with water lines that must either drain back at night, or be a sealed anti-freeze system, and if it’s done at minimum cost, your ROI could be quite quick.
thanks Dean
so let me get this correct. the solar air heater needs to get up to a temperature of about 110 degrees F to provide heat to the house? And if not, the solar heater can actually have a cooling effect on the house? I was under the impression that these heater did not work very well on cloudy days. I live near Albany NY where cloudy days are the norm in the winter time.
Brian
Why anyone would pay $2000.00 for one of these things when you can build one for under $200.00* is a mystery. If properly built and installed it does not breach the envelope of insulation, and cab be set up very easily to shut off anytime the panel is colder than the inside air temperature.
According to their info, it is thermostatically controlled to turn on when above 110 degrees. It won’t necessarily cool you house, but it is will have an inlet and an outlet which are openings to an uninsulated panel, so you could lose heat there. They definitely work better on a sunny day, but there is still energy from the sun on a cloudy day.
Dean
I think it’s significantly less than $2000 when you include tax credits, but people pay for things like this for the same reason they pay for anything. It could be convenience, it could be lack of tools, knowledge, confidence, or many other reasons (like it’s more cost effective to pay somebody else to build it than build it yourself). On the other hand, I think it would be great for you to post the link to the free construction plans and video. I think many people would find it useful.
A comment on Return On Investment: I find it very interesting that people can spend a lot of money on things that they think are cool, or justify in some other way, and ROI is never a consideration, yet as soon as anyone mentions an “alternative” energy source, there’s a question about what its ROI is. Maybe the ROI is increased resilience, or saving the planet, or some other thing that is not so easily measured in dollars. I realize there is a lot to be said for trying to get as much energy out for your energy in, but if someone has $2000 to spend and they spend it on a clean energy source instead of a new HD TV, then I say “way to go!”
Dean