I recently finished the Crash Course, and while I was impressed with the clear outline of the impending problems, I don’t really understand how buying gold will work as a true hedge, if we’re assuming the worst as far as global economic collapse. Ever since the breach of Bretton Woods, the world has had no tacit agreement about the value of gold. In a truly survivalist economy, might gold not be completely useless? You can’t eat it, you can’t use it to stay warm, it can’t teach skills or heal you, and as medium of indirect barter, there’s no agreement on how much it’s worth. A point was made that assets are not the same as fiat currency – if there is no buyer, then the asset is only worth what it gives you in terms of your own survival. Gold is just chunks of metal. Unless the world once again agrees that it is indirectly representative of a specified amount of labor or essential asset, what good is it?
I suggest you search for the you-tube videos of Zimbabweans on this site, and how they’ve been reduced to panning for gold to trade for bread. Also, search references to gold on this site. Among others, I believe I have posted some sound explanations on this topic.
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My 2 cents: even if there isn’t a specified amount of labor agreed on ahead of time, most people believe it is worth quite a bit of labor. The senerio where gold would be the most beneficial is a collapse that is short of a total collapse: The dollar hyper inflates its way into nothing-ness. People learn to live with less and start setting up local money systems. Some attempts are made to create a new, world-wide money system. Unless gold gets physically taken away from people, or the collapse is so bad that you don’t have food, i think gold will be worth more when the dust settles than most other things you could currently buy.
Either extreme would decrease how much is gained by holding gold. A total collapse, neighbors you trust, useful skills, and good health, followed by tools, food and shelter are going to be worth more than anything else. A recovery could send the price of gold dropping as people sell their gold to get back into the rising stock market. I don’t tend to think the collapse will happen fast enough that gold will be functionally worthless. I also don’t think a real, total recovery ‘back to the way things were’ is possible.
I’m just finding it strange that the implicit message of all the charts and graphs is that some rather extreme shift in society is inevitable – the next 20 years is going to look verrrrrry different from the past 20 – and yet I’m seeing a recommendation for a strategy that only works if nothing much changes. Or that’s how I interpret Crash Course, anyway. Gold is only a valuable asset as long as we agree that it is. Bread flour and drinking water are valuable assets no matter what. – ask any Zimbabwean.
The idea that gold is valuable isn’t an idea from the past 20 years. It’s an idea from the past 5000 years. Yes many things will change. Perhaps the usefulness of gold to retain value over time will fall by the wayside. If gold doesn’t work as a store of value, what will? Bread doesn’t work as a store of value: is bread that is a month old as valuable as bread made today? Water could potentially be used as a store of value, but this seems unlikely since it tends to fall from the sky.
Yes, there is a chance that society will collapse to the point where storing labor is impossible. I *really* hope this doesn’t happen, becuase there would be no way to work today to improve tomorrow for yourself.
Gold is viewed as a worthwhile place to put money, not because we know it won’t lose its value, but because it seems less likely to lose its value than other things (US$). If I knew exactly what tools, supplies, land, and seeds would be the most valueable to me over the next 30-50 years, and if I had a place to put them, I wouldn’t bother buying gold.
If not gold, what should a person do with their money? I don’t want to just leave it all in dollars, since i think hyper-inflation is likely sometime in the next couple years. I don’t have storage space to spent my life savings on food or anything similar. I am spending some money on tools and after I move to MN this summer I am going to take classes in useful skills (food preservation, gardening, repair). Gold is a way for me to protect from total weath loss in the event of a hyper-inflationary time that is not accompanied by a complete break down of social order.
Yes, I originally questioned gold as hedge strategy because of the fear of hyperinflation. I’m just wondering if it will work. If 80% of the population controls 15% of the wealth … wealth which is questionable to begin with, since it was created primarily out of air and promises, then 240 million people will have to rely on *something* to get through if our currency fails, and it won’t be gold, because they don’t have the resources to buy any. Which makes me wonder how valuable gold is going to be. As an actual alternative currency I suppose it works better than, say, cows, but it’s hardly convenient to convert gold into eggs or diapers or fuel. I go back and forth between wanting to learn from the hyperinflation scenarios of the past, and wondering if it’s a whole different ballgame this time, because it looks like the whole world may be going bankrupt at once as we smash up against the finite limits of our planet. Personally, I’m leaning toward investing in my own self sufficiency, and that of my neighbors.
Silver is a good alternative to gold and more accessible to common folk. Either is a good store of value. These things have always been valuable, and probably always will be, because it takes a lot of effort to produce or obtain them. Some might call it counterfeiting, but nearly anyone can cut down a tree, stamp some numbers on it, and call it money. But a glut of precious metals would be an oxymoron.
Even if/when TSHTF, some people will have excess production or goods to trade. But if their immediate needs are met for the most part, they’ll want some store of value. Gold, silver, and other precious metals fill that role well.