I found a good discussion from a couple years back relating to risks of owning gold following a currency collapse: http://www.peakprosperity.com/forum/lets-talk-about-gold-confiscation-again/30881
I would like to hear people's thinking about how they expect to convert gold into value after the financial system as we know it has melted down. Will gold become money? If not, should we assume there will there be an orderly market with stable intermediaries for "cashing in" PM to whatever ends up being money? Will the government take most of the proceeds as nominal capital gains taxes? Will trading in PM be relegated to a black market? If so, what fundamentals intrinsic to PM lead us to believe it will retain its current value (more or less) as the economy devolves to, say, barter?
It seems there are a ton of questions. How can investors be confident of PM as a post-collapse safe haven? If we can't, should the strategy be to somehow convert PM to basic post-collapse commodities: land, tools, ammo, etc.? If so, how on earth do we time when to liquidate our PM positions to buy these things before a systemic financial collapse occurs? If we can't reasonably hope to time that right, why aren't we investing in those commodities now rather than PM?
Apologies if the above is scattershot or incoherent. I know I haven't posted for a while. Not trying to be obnoxious but I hope some of you will find enough interest to reboot the discussion one more time.
Probably questions better suited for "investors". Those who have PMs because they will be worth "something" aren't concerned with preserving current value, only in knowing that what they do hold won't be worthless.
I imagine precious metals being used directly in barter, not converted back into dollars and taken to a store. So, for me, PMs are not an "investment." It is having a form of currency that is universally recognized and desired regardless of the condition of the monetary system. Me to the farmer: "I'll trade you one of my 1/10 ounce gold eagles for 1/4 of that cow." That should work during inflation, deflation, stagflation, collapse and normal times.
Small value: This is the reason that having silver (which is worth much less) and small pieces of gold is important. You can't buy a loaf of bread at a road side stand with a 1 ounce gold piece because no one could give you change for a coin worth $1,600. But a small silver coin, such as a US dime, minted before 1964 (that contains 90% silver) would be about right for a loaf of bread.
Easily recognized: An easily recognized coin should be able to be traded without the concern of needing to verify its content, such as by having it assayed by a commercial lab.
A nice online currency converter app can be found at http://www.silverandgoldaremoney.com/ There is an iPhone version that can be downloaded, too.
I don't know how to barter for big-ticket items like houses and cars. During social upheaval how will change of ownership be recorded? How would the sales tax be determined and collected?
I think you should make investments to simplify your life and reduce your reliance on outside sources first - before piling all of your money into gold. That has been the consensis on this website for some time now. You're absolutely right that it will be dificult to time this thing, and the best time to buy solar panels and drill a well are before people realize they are necessary.
People that buy gold with the hope of cashing it in for more stuff in the future are called speculators. In my opinion you should buy gold with "leftover money" that you would like to preserve. Gold is not a magical substance that will allow you to continue your current way of life indefinitly.
I myself am a hipocrite on this, but have my reasons... My wife still thinks I'm crazy, and gold is the only investment I can convince her to make (since it doesn't change her lifestyle). My timing for "cashing in" to buy more tangible provisions will depend on my wife's acceptance of the predicament.
But in a perfect world, my order of investment would be:
1. Get out of debt, 2. become self sufficient in terms of safety, energy/communications, water, food, in that order, 3.) identify and associate with likeminded individuals, and 4) buy gold.
Read Daniel Ackerman for a more refined view of one possible future. If we have an orderly transition to a high inflation future then 'out of debt' is NOT what you will want to be, you will want all the debt you can service because one of the few ways of escaping the huge inflation tax is to pay off debt with inflated dollars, preferably the debt was used to buy appreciating, tax preference favorable assets.
He is correct, that to prevent the pain coming to most boomers, one MUST reposition ones self.
As a follower of fofoa I have an even different take...that there will be a RESET with gold reset much higher. I believe this will happen but when it will hapen is something no one can predict so I have a hybrid approach. I save in gold and have no fear of productive, servicable loans.
Only if we have a deflation will being debt free be helpful. NEVER has a currency like the dollar deflated however. Remember 1929 saw deflation but the dollar was a gold standard instrument then. Within 2 months of changing to a pure fiat currency in 1933 the economy was facing an annualized inflation rate of 40%!!!!
Deflation with a pure fiat is simply not possible because the pain is too great and fiat CAN be expanded (and so it will be). Do you really expect to buy bread for 25 cents a loaf again? ...after 99 years of gradually increasing prices? Will the world fight over those purely symbolic pieces of paper when Ben Bernacke can conjure them up at will? NOPE...inflation it will be! So therefore hold gold and other assets not cash and treasuries....(yes you will need some cash but for goodness sake don't stack up piles of it in your safe...use gold for that purpose.
Like we have any money left over for gold after paying off our debts and getting as ready for the wild economic ride we're in for! A well, a huge raised-bed garden, solar fans, efficient woodburning stove, concealed carry permit, canning supplies, pantry, etc are not cheap. What little PMs we have are some silver to pay property taxes.
Plus I've read all the information I can on "going into debt to make money on inflation." What a waste of resources that debt service is! Call me old school: I was taught that there are only THREE things you should go into debt for. Those are buying a house, getting an eduation in a practical field where they are hiring (and tools to do that job), and transportation to that job. That's it except for owning income-producing property, as an extension of the homeowner thing, and you'll notice they all come under the category of "it takes money to make money." I cannot tell you how wonderful it feels to have the debt monkey off our backs, and to not be living in an expensive-to-run McMansion.
Should I come into some money, unless I see a local income-producing property that I can actively manage, I'm with Dogs-in-a-Pile: I think (more) solar panels are a great investment. Meanwhile I have a list as long as my arm of LITTLE things to get or learn. Today I learned how to make a hot pickle relish out of the proceeds of my organic, heirloom garden. This week I bought a book on increasing organic gardening yields, and last week we set up a solar battery charging station. This is not a brag but by way of example: what have you done other than just stockpile precious metals?
Gold? Pshaw. If it's the only prep your spouse will let you make, or if you're very wealthy and have not only bought but LEARNED what you need to survive a crash, then that's fine. Otherwise, it's a luxury most of us cannot afford to get sidetracked onto.
Chris and Adam: My preparations for our future are proceeding (many thanks to all) but have an ANXIETY that would appreciate your thoughts.
Beyond confiscation of metals (or the attempt thereof), my FEAR is the occurrence of a bank holiday and/or a revaluation of the USD.
Here’s why… I have withdrawn an amount of $$ from the system and gave it MATTRESS lodging. Safe from a bank holiday BUT…
Devaluation… How would that occur in your mind? Do you see both the holiday and the devaluation happening at once? Any forewarnings that could signal the event before it gets here?
Is my PHYSICAL PAPER at a greater risk “mattressed up” than in a money market or bank account or, shudder, back in the stock market??
I'm sure Sir Ben won't be kind enough to give me a heads up about a revaluation - in your thoughts would it be prudent and proactive to convert it all into hard goods: food, weapons, tools, etc.
PS Oh, doesn't it BURN that financial folks still direct us to invest in the over-hypothecated, robo-driven, well-manipulated stock and bond markets - with our good interest at heart!!
PPS Writing in JAMES GRANT (Interest Rate Observer) for president in November... he doesn't stand a chance, much as we with either candidate. Just saying and hoping to start something here...
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