Gold and Silver Dilemma

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krogoth's picture
krogoth
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Gold and Silver Dilemma

Gold and Silver Dilemma-

 

I am a bit confused about the posters here, and Chris M. himself about Gold and Silver. I am assuming that you want to put a considerable amount of your personal capital into investing in Gold and Silver, but I am wondering why? Let's say the worst possible case scenario happens-

A financial world collapse and chaos-

The world financial markets have crashed, oil is no longer available, food is not being delivered, stores are empty or looted and electricity is not being generated on a city or state level at all.

So, is the plan to buy Gold and Silver, wait this possible scenario out even if it takes multiple years, and then when some resemblance of civil order and banking returns, cashing the gold and silver in for cash again? Or moving to a gold and silver standard? How do you cash Gold and Silver in? If I take a Gold coin into a store (once the stores are full again) or let's make it even simpler, a trader of some sorts, selling milk and beef jerky, how does he give me change for my Gold coin? Or my gold bar, or even a gold chain? How does the trader know it's real Gold? I mean, the Gold Coin is worth more than the milk and jerky, right? Same with Silver.

So my question is, all you posters about Gold and Silver, are you suggesting that this is a safe investment for a possible future switching back to money of some sort? How will, in your opinion, this work? Please enlighten me with your multi year Gold and Silver plan for chaos scenarios to simple scenarios, like just a financial crash.

 

 

Thanks

 

 

 

 

 

 

dcary's picture
dcary
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Re: Gold and Silver Dilemma

Both gold and silver are fairly easy to verify...by weight and volume...and in the form of coins they will be of value, I think.

I own some of each in coin form and some in raw form and etfs as a hedge against hyper inflation.  I would gladly trade the etfs for physical if I could find any at a good price.  The way I am reading the debate, it is not clear how long the deflation will last, and there remains some likelihood that inflation will follow soon if the government starts printing money like crazy...which they often do in such situations.

 I do not know for sure if we will suffer an extended period of deflation, where cash is good, or eventually inflation where commodities like gold and oil and food are good.  If I could store gasoline indefinately, I might do it, but it goes bad, as do coffee, chocolate, tobacco, etc.  Gold, Silver, and perhaps still to produce alcohol seem like the best hedges.

 For myself, I am in both cash and precious metals, with a few energy and fertilizer stocks that are doing poorly at the moment.  Wish I had sold them to buy back later...but I did not expect them to go down with the rest.  Foolish me.

 Again, I am content to have both cash and gold & silver right now...my read is that sooner rather than later gold will be a winner...and if not I will just sit on it.

switters's picture
switters
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Re: Gold and Silver Dilemma

Imagine this scenario.  Deflation for the next several months or even a few years, followed by a period of inflation and then perhaps hyperinflation.  When inflation begins your gold & silver will start to appreciate in value.  At that point you can trade it in to buy a piece of land, have a well dug, buy class one tools, install solar panels, wind turbines or a micro-hydro system, or do any number of things that will provide energy, food, shelter and a good life for you and your family.  

Sure, you might have to trade it in for cash but hopefully only for a few hours in between the time you sell your physical metals and buy whatever it is you plan to buy.   

Here's one potential problem (that I'm worried about myself because I am heavily allocated to gold & silver).  Say in five years the real estate market has bottomed and houses are selling at fire-sale prices.  But all of your available capital is in gold and silver, and in spite of all the predictions of hyperinflation, the economy is still in a deflationary depression as people like Mish are predicting.  It's likely that if you were to sell your PMs at that point, you'd be doing it at a loss - perhaps a significant one depending upon when you bought in.

I haven't heard many predictions that deflation could last for more than a decade, so this isn't a concern at all if your horizon is strictly long-term.  It sounds like you also have cash so you're hedged against both inflation and deflation.  At this point that's probably wise.  

If I could do it over again I would have kept more cash than I did instead of buying quite as much gold and silver, but I wasn't expecting deflation.  

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capesurvivor
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Re: Gold and Silver Dilemma

I don't think anyone really knows, switters; we are in the twilight zone. How long can you prop up a fiat currency? In the long run (I know...) we have to inflate. I wish I'd bot physical metals, just have a few gold stocks (way down now).

When I get some spare cash and investigate a bit, I'm going to buy a year's worth of freeze dried food. Expensive but...if things turn out great (right) I can still eat it. The other "chaos" items like guns and ammo, vodka, meds, etc...you almost need to assume a Mad Max scenario to start acquiring. Maybe...who knows. Won't hurt to have a bit of each around. Mel Tappan used to say that you could always buy a .45 Colt ACP with a 20 dollar U.S. gold piece. Oddly enuf, that has proven correct for decades.

 

SG

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DurangoKid
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Re: Gold and Silver Dilemma

Keep in mind that gold is a commodity, just as rice, tools, and in some ways, real estate.  What you're interested in is how much gold trades for a given commodity.  In Queen Elizabeth's time, an ounce of gold bought a fine men's suit.  About the same today.  Also keep in mind that hoarding gold and silver is not about speculation so much as preserving wealth.

 So, let's have a reality check.  In the coming couple of decades there is going to be enormous upheaval as monetary systems collapse and resources, particularly oil, deplete.  If you're forced to relocate and take only what you can carry, you'll probably do ok if your gold and silver can keep you and yours fed and clothed.  It's not about prosperity, but survival.  There's a pretty good chance where you are right now is too far from where your future food supply is located.  Whatever paper assets you purport to own won't do you much good.  So, it's trade some metal for a good pair of hiking shoes, a wagon of some sort, and hit the road.  Millions of people will be moving around by whatever means they can afford using whatever infrastructure is still in working order.

As far as acquiring more gold and silver, be careful.  There's a lot more promised precious metals than exist.  You might have to buy only what you can see on the counter.  Rumor has it that some dealers have significant time lags between orders and shipment.  This raises the question of what are they doing with your money in the mean time?  COMEX has a lot of paper gold contracts coming due soon.  Who will get the first dibs on physical gold and silver?  I'm guessing the people with the most clout.

I'm not as concerned about Federal Reserve funny money as I used to be.  When I have to dip into my little hoard, I suspect that Fed dollars will be more useful as toilet paper.  As the Roman empire fell, people buried cashes of coin money.  The fact that people occaisionally dig them up means the former owner probably didn't live long enough to spend it.

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Erik T.
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Re: Gold and Silver Dilemma

I've noticed a trend in the comments on this site - not so much in this thread but elsewhere - that makes me feel that some people have missed the point Chris was making about precious metals such as gold.

I've seen comments along the lines of "Chris told us Gold was a good investment, but the price of gold has actually gone down since he said that, so that means Chris was wrong". I think that sort of sentiment reflects a misunderstanding of what Chris has actually been talking about.

Chris has advocated owning gold because it is a store of value that is immune to hyperinflation. It's like an insurance policy: If things really go to hell, the gold you own will still be worth something. Chris has said on many occasions that he doesn't even think it probable that things will ever get quite that bad. What he has said is that they could, and if they do you ought to have thought about it and considered how to protect yourself.

I like Chris' fire insurance analogy: You buy fire insurance not because you think your house is likely to burn down, but rather because if it ever did, you'd really be screwed. If your house never burns down, that doesn't mean buying the insurance was a mistake. Rather, the insurance premiums you spent were a worthwhile investment to protect against a risk that fortunately never happened.

I personally am pretty well convinced that the price of gold is headed DOWN from here. Yet I still own quite a bit of it. Why? Because if I'm right (gold price goes down), I don't expect to loose that much. But if the relatively unlikely outcome of hyperinflation were to occur, my gold would be the only thing saving me from the poor house. I accept that I'm loosing money on the more likely outcome that gold prices will erode 10%, because I know I'm covered if the currency collapses and gold prices increase by 10,000%. The most likely outcome is I loose money. If you're not comfortable with that outcome, investing in gold now isn't wise in my opinion.

These are just my personal opinions; I haven't spoken with Chris about this.

Erik

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Re: Gold and Silver Dilemma

  Physical gold and silver are part of a good insurance policy to have in case of currency breakdown, however one of the best investments for the future(short and long term) is putting some money into quality firearms, and assessories ( magazines, scopes etc) and ammunition. These items hold or increase value over time and are useful tools for sport, hunting and self defense. If you don't know how to use one- get some training- it could save your life one day.by putting food on the table or in self defense. also these items could be used for barter in case of a total system failure.

L

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mainecooncat
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Re: Gold and Silver Dilemma

Hi Krogoth,

Wanted to take a bit more of a philosophical tack in answering your question.

In the macro picture, I think gold and silver only remain viable as long as there’s an authority that can enforce their legitimacy and universality. In the context of a complete collapse, it’s hard to imagine gold and silver being useful because of the uncertainty regarding economic standards. Clearly barter would thrive as one does not need a third party or government to tell them that food is valuable and necessary for their continued existence. Because of this people can readily determine different levels of value by comparing other items/services of value. However, with gold and silver, society will need that authority to grant them both legitimacy in general but also a specific value. Essentially fiat then. And then, who gets to decide that value? Is that value fixed or floating? Who decides that?

I think we should remember that we’re not living in the Middle Ages, replete with bandits robbing caravans of sacks of gold coins. We live in a world in which the vast majority of people are economically illiterate and have never even pondered many of the subjects discussed on websites such as this. They are not sophisticates of any kind nor are they historians of the evolution of money. Most don’t know – at least according to our current system and perhaps in the near future – that precious metals can replace paper currency in everyday transactions. Most couldn’t tell the difference between a real and fake coin or if a certain quantity of PM was diluted with some other substance. How do they know that this gold and silver is "good" in the next state, town or valley? Maybe it’s been seized or devalued by some regional government in the next state where you’re planning on buying something in the near future.

Furthermore, though statistically most people live in urban areas, North America at least is primarily a rural place where much of the population still lives. In these areas, I think gold and silver will struggle for viability more so than in an urban center where there would most likely be greater authority and some kind of centralized economy, possibly even banks to deal with the issues of denominations and change.

I see gold and silver being more viable in a context of a more centralized and universal ruling body. The more regionalized politics and economies are, the less viable are gold and silver.

But in terms of "investing," go with inherent value. I think people must have some things of inherent value. I can’t imagine not buying land if one has the ability to do so.

 

By the way, good point on the firearms, Larry. Inherent value, baby.

krogoth's picture
krogoth
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Re: Gold and Silver Dilemma part 2

Erik,

If anything I think you and Chris have been pretty neutral about taken a position on anything for purchase, controversial subjects or religious affiliation. It's better if Chris stays neutral and not advising on any subject or purchase for the future. That ruins the educational and openness of this website. If people are saying Chris or Erik told me to buy Gold, they are sadly misinformed because I have never seen it. I know a lot of people here would like direction from Chris, but I don't really think that's his message.

Sadly, as I have seen on this site and on other websites I contribute to, people see someone going in one direction and assume that's the direction they should follow based on shared information, and that assumption becomes a distortion.  If you or Chris are buying Gold, you can share your personal experiences on this or anything else to help inform people. I like to help by saying what stocks I think will fail next and why, but I don't tell them to buy, sell or short etc.

That's the reason I started this subject. Why the direction of Gold and Silver, and what people plan to do in the future based on this direction, and where do they see Gold and Silver fitting into our future. If a lot of the users feel it's important to go in this direction, I want to know why. It belongs here on the forums.

A lot of people are looking for direction, where you are providing education, or a baseline to make your own decisions. It should stay that way.

 

 

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Damnthematrix
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Re: Gold and Silver Dilemma part 2
krogoth wrote:

Sadly, as I have seen on this site and on other websites I contribute to, people see someone going in one direction and assume that's the direction they should follow based on shared information, and that assumption becomes a distortion.

I'm starting to think that not many people who post here have actually taken the time to do the entire crash course, let alone more than once.  So it's easy to see readers/posters assuming Chris means something when he in fact does not.

Doing the entire crash course is a fairly large time commitment for anyone still absorbed by the Matrix......

For what it's worth, I wouldn't even touch precious metals unless I was completely out of debt, and had prepared for a post crash arrangement involving growing my own food....  Then, and only then would I 'invest' left over money into PMs.

That's why we have not bought gold......  plain run out of money, and the house is still unfinished....  something I will have to attend to now they're predicting an active Cyclone (Hurricane) season here this summer! 

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gyrogearloose
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Re: Gold and Silver Dilemma
mainecooncat wrote:

 
Most couldn’t tell the difference between a real and fake coin or if a certain quantity of PM was diluted with some other substance.

Yes, most couldn't, but many would quickly learn.....

From a previous post on this part of the matter

24 kt 99.9% gold      hardness 40 vickers

22 kt 92%  gold        hardness 70 vickers

Even alloying a small amount of  another metal with gold makes it significantly harder.

I remember seeing old western movies and  recall cowboys biting coins to check them, a simple hardness test.

As to substituting with lead, if it is in coin from and the same size
as a gold coin you already have, the difference in weight would be very
noticeable.

gold 19.3 g/cc

lead  11.2 g/cc

Together these unique properties give a relatively easy and accurate test as to the purity of the gold.

 

Hamish

 

switters's picture
switters
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Re: Gold and Silver Dilemma

I guess it all depends on how you think this transition is going to play out.

It's possible that in a completely deindustrialized, decentralized world gold and silver coins would not have value.  It's also entirely possible that they would.  Arguments can be made on both sides.

However, I happen to believe that there's a lot of ground to be covered between where we are now and that hypothetical world, and many steps down the staircase to be taken on the way.  

It seems likely that if inflation were to resume after the current period of deflation concludes, the price of gold, silver and other commodities would go up.  Even if hyperinflation ensued, there would still be a lot of people with money who don't subscribe to the "end of the world" scenario looking for a safe place for that money.  At that point buyers would outnumber sellers and the price of PMs would surely rise.

It's all a question of timeframes for me.  Will gold and silver ever be worthless?  Perhaps, but probably not in my lifetime.  Will the price of gold and silver go up again?  Almost certainly, and although no one can accurately predict when that will be, I'm fairly certain it will happen in my lifetime.  Therefore I saw gold and silver as a good way of preserving my savings.

What I'm really arguing is that there will be a substantial period of time between when inflation or hyperinflation begins and when society/civilization becomes completely deindustrialized and gold and silver lose their value (if either of those things ever happen at all, which is not guaranteed).  During that period, those that are holding gold and silver will be able to trade it in for more essential assets like land, energy infrastructure, etc.

 

krogoth's picture
krogoth
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If it gets bad enough

Thanks for all the responses so far, excellent posts. You know, I was thinking if the economy gets bad enough, like apocalypse style, we can all just stage a CM Gang raid on Fort Knox for all the Gold. Oh wait, scrap that, I forgot that no Gold is there.

 

 

 

switters's picture
switters
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Re: Gold and Silver Dilemma
ErikTownsend wrote:

I've noticed a trend in the comments on this site - not so much in this thread but elsewhere - that makes me feel that some people have missed the point Chris was making about precious metals such as gold.

I've seen comments along the lines of "Chris told us Gold was a good investment, but the price of gold has actually gone down since he said that, so that means Chris was wrong". I think that sort of sentiment reflects a misunderstanding of what Chris has actually been talking about.

I'm not sure where you get this idea, Erik.  I've never heard Chris refer to PMs as an investment, but instead as a hedge against inflation.  In any event, Chris has repeatedly reminded people that he isn't an investment advisor.  Most adults (theoretically) understand they are responsible for their own actions, including the investment decisions they make.  I don't think any reasonable person here holds Chris liable for the choices they've made.

On a personal note, I was caught off-guard by deflation (as apparently Chris M. was too) and if I had seen that as a higher possibility than I did I probably would have kept more money in cash and bought less gold and silver.  If my horizon was purely long-term, I would have no regrets at all about holding as much PM as I do.  However, I plan to buy some land and/or a house in a few years when the real estate market bottoms, and if we're still in deflation with low PM prices at that point, I'll be sorry.

But that's life in turbulent times.  You win some and you lose some, and it just goes to show that even awareness and preparation is not always enough to insulate us from the effects of this crisis.  

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switters
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Re: Gold and Silver Dilemma

Another question for those of us that own gold is, "when the time comes, will owning it do us any good?"

Eric Janszen addresses this in an article that Chris linked to in the most recent Martenson Summary:

Quote:

The range of future popular opinion of private gold holders under those drastic circumstances ranges from villain or hero and everything in between. If gold owners are vilified, you can count on a less than friendly government policies on gold taxation and possession. The 1933 confiscation was strictly old school; the modern approach is more likely to take the form of a 90% capital gains tax on private gold sales with high penalties to encourage sales to the government at a fixed price and slow a popular rush to the metal, and of course create an enormous black market in the bargain. If that sounds paranoid, you haven’t been watching the news lately.

A 90% capital gains tax on private gold sales or selling it to the government at a (probably very low) fixed price.  Yikes.

I doubt silver would be subject to the same policies, but Janszen isn't ruling out some type of tax on silver as well.

 

krogoth's picture
krogoth
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Re: Gold and Silver Dilemma

Switters,

 

This is one of the reasons I asked why so many here mention Gold or Silver. If history repeats itself, or it's heavily taxed, it's pretty risky.

cybernytrix's picture
cybernytrix
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Re: Gold and Silver Dilemma

I saw this on some other forums. This is a lot of rumor mongering, but seems to make sense at least!

Separately yesterday, Phibro, a commodities-trading firm, confirmed
that it was the dealer for all the silver purchases by Berkshire.
Phibro is a unit of the Travelers Group, in which Berkshire has a major
stake.[...]

Then you have to tie it up with this:

Sometime, back there was speculation that Warren Buffet could be a possible choice of US Treasury Chief. This news was sparsely reported - originating with AFP.

See here for more.

Any thoughts?

 

krogoth's picture
krogoth
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Warren Buffet

Mr. Buffet has made some whopper mistakes with financials in the past. I would personally see a ballbreaker like Paul go into anyone of these positions of finance for the government, but that's dreaming.

 

 

 

 

switters's picture
switters
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Re: Gold and Silver Dilemma
krogoth wrote:

Switters,

 

This is one of the reasons I asked why so many here mention Gold or Silver. If history repeats itself, or it's heavily taxed, it's pretty risky.

Hopefully there would be signs that confiscation or a tax was on the way, and those who were watching for such signs (like us) might be able to sell in advance. 

krogoth's picture
krogoth
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Re: Gold and Silver Dilemma

Well keep me informed please. I am converting some of my investments and may be going for some Gold. Even if you contact me personally, I would appreciate your advice or news on it.

 

 

 

 

 

 

KKPSTEIN's picture
KKPSTEIN
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Re: Gold and Silver Dilemma

There are several ways to cash gold coins in.  Gold dealers, coin shops, jewellers.  My company will buy back coinage for 10% above spot price of weight in gold.  It is easy to cash in gold. 

I wanted to share some important information when selecting gold coinage.  Here is some background, historical information on why tangible, privately minted coins are better:

Throughout history 2 distinct types of coins have circulated; Monopoly Coins and Open Exchange Coins:

1.  "Monopoly Coins" identified by:

- Government and/or 3rd party monopoly ownership (e.g. by various coinage acts and decrees.)

- A monetary face value determined by statute (e.g.1 Denarius, $1, or 50 pence)

- Government inscription (e.g. Image of "Caesar" or state "ID".)

- Little or no integrity of precious metal content.

- Little or no intrinsic value.

- Being merely tokens of inferred value.

- Government can buy back for face value only - $50 gold coin (you'll get $50).

2. "Open Exchange Coins" identified by:

- Private bearer ownership.

- Intrinsic value in their own right.

- Integrity of precious metal content.

- Absence of a monetary face value.

- Absence of government or third party encumbrances.

- Open market assessment as to their value and tradability.

- Bearer's liberty as to usage or hoarding.

With the benefit of historical hindsight, the civilizations that have embraced a system of just weights and measures and an open exchange of gold and silver coinage, not only enjoyed longevity as a power, but their citizens and those who chose to trade with such currency of integrity, enjoyed the prosperity and security it ensures.

MAXIMUM BENEFIT TEST

In order for gold and silver coinage to enjoy maximum benefit in the market place it must pass the following 5-point test.

1. The coin must be your property (Government issued coins are not yours)

2. It must be a stipulated weight (Grams or troy ounces are preferred)

3. It must be a determined purity (Preferably pure gold, pure silver or a mixture)

4. It must be in small denomination of weight (2-30 grams, or 1/10th -1 troy ounce)

5. It must be internationally recognized (Via a reputable hallmark or trademark)

JOSEPH WEALTH SYSTEM SHEKELS:

* Mint fresh and un-circulated, issued with their refiner's certificate of fine weight and purity.

* Stipulated weight and purity, insuring their determined international value.

* Small denominations of weight making them liquid and easily tradable.

* Bear an internationally recognized Hallmark, attesting to their internationally reputable purity and minting.

* Based on the ancient 'shekel', the world's earliest recorded system of weights and measures.

* Fit the description of religious collectible, further protecting against government confiscation.

* Fit the description of 'free market commodity' (sometimes referred to as free-market money).

Weight: 2.85 g for quarter shekel

or 11.4 g  for fulll Shekel

Purity: 999.9 or 24 K

Ownership rights: 100% private Gold, non government issued.

Minted in Argor-Heraeus, Switzerland
www.argor.com

Shipped directly to you via Swiss Registered Post.

Founded by Anglo Far East Bullion Company

Please let me know if you have any additional questions.

Best regards,


Kirsty Hogg

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