Gold - How does it work in "Bad" times?

[DaveTheAffable]

This is a serious question, about the mechanics of gold. No politics. No "Well if the government could/would/should...."

 

If things got "bad" here in the USA, what would you do with gold? Do you go down to your local grocery store and ask them to cut a slice off so you can buy food? Can you take it at a gas station, or a car repair place?

 

I've heard people say, "You take it to a bank/assayer/gold dealer and they will give you LOT's of cash so you can live". Would a local bank take gold? Or a "dealer". Where does this person get the cash to give you, if all the cash is tied up or worthless? If I want to trade 50 oz of gold, does the local guy have $75000 cash in his back room?

 

I'm sincere here. NOT criticising the decision to have gold, just wondering how it would work as an exchange media if things got "bad".

[Twisties]

It's a funny thing, because of course gold has no particular intrinsic value in a pre-industrial society (I presume that most modern gold using manufacturing would be on hold if the currency were to collapse). So, it's value is the result of a social agreement about it's value, the same as paper money. Unless you are going to make some jewelry, it's the same for gold.

 

What gold has going for it is universality (it's the same everywhere, except of course, different alloys and grades are not), and historical acceptance.

 

In the event that you need to use your gold to live on, I don't think you are going to want to be trading it for paper money, at least at first. Eventually a gold backed paper money would have to emerge if we're to ever recover, because you simply can't store or move so much gold securely, timely or efficiently on a global economic scale.

 

So yes, I would imagine that in the case of a complete collapse of the currency you would get a banking system and financial sector collapse, and a return to a local barter and gold/silver for goods economy. Don't plan on buying Japanese trade goods. Your worries will be food, prescriptions, guns, ammo, avoiding pollution, and sanitation.

[Twisties]

...and, good balances (scales) and nippers will be in demand too.

 

Frankly, for my part, I sold a good chunk of silver recently, and I figure that if the currency collapses, we're (Sharon and I) pretty much just dead anyway. I don't see any reasonable way for the planet to support present numbers without the present technology. Gold might keep you going a week or two longer than some, but unless you have and can control a private fortress stocked for decades, the means to get there, and good health, I figure it's all pretty much futile.

 

Certainly, for the average person in a city or suburban environment, any collapse of the utilities or food transport and storage network will mean death. Since all of these systems depend on big energy (fuel and electricity), they would collapse if the currency collapsed. The odds of surviving this are vanishingly small.

 

Never say never, but I'm not living in fear of such eventualities.

[Paul Mihalka]

At the time of collapse in Europe at the end of WWII, gold was worth, well, it's weight in gold. The trade was done in gold coins, the best known one was the "Napoleon". Nobody was slicing off a piece of his gold bullion brick. People who had something others needed, like farmers having food, traded it for gold to be wealthy later. My father, a very smart man, had something much better, handier. Packages of cured tobacco leaves. People would give anything for a smoke.

[Dave McReynolds]

The thing is, there's a lot of different scenarios that could play if our economic system were to fail, other than a complete colapse of everything.

 

There have been many examples in history where economic systems have failed but society itself has held together. If that situation should occur here, my guess is that gold might be a good thing to have, as it has in other times and places.

 

It might be difficult to figure out how to use your gold as an exchange medium, but people without any gold might feel that that was a good problem to have.

 

But early in our own history, where silver was a primary medium of exchange, people would sometimes cut their silver into wedges: "two bits, four bits, six bits, a dollar," for the purpose of buying things that cost less than a silver dollar.

[Twisties]

Tools, skill and a shop might serve one well, as well.

 

I don't think we have ever witnessed such a collapse in a modern urban population. Europe after WWII had international support, and was still a much smaller and more rural society than today. Even in urban areas, at that time in both the US and Europe, there were home gardens, chickens, and perhaps even small livestock (pigs) in the yard.

 

Sanitation systems were far less developed and energy intensive.

 

Today food is not produced in urban areas, and a collapse of water supply and waste water management will bring dire consequences.

 

We have seen glimpses of what can occur after natural disasters, but these were isolated local effects with the support of the broader economy.

 

I doubt we have any concept what a currency collapse would bring, but I assure you, if the electric power goes out, or there are severe fuel shortages (such that food can not be transported overseas, the consequences will be global and dire.

[John Ranalletta]

Gold has value in that its price is an index of people's confidence in the future and in their governing authority.

 

Second, a cursory reading of Jude Wanniski's articles demonstrates that gold acts for currencies as Polaris does for navigation. Written in 1995, it is as true today as it was then (IMO).

One standard is so clearly superior to differentiation that it has survived untouched for many thousands of years and will survive to the end of time on Earth. These are the latitudes and longitudes that pinpoint place on the entire planet. In every language and in every culture, East, West, North and South are the standards of terrestrial direction. It happened that out of the billions of stars in the sky, the Creator provided us with one, the North Star, that remains fixed in position. Every day on the planet is different than the day before, but the one constant is Polaris. Thank goodness for one fixed reference point in the heavens, which enables us to make sense of all other units of measure. If there were no fixed reference point, there could be no North, South, East or West. The four billion people on earth would be in a constant state of confusion. The directions to grandmother's house would be as complicated as astrological charts. Only a few airplanes could venture into the sky at the same time or they would forever be bouncing off one another. On the oceans, it surely would have taken several thousand more years for Columbus to venture across the Atlantic. But because of the standard reference point provided by a single star, organization can be as efficient as it is. Note that people south of the equator never glimpse the North Star, but still enjoy its benefits as a reference point. Even under the oceans, we can observe thousands of fish, swimming in schools in incredibly close formation, turning as a unit, with slow-motion film revealing that they defy all the laws of probability by not bumping into each other. They move according to their own fixed reference points built by biological imperatives.

 

Gold money will change for smaller money in order to make smaller transactions, one ounce for twenty of silver, or 6000 of copper. But it all starts with Polaris. For all these thousands of years, almost all contracts have been made with gold as the reference point. "Dollars" or "yen" or "francs" or "marks" have served as "symbols" of gold. The term is that of Marx, who joined the other classical economists in asserting that the responsibility of government was to keep the paper symbols of gold in circulation exactly equal to the amount of gold for which they would substitute. As long as this one task was achieved by government, the monetary standard would remain constant. This would be the case no matter how many contracts were drawn by public or private transactors using gold as the unit of account.

 

When President Nixon in August 1971 made the decision to devalue the dollar against gold, to $42 from $35 per ounce, he repudiated the national debt by 20% and made inevitable the general rise in prices that rippled through the galaxy of all prices. This was bad enough, but it still left an unreliable fixed point in the dollar realm. The nation still had a standard of measure, suspect though it was. In 1973, Nixon went the next step and - with gold now at $140 per ounce — "floated the dollar." This meant the nation's Polaris would now drift in the sky. All Americans would have to spend considerably more time and energy in calculating prices in relation to their wages, savings, and their present and future needs. And because the dollar had supplanted Britain's pound sterling as the Polaris of choice in the commercial firmament, when Nixon floated the dollar,3 all other currencies in the world set up larger or smaller orbits of change around it. The national monetary standard had declined, and so had the international monetary standard.

[David13]

It reminds me of the barter system used in the cartoon about the world's best hamburger, and the scales; where the 'lucky bucks' were put on one side, and the hamburger on the other.

Since gold is heavier, you would get more for the gold than your paper money.

A quarter pounder would cost you 4 ounces of gold.

I suppose they may not be good burgers, but they would be the only ones around.

dc

[Twisties]

Actually, Polaris does drift in the sky, in fact ancient mariners used other stars. Just saying. FWIW.

[Deadboy]

I have often thought the exact same thing....it is actually worthless except for the fact people agree it isn't (just like currency). For bad times I prefer lead, brass and marlboros myself....

[MT Wallet]

I take it in denominations of .38, .45 and 30-06. I'm glad we had this discussion. I was wondering about the worth of gold. It seems to me it keeps going higher because the paper money buying it is worth less and less.

[CarrotNC]

Gold is a means of storing value in a compact and portable material that's globally recognized and accepted. Its utility in the short term may be questionable, but the longer your event horizon then the more valuable it becomes.

 

If you're thinking of stocking up on gold, I'd recommend you first think of what you'd want to trade it for if things go bad -- and stock up on those now instead. And be sure to stock up on the knowledge of how to use that which you stock up on since it's useless until applied (and is infinitely more portable).

 

By the way, if you want to know what you need to focus on stocking up on first, then just throw the main breaker on your house for the weekend and turn off the water -- it's a really quick lesson in what's important.

[Matts_12GS]

I have often thought the exact same thing....it is actually worthless except for the fact people agree it isn't (just like currency). For bad times I prefer lead, brass and marlboros myself....

Don't forget sour mash and gunpowder.

 

[1LIFE2LIVE]

This is a serious question, about the mechanics of gold. No politics. No "Well if the government could/would/should...."

 

If things got "bad" here in the USA, what would you do with gold? Do you go down to your local grocery store and ask them to cut a slice off so you can buy food? Can you take it at a gas station, or a car repair place?

 

I've heard people say, "You take it to a bank/assayer/gold dealer and they will give you LOT's of cash so you can live". Would a local bank take gold? Or a "dealer". Where does this person get the cash to give you, if all the cash is tied up or worthless? If I want to trade 50 oz of gold, does the local guy have $75000 cash in his back room?

 

I'm sincere here. NOT criticising the decision to have gold, just wondering how it would work as an exchange media if things got "bad".

 

When things get really "bad"; PM will hold some type of value to those who put a value on PM. Food/Clean Water, Safety (Ammo/Guns/Medicine) & Shelter will be critical during extreme "bad times"...