Thoughts on the Gold Standard…..

by SF

I realize that this will probably count as heresy in this company, but I feel it is time for me to explain at least an alternative standpoint. Maybe somebody can give me a concrete reason that validates the gold standard. The argument that it was historically always thus is not a real argument in my eyes.

 

In answer to everybody that demands a return to a gold standard for currency: Why is this any different to any other arbitrary valuation system? I agree that it has the one advantage that it has a finite supply, so it cannot be inflated indefinitely and at whim.

 

Gold is simply a commodity – it does not have value per se. Just like a dollar note, it is only valuable because we agree that it is valuable. Indeed, throughout most of history, gold was a singularly worthless commodity except for decorative purposes. It is too soft for tool-making or construction work. Okay, it has applications in modern electronics, but that is not the reason that it is considered valuable. Yet the idea persists that gold holds “true” value, and people hoard it for that reason.

 

But who is going to trade their food or goods for your gold if society breaks down? In previous wars, it has been used to trade for goods during times of shortage, but I feel that this trading was based on two premises that may not be true in the sort of scenario people here are contemplating.

 

1.      There will be a return to the previous state of society relatively quickly so that I can enjoy the proceeds of the transaction (gold) presumably by selling it on at a higher rate.

 

2.      There is little or no risk of finding themselves lacking because they have sold goods. There is probably little enjoyment to be had from a quantity of gold when you are dying of hunger or thirst.

 

In both cases, the common factor is hope for the future. Hope that the disruption will not last long and hope that there will be a return to “normalcy” – life as it was before the disruption, with an identical system of values as we had before.

 

Talking to the older generation here in Austria, this functioned in the second war until the point was reached where the people were unwilling to sell anything because they did not have enough for themselves. In the country areas it did not quite get to this point, but in Vienna and the other large cities there was simply nothing left to buy, and nobody was foolish enough to trade “valuable” food for “worthless” gold or diamonds. The hope was certainly alive at that point that there would be an end to hostilities, but the necessity to survive until that time came was paramount.

 

And remember, that was a time when the general population was relatively disciplined in all countries. That discipline gives the basis of trust that allows trade to occur. You will think twice about trading with somebody if you are continuously wondering when the ambush will take place.

 

I suggest that the modern population will both less trusting and less trustworthy, and that there is very little likelihood of a similar system working today.

 

Gold is simply an agreed carrier of value – something that is rare enough to be used for this purpose, has no other real use that conflicts with its use as “money” and is reasonably proof against counterfeiting.

 

For me, it is not a material that I plan to store in case of a collapse of society. That does not mean that it has no place now as a trading article, but its value ends in my eyes at that point. Exactly the same applies to silver and all the other “precious” metals.

 

I just want to say in closing that I enjoy the site very much and I have learned a lot here. I guess this is just one of those points where we will agree to disagree.

 


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18 Comments

  1. I think that ammunition will be the new form of currency in a post SHTF situation. For now though, I believe we would be far better off with the Gold Standard than with what currently backs our money, which is nothing. When our creditors come around to understanding that we are just printing worthless paper, and that we’re never going to pay them back, they will convince OPEC to deal in a currency other than US dollars. This will remove the relevancy from our money, and precipitate economic collapse. FOOLS can horde their gold and silver! My family is stocking the 3 Bs: Beans, Bullets and Band-aids.

  2. I know a doctor who walks around with a gold ounce in his pocket and at every chance tells people to invest in it because when currecy fails, gold will be of value. My question to him is always the same, “If and when money fails, or hyperinflates, and you’re left with all your physical gold at $1300-1800/ounce, how will the store make change for your purchase? Will the you accept the change in devalued paper money? Will you buy $1300 worth of bread?” He is actually a great guy and preps otherwise(home, garden, bees, and other); however, as stated in the article, “we agree to disagree on this one.”

  3. Watch the 5 short videos at hiddensecretsofmoney.com and see what you have to say about gold and silver after that. It really made me change my view.

  4. You are making a base mistake concerning a Gold Standard. You need to look at it in a Current Day and a Collapse way. Of course, in a Post-Collapse (PC) environment the only things that will matter are what you physically have on hand to survive. If you don’t have something in a PC hen no amount of any form of money will be useful. However, in a Present-Day situation (and long-term PC) a Gold Standard is necessary. Two main reasons: 1. There is a finite amount of Gold…you simply can’t fake it or make it…therefore it has a base for its value because of its relative scarcity. 2. Gold is one of only a very few materials on Earth that stands the test of time…meaning it doesn’t dry up, rust, fade, etc. Many other items have been used as money in the past…tobacco, nails, shells, etc. but Gold remains. For example, a ship sinks in the ocean…years later it is discovered…what is usually the only thing left? GOLD. We can’t keep up this fiat money charade, we need honest stability and accountability…Gold seems to be the best option we have.

  5. Three decades ago when I was a young pup and just starting in a serious career, an old timer told me to buy one ounce of gold each time the eagle flew (pay day for us federal types). My particular peers at arms had long done so following the depression and he commented that upon retirement one would probably have a million in gold apart from retirement income. The practice had fallen off but the old dinosaurs remembered what the old dinosaurs told them and still offered timeless advice. For years maple leafs went into a boot on the shelf and the shoe got heavier and heavier. The time eventually came when the shoe had to be emptied and buried in an ammo can and before retirement a second 30 mm can was almost full. The old dinosaur’s prognostication was correct and seldom has anyone given better advice. Inedible they are, gold and silver, but barter they represent and as timeless as the Old Testament. Sure there are times when food may be more valuable than gold (and we are told that time is coming in Revelations) but there may be a lot of living between now and then. I’ve said it before, goats, chickens gardens, and beans will see you through and renewable food sources just like gold in the ground are an essential part of any serious preparations. As for anyone having valuables, the thief will often seek to come in the night, so guns and ammunition are added to the strong man’s mix. Trade .22 bullets I may but few and only to proven old friends. Bulk 5.56 and 7.62 I think will stay in long term storage alongside the gold because even if traded to friends, one never knows who that friend might trade with. The though of bartering away the very material that could be used to kill family is anathema.

    My thoughts,
    PR

  6. Gold is for wealth PRESERVATION only. I don’t think you will be able to use it in a SHTF situation.

    However, Gold is the ONLY thing that you can own that has an Allodial title (also known as a Kings title), THE ONLY THING.

    Once it is in your possession, TPTB cannot tax it or take it away by eminent domain. It is yours.

    From Wiki: Allodial — Free; not holden of any lord or superior; owned without obligation of vassalage or fealty; the opposite of feudal.

  7. “I agree that it has the one advantage that it has a finite supply, so it cannot be inflated indefinitely and at whim.”

    You answered your own question. This is the PRIMARY reason for a Gold standard. No single person, committee, or any form of Government entity should have the power to control the “value” of money. That is simply too much power which will corrupt absolutely.

    If you research more on the history of different items which were used for money you will see the path which is ALWAYS taken and WHY it is taken. Even if you start with shells (sea not ammo), salt (yes, salt was used as money), rocks, gems, ivory, etc. it all gets used for a while and then fails.

    Precious metals have always endured and meet the fundamental criteria for money. Every single implementation of Fiat currency in history has failed and it is only a matter of time before ours fails as well.

  8. I understand your confusion about gold if you believe that people mainly invest in gold because “it has always been thus.” The fact that gold has always been coveted is not the main reason people invest in gold. People who use that as a reason to invest in gold do not stop to consider WHY gold has always been coveted.

    Which brings me to your second claim, that gold is an arbitrary valuation system. It is not. The dollar is, however, so you have this all backward. Gold is a market-proven vehicle for preserving wealth. An ounce of gold buys today what an ounce of gold bought 75 years ago. You absolutely cannot say that about the US dollar. It is this fact, that gold holds its value, that drives people to want to return to the gold standard.

    Your statement that it is finite in supply and therefore “cannot be inflated indefinitely and at whim” shows that you really do not have a grasp on the gold market at all. The fact that gold increases in price demonstrates the declining value of the dollar, not any increase or inflation in the value of gold.

    You make other claims that, to be blunt, show a naivete about investing that you should overcome if you write further on this subject. I strongly suggest you get more educated so you have a real basis for your position, instead of going just off the top of your head.

  9. As noted above, what you can buy with an ounce of gold, or silver, is pretty constant. But the printed money is worthless, except that it has been commanded to be accepted by law, written by those same people that are printing the money.

    Recently, in the news, is a story about a couple who found cans filled with gold coins buried in the late 1800’s. The face value of about $27,000. As an indication of the loss of the value of the dollar, the value of the gold is now over 1,000,000, but the collector value at auction is estimated to be over $10,000,000.

    Now, by keeping paper dollars, you subject yourself to the whims of the printing “authorities”, and it will lose value, purchasing power, at whatever they decide will be our inflation rate. Plus some added loss due to whatever trading partners inflate the costs of their goods. When TSHTF, you losses will compound. In the long term, what will hold value? Well, gold and silver, among some other barter items, and whatever marketable skills you have to sell. That is it.

    Would you rather have dollars that lose buying power, or something that holds some stability in the long run? I know what I want.

  10. A word about value of gold.

    I don’t remember where I heard this, but it put’s gold’s value holding ability in perspective.

    “In 1860, you could buy a real nice suit of clothes with a $20 gold piece, today you still can.”

  11. I don’t see things as the author so I will gladly offer some of the Federal Reserves finest freakishly printed (from thin air) notes in trade to take that impractical, useless precious metals stash off your hands.

  12. Gold is an antiestablishment investment. Gold bugs bank on a weak dollar and that time is now and the foreseeable future. I cannot say enough good about Von Mises Institute and economic academy (http:mises.org). Kitko (www.kitko.com) is one of the standard gold bug sites and offers a wealth of information on precious metals. For those visiting this site, I recommend having look at the historical tables and follow rhodium from 1980. Wars drive this rare earth to astronomical heights. Both sites offer an excellent education – free. PR

  13. Scott,

    I’ve begun to watch the 5 videos that you mentioned above. Extremely educational, informative, and a real eye opener. They put the history of money and currency into a very clear perspective compared to today’s problems. As well as, how our government and banking system are robbing the middle class, and if not stopped soon, how it will result in the loss of our freedoms; which unfortunately has already begun. The comparison of how Hitler came to power in Germany is eerily similar to what is happening today in our country. Thanks, for the heads up.

  14. vandal67

    I was just looking for a way to protect what I had. Back in 2008/9 I lost a large amount of my retirement savings. I know that our Dollar is going to collapse and this time all could go away. Look what happened just recently in Greece. Their economy collapsed and peoples bank accounts were wiped out. Most of our investments today are just a bunch of numbers in an account kept in a computer. At any time especially when the dollar collapses, these numbers can go to
    $0.00 instantly. There are no guarantees. You placed your money with them (banks, stocks, mutual funds etc.) but it is a risk or a gamble. I won’t gamble with these thieves any more. The whole game for the banks is to make money. Finish the 5 videos and pass it on. Mike Maloney is not making you do anything, but his education in the economy and desire to pass it on is invaluable.

  15. I think that’s just it, gold will work in many situations of collapse, but it won’t in other more extreme cases. Gold and silver should be one of the many tools in your prepardness, but not the first. Knowledge and skills, even cash savings, food stores, debt reductions, etc should come first IMO.

  16. Change at the grocery store for a $100.00 piece of gold, no. But why not have some or silver in fractional amouts. Dversify your assets just as you would diverify cash, ammo, food, first aid kits ect, ect.

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