badon
Administrator
Capitalist Pig
 Offline
Posts: 10262
badon™
|
 |
« Reply #3390 on: 2015 Sep 02, 07:52:21 am » |
|
If you ever need to use gold and silver as money, you'll be in such a crappy situation that a sack of potatoes will cost you 2 ounces of gold. Therefore, in my own investment strategy, I decided to put the "metal money" into an inventory of food and other marketable essentials. Imagine this scenario:
1. Fiat currencies suddenly start crashing in a domino effect worldwide.
2. Within weeks, your income is insufficient to pay the bills, so you stop paying them.
3. Within days, "the man" (landlord, tax agent, hungry zombies) come knocking, and you deal with them successfully because you're rich, and he decides he will accept your payment in gold.
4. Within hours, everyone who was not so rich starts to get cold and hungry, and they stop going to work because they have more pressing needs to deal with.
5. Government price controls go into effect, which forces the food to get exported to somewhere without price controls.
6. There are 5 sacks of potatoes at the grocery store...only 5 sacks of potatoes, and regardless of price controls, they're going to the highest bidder.
7. Being rich, you proudly waltz to the front of the line and hand over your gold, and walk out triumphantly with no gold, but lots of potatoes.
8. Everyone thinks you're a genius for being so smart to stockpile gold instead of crappy fiat.
9. You don't look so smart to me because I'm watching this play out from my high-rise penthouse apartment, which I paid for with a sack of potatoes that I bought for $5 before the crash.
10. "The man" comes knocking on my door to collect rent, and he's full of "Sir's", "Mr.'s", and "thank you's" because he's very grateful that at least one tenant is still paying rent with something that has immediate value. The sack of potatoes he got from me for the month will feed his family better than anyone else's, for a few days at least.
11. By the time things get back to normal, I own the Penthouse apartment, the building it is in, and a huge pile of gold, but I'm starting to run low on potatoes...
12. I go to the grocery store and buy another sack of potatoes for $5.
I have absolutely zero stockpile of precious metals. It wouldn't hurt to have maybe a handful of silver dimes or something like that, but I don't think I'm missing out on much by not having it. Sure, if things get really bad, the military or police will probably take all my food, but my entire stockpile of food cost much less than a single coin in my collection, and I have a backup plan if the food is taken. The good thing about stockpiling food instead of precious metals is that it's a LOT cheaper. You can easily afford to have a stockpile at home, another buried in the back yard, and another one hidden in the forest. A few thousand dollars goes a LONG way when you're buying common household goods during a time of plenty.
In 1933 in the USA when the government seized everyone's gold, people's biggest problems weren't a shortage of gold, it was a shortage of food. One of the first things the government and the banks did when people stopped paying their bills, in their infinite wisdom, was to seize all the indebted farms and shut them down. Bam, instant food shortage. Gold and other precious metals seem like a good idea at first glance, but they're not. They're too easy to codify into laws that ensure they're useless to you. Maybe some of those indebted farmers had a stash of gold that they could have used to pay their debts, but guess what?! Gold was officially illegal, and so they still ended up unable to pay!
Good guess about my sale date for the precious metals. I dumped the last of them in 2008. A few days ago I toyed with the idea of buying some silver or gold, but I didn't go through with it. Right now, I think the Chinese numismatics are a much better long term investment, and my gold/silver money goes into food or something else I can use. I might still buy precious metals at some point, but it probably won't be a lot of it, and/or it won't be held for very long.
At one point I had so much of it that I required some serious planning in transport to move it, and I decided after I sold it that I probably won't want to have more than I carry in my pockets. Even then, I'll want it in a form that doesn't look like precious metals. That's why I love palladium. Buy it in wire form, and it looks like aluminum or stainless steel wire. Throw it in the chicken pen, next to the poo shovel, and no one will notice it.
Jews crossing borders to escape the Nazis also used palladium and platinum because it's much easier to hide than gold or silver. I seem to remember a story about a family that had their palladium melted down and cast into tools for changing a tire in their car. When they crossed the borders, the soldiers took all their money and jewelry, but when they got to their destination, they still had their palladium.
If you want to see what it's like when valuable things become worthless in a crisis, watch the movie Casablanca. Trying to buy safe passage out of Casablanca with a handful of diamonds was no better than trying to do it with a handful of sand. Everybody had diamonds. Nobody had food, shelter, or other basic essentials of life. Whatever everyone else is stockpiling - if it something you can't use yourself like food, and you intend to barter with it - then you something different from what everyone else has. The thought crossed my mind that cigarettes might become a little on the valuable side if supply were disrupted for a few days. I'm not sure if it stores well, and I wouldn't use them myself, but there's an idea to get you thinking about what you can hoard that might be in a severe shortage eventually.
Some people like to store gasoline, but petroleum products don't store well, and gasoline is notorious for going bad in only a few months. On the other hand, ethanol can be used to water down gasoline or sometimes it can even replace gasoline, and it has no limit to its shelf life. Plus, one thing you can always count on when times are bad is a high demand for liquor, haha. So, instead of cigarettes, maybe ethanol would be a valuable thing to store. For safety issues, ethanol can contain 30% water and still work effectively as a fuel. The water makes it difficult to ignite, so it reduces the incidence and severity of accidents, if they happen. Plus you can distill out the water if you really need to.
The big advantage to stockpiling important commodities like food and fuel instead of precious metals is that the inflation that causes rises in precious metals works on food and fuel too! If gold goes up in value, the odds are good that food and fuel went up in value too. So, you're actually not missing out on as much as it might seem at first, if you don't own precious metals when prices go up.
One more thing, keep in mind that it's hard to get full value out of a 5 ounce or larger hunk of gold or platinum or rhodium or whatever, because it's too expensive for most buyers. I have recorded many big gold pandas in the LBC list that sold for BELOW melt value, because someone put them in a cheap auction and nobody watching had enough cash to buy it. If the seller had put it in a bullion category instead of a numismatic category, it might have sold to a bullion dealer for a fair price, but I've seen that go bad on big deals too. I remember one time when I saw something ridiculous like a gigantic 30 ounce brick of palladium that sold for way less than melt value, even though it was in the bullion category. It was just too expensive. I've made a lot of money on deals like that.
|
