Gold – Follow the Yellow Brick Road?
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Lewis Wickes Hine Game of craps. Cincinnati, Ohio 1908 The following is a veritable tour de force by Nicole Foss on the value of gold in a crashing ec
[See the full post at: Gold – Follow the Yellow Brick Road?]All very true. Of course. 🙂 If it’s not in your hand; you can’t use it.
I prefer silver, being an extremely unwealthy person. Gold is too valuable for me. I have visions of really needing to go someplace, after TSHTF, and being at a gas station desperately needing gas- saying to the station owner “Have you got change for an ounce of gold?” He will smile, and tell you no. So – your 30 gallons of gas will cost you an ounce of gold.
Silver is a little easier. The other factor to keep well in mind is that no business person will accept your gold – until you prove it IS gold, not a fake. Tungsten is only one of the more sophisticated ways to counterfeit; in all other times when metals were money- it was understood, your money had to be tested. That takes time; and money, too.
If I had any money- I might buy a little more silver at the moment.
Greenpa: Purchase a Fisch library: https://thefisch.com/
Very true about wealth drawing fire, but not just gold; any visible wealth. In any case, the only sure thing is to get out of debt, so it cannot be called. Certainly it’s possible that high/hyperinflation would minimize your debts, but what in the last 15 years would make you think everyman, i.e. the net debtors, would be allowed to prosper at the expense of the banks and financiers, i.e. the net creditors? They’ve shamelessly changed the rules at every turn, or ignored rules altogether, or lied and stolen billions outright more times than I can count, the roll up of MF Global being but one egregious example.
So even if you think the deflation will precipitate a currency revaluation (as 1933 or 1970s) the this rule-created inflation seems more likely to follow the Mexican Peso crisis, where money lost value but debts stayed the same, making those debts ever-harder to pay, and thereby transferring enormous wealth and power to the insider class and leading to the atrocious situation Mexico is in today. It would make a lot of sense if this debt-baiting were the case, for the present environment has artificially enticed the whole world–man, company, and nation alike–into enormous, unprecedented debt. You think they encouraged that debt to let all those guys win at their expense? Perhaps not.
In any case, debt is an obligation, and the fewer obligations, the more options one has, which seems preferable in a time of crisis and uncertainty. If debt is between 8-25%, and the stock returns have been modest, and bonds and cash practically zero, then being out of debt seems the surest, safest, most profitable investment available. Certainly better than gold or silver, which might draw legal or criminal fire, onerous windfall taxes, be outlawed altogether, or need to sell them in or out of a financial/money system that has more or less seized up. They might work after the system is restored, but as we’re finding out in Argentina, Cyprus, Greece, Russia, etc, the in-between crisis might be years or even decades long.
Highlights the quote: “There [can be] no safe store of value. If there were, the government would have to make its holding illegal,” Perhaps that is a way to say there can only be either freedom or fascism, because a mix will require the ruling forces to gravitate either to free human action which is cheap, or to ever-increasing control which is expensive and self-defeating. However, ever-increasing authoritarian control can last a very long time indeed, as it did in the Soviet Union. That’s not a lifetime bet. It’s a bet you only make if you have multi-generational wealth to protect: not an easy place to perch, even for the truly wealthy. Saving 8%-25% a year in debt, however, is a sure thing. The only possible downside is lost opportunity cost if we are freed when all our debts are miraculously wiped out. If that happened, the economy would be so hot perhaps we wouldn’t mind foregoing a higher initial point as everyone would move up rapidly and happily together.
For those with eyes to see what demonstrably exists in reality:
AitT – Sir Isaac Newton Weighs in on the World Trade Center North Tower Collapse Official Narrative
https://www.weaponsofmassdebt.com/index.php/blog/aitt-sir-isaac-newton-weighs-world-trade-center-north-tower-collapse-official-narrative/
The Debt-Money Monopolist financed 9/11 narrative is as fake as $3 bill.
Also… from the article…
“bank deposits would lose their purchasing power and government-created bank credit”
Government created bank credit. Repeat that as many times as possible until you realize that the government doesn’t create bank credit, banks create bank credit, hence the darn name, “bank credit!” No wonder we make so little progress against the Debt-Money Monopolists.Great synopsis!
And considering AU has pretty much outlasted governments for thousands of years, this one will likely be outlived by it as well. So, if one is simply looking for a portable bridge to the “Other Side,” well, we do still have options, no?
And considering the lust for power on the part of TPTB, shorting their abilities to crush deflation is a high risk proposition. Feel lucky?
Great estates are made of Real Estate, Precious Metals and Collectable Art. Most of these holdings are bought with no intention of selling, but to preserve wealth over very long periods. Don’t know of many old and lasting fortunes consisting only of fiat notes.
Also, this time around, I’m not too sure the general public is going to be as cooperative with government confiscation as in the past. California’s Prop 13 was an example.
Best point made in the article was one of priorities. Time to move to where one plans on making a stand for the duration. Mild climate, long growing season, reasonably sparse population density, water and wood sources etc. Skill sets and tools to fix or build things, and access to a sea port in case the best way to avoid trouble turns out to be to simply leave. Then, put any surplus in other tangibles.
Here in Asia, gold is and historically has been, an integral part of the cultures.
A far different set of values than the west; gold is very fungible here, as there are gold shops everywhere ready to buy and sell by a simple walk-in.
Bullion and coins can be problematic (for exchange), but jewellery is a whole different reality. Rings, bracelets, necklaces, et al, can be bought in a wide variety of weights, which make them very useful (without the security risks) for small, medium, and large expenses.
Personally, I do not view gold as a savings tool, but rather as a security reserve for emergencies. As the old saw goes; don’t put all your eggs in one basket.
It shouldn’t matter what the day to day price is if one wants security; not investment…
Gold as an investment is a fools errand, IMO…Great estates are made of Real Estate, Precious Metals and Collectable Art. Most of these holdings are bought with no intention of selling, but to preserve wealth over very long periods. Don’t know of many old and lasting fortunes consisting only of fiat notes.
Thank you Professor. Few understand gold, but most have much to say about it.
Confucius Say ” A Fool and His Gold Are Soon Parted.”
A thought provoking essay, but I have a few objections. First, gold has not held constant purchasing power over time. An ounce of gold had far far far more purchasing power during the Roman Empire than it holds today: https://ancientcoinsforeducation.org/content/view/79/98/
There are many historical merchant records from the Venetians that also confirm gold purchased a lot more throughout the middle ages than it does today. Why is that so? On the runup to peak debt in our modern world, virtual “financial wealth” competes against gold and other material world items as a store of value. I think that Nicole is right that the whole world of financial wealth is going to come crashing down. When that happens I think gold we be de facto revalued much higher relative to the current purchasing power.Nicole is right that in a financialized world supply and demand do not set the price. And for that very reason I think Nicole may be wrong that the purchasing power of gold will be falling because people are forced to sell.
So just like Michelangelo, I like getting paid in gold ducats, they are about 1/9 oz each, say $125 a piece. they are dime sized little coins. I change about 20% of my income into little gold coins and old silver dollars everytime I sell my art……..its my treasure,my core savings, my last dollar in my boot,etc….its security. I’ve got paper cash too and a little in the bank, to use while the bank still works. My plan is to use paper money till it is no longer accepted, then go to coin if I need cash to trade. I suppose gold may be made as illegal as heroin, if that happens I’ll cast the gold into religious artworks, crucifixes and the like, hoping that would exempt my ownership of it(assuming we still have a constitution)and preserve my ability to trade it.
I just have this faith that:
1)gold and silver will never be worthless, never go to zero
2)may well preserve a store of wealth much better than a pile o paper dollars
3) may be the basis for money in what ever economy emerges on the other side of the “several decades of challenge” we face, and my kids/grandkids may be greatful for what the old man put away for them.My grandpa lost $45000 and his three fruit stores in the depression, he died a very poor man 25 years later in 1953…the banks just closed their doors and his money was gone never to return…I wish he was storing 2250 oz coins of gold instead.
thanks Stoneleigh
The end of my last message was rushed because my wife was yelling at me that it was time to go.
I wanted to add a point that Nicole touches on in the article, and that sculptor also touches on by referring to “whatever emerges on the other side”, and that stands in sharp contrast to Greenpa’s concern (in jest?) about getting change at the gas station. My point is this: Nobody should buy gold with the idea that they will sell or barter it away to get through the crisis that is coming. The whole point of saving gold is to have something once you get through on the other side. As for getting through the crisis, that is where the perspective of TAE is so helpful. We all need to be prepared so that we can get through this crisis without the need to buy anything. That means getting out of debt and eliminating dependence on cash flow is the top priority. If you can do that first, then it makes sense about how to save up some wealth that you hope survives to the other side. If you need to sell your savings during the crisis, before the final death throes of the system that is on its last gasps, you might need to sell at prices still set in the futures market, which may have a long way to drop before the rubber bank finally snaps and we find real price discovery in an un-leveraged all physical market.
bogaloo, perhaps another point I would like to add is this: Gold is my hedge against absurdity.
gold is an ancient classical timeless symbol of worth,(“good as gold”, “the gold standard”,etc)In the world of art, I have witnessed a kind of madness in modern times….Da-Da-ism, an Absurd world where sculptor Duchamp mounted a urinal on a gallery wall which became as highly valued as a Rembrant or Vermeer or greek antiquity,….An artist (Manzini) has literally sold an edition of sealed cans of his shit which now are collected at over $100,000 per can….a gallery filled with dirt 3 feet deep gets rave reviews etc etc…OK, I admire their vision and verve in marketing, but sorry, their art has no value to me, ( I am a classicist, I sculpt the human figure.)
We are now entering an era of financial Da Da. where professeur-academic-philosopher- wizards propose theories of money that are absurd suggestions…..however, the willing masses are induced by these hypnotic suggestions, under the trance of a zero added to the end their account, they believe it will render them ten times wealthier. I believe this is the road to Zimbaweimar. So I cling to the classic values of a foregone age.
Gold is fairly immutable and its physical amount cannot be increased by 10x a bankers keystroke, it has a history (and, BTW is held by governments/central banks/oligarchs/used as money in over half the world africa, middle-east, asia etc) ……I think Nicole is brilliant, but perhaps her sensible pragmatic intelligence may partially blind her to the ridiculously absurd behaviors of which the financial/ruling elite are capable……my gold is a hedge against that madness, a hedge against chaos, it is one of the anchors of antiquity to which we may moore in future times.
I love how many people constantly argue how gold will never lose its value, how it will preserve wealth, how it will help on the other side of crisis, blah blah blah… those who get all defensive and emphatically state how valuable gold would seem to be either obtuse or gold bugs.
The things I take away from this article and Nicole’s previous comments on gold is that it’s unlikely you’ll be able to benefit from it regardless of how valuable it is (as it might be 20 years before you could safely trade it for something – that’s a LONG time away when volatility and uncertainty for the future are exploding), and that investing in gold before investing in your own resiliency is pointless as you won’t be able to hold onto your gold if you don’t have a strong/sustainable foundation in place.
I’d love to know how many people who are “stacking” gold and silver actually have a large paid-for property with access to water, decent soil, natural energy sources like wood/wind/water (not fancy-pants PV systems that will likely fail long before their 20+ year ‘guaranteed’ lifespans), valuable skills to produce things or provide services of actual value to anyone, a strong tie to a community of like-minded individuals, hard goods for working & living off the land, etc.
Even ‘prepper’ style solutions like freeze-dried foods and ridiculous weapons caches may end up being a better investment than gold in the short term; freeze-dried food can be eaten, and weapons can at least be used for hunting.
So please, do everyone a favour and stop trying to make arguments for how valuable you think gold is. It’s not a question of gold’s value, but the circumstances in which you can capitalize on said value. And I think Nicole has made very strong points that few of us “average people” will be in a position to do so.
Cheers.
Variable81, these are all good points, all factors that one should consider when making decisions. However, I get the sense you approach this as an “all or nothing” proposition when you present it as a choice of either/or. In fact we are not presented with one path to follow, but multitude of decisions we need to make individually and as part of our communities. I agree with you that many who are “stacking” take a view that is narrow and naive. But I think it is also narrow and naive to not buy any gold at all. I think this is just as foolish as living in a small flat in a big city with no more than 3 days of food on hand. Isn’t there a middle path, a path of moderation, a path with the common theme of “get out of the financial system and into the physical world”?
When the financial system collapses, the real world, the physical world, will still be with us. And when that happens, everything in the world will be revalued against things in the physical world. Ownership may change, but there will still be an owner for everything capable of ownership.
You seem to take a view that it will be a long slog, one that will last decades. That may be true, but then again it might not be. There may be a sudden collapse, followed by just a few months of chaos, followed by a whole new steady state financial system, where everything is suddenly revalued against the one physical asset that has been used for centuries for that purpose. Or there may be war, to accelerate our journey to wherever we are going. One way or another, there will be another side for some of us who live long enough to see it.
I for one do not think that things will get so bad, and stay bad for so long, that the only people who survive are the people on the TAE commune. Rather, I think it will get very bad, and be resolved fairly quickly, but with a new steady state system characterized by a massive rich-poor gap (one that makes the current gap look like a crack in the sidewalk). And there may be some people kicking themselves saying “What was I thinking, thinking that I could go back to farming — when I don’t know anything about farming? Why didn’t I sell that crap in the garage and at least buy a few double eagles?”
Who knows? It is impossible to be prepared for everything . . .
variable81……of course, take care of your paid off homestead, well stocked with tools of survival, well insulated, supplies laid in, etc…..then examine your left over stack of paper promises(cash, stocks, bonds), save some or most of that stack, but diversify and hedge its value, because there are currency collapses, market collapses , bonds that default, annuities and pensions that disappear; sooner or later, every paper currency in the history of the world has failed. These collapses are sometimes slow but sometimes unbelievably rapid. But even after such a collapse there is always a need for liquid asset/ cash.
if you have property, you will always have to pay taxes to keep it, or protection to the local war lord or community protection society, etc etc…there is always a Ceasar with a tax man with his hand out. Pay or lose your land. So unless you think you will be able to settle your tax bill with homegrown tomatoes , have some coin laid in, they are cheaper than bullets to protect your homestead ownership.Check out “Devil Take the Hindmost: a History of Financial Speculation” by Edward Chancellor. The book covers many of the financial bubbles dating back to the Roman Empire (e.g. Tulipomania, South Sea, 1920’s stock markets); if I remember correctly, the time it takes for the “bust” to play out is about as long as it took for the “boom” to reach its peak.
We’ve arguably been blowing a massive debt bubble since the late 70’s or early 80’s, so I figure we’ve got about 20 – 30 years of deflation/depression to look forward to. Even were a war to be started, I doubt it would happen so quickly that we wouldn’t have to endure at least a few years of hard times prior to wartime industry ramping up (which given our increasing constraints on commodities and cheap energy, one has to wonder how inflationary that would be in the face of trillions of dollars of debt defaults).
I don’t think we’ll see many people wishing the had bought gold once the collapse arrives. Gold, like most commodities, still has a long way to fall in terms of price. And I think most people will be wishing they had learned a trade or learned to farm, had made sure they had access to food/water/energy, had established resilient and like-minded communities, and had taken better care of their health. I don’t see gold helping very much in any of these areas at a time when nobody has anything of real value (i.e. food/water/energy) that they would trade for gold, and those who could afford to buy it off you would not likely pay fair market value (instead, squeezing it out of you as cheaply as possible when you are desperate).
As Nicole said, gold will likely hold its value. And having a small amount of it as a hedge or for some emergency may be a good idea. But people who are completely unprepared and think that gold will be some sort of panacea during a collapse are likely in for a surprise.
“there is always a Ceasar with a tax man with his hand out”
This assumes there is enough energy / coordination / trust to have a “taxman” in place collecting for the government. As Nicole has pointed out several times before, the trust horizon looks to be collapsing and Federal / State / Provincial governments may find themselves constrained in the near future.
However, you’re probably correct that for some period of time governments will use whatever influence they have to extort as much tax revenue out of land owners and the general citizenry as they can. The only way I can see avoiding that is to own land in undesirable locations and/or where taxation is low and to minimize one’s footprint on said land (i.e. a million dollar home might not be the best investment).
Cheers.
I appreciate Nicole’s perspective. In a just world, unstoppable deflation would occur, wiping out the banking system and their governments. However, there is a strong motivation for politicians to keep their beloved banks and for those who control the banking system to maintain their top dog status. I wouldn’t be surprised to see negative interest rates by the end of 2016 in the U.S. and another version of QE. I believe such actions would put a floor under gold/silver.
Gold and silver have not hit bottom yet as they tend to decline during the hard down phase of the stock market. So, a 50% retracement for gold to $950 and silver beneath $12 could be expected before rebounding. FX markets are what’s going to get the U.S. Once the Euro goes, the U.S. dollar will be close behind. This may not happen until after 2020 but it would behoove one to have PM’s under their direct control. Silver would skyrocket in such a scenario.
on the understanding that gold is only useful for long-term capital preservation and would only be useful after coming out the other side of a (potentially drawn out) crisis
and on the understanding that gold is not a panacea to getting through the actual crisis when more immediate wants will dominate …
what are people’s thoughts on allocated reserved bars bought via BullionVault?
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