With the national debt increasing by over a trillion dollars this year, and maybe even larger to contain the effects of the coronavirus pandemic, budget deficits on a scale not seen since World War II, with an unemployment rate soaring to higher levels than during the Great Depression, record government spending, and the lowest interest rates in years, we have to ask ourselves if this is sustainable. Nations which have gone this course and experienced the same hyper-inflation we are staring down the barrel of right now, like Venezuela and the former U.S.S.R have imploded as a result of the same. With interest rates so low, is the Federal Reserve running out of tools in its tool chest to steer the country away from certain hyperinflation? Are we spinning out of control? Are our markets on the verge of collapse? Are we out of options, and what can you do to protect your finances against the hyperinflation which appears to be inevitable?
In this blog, we’ll look at the historical role precious metals have played as a safe haven against hyperinflation and address many concerns and questions preppers have asked when it comes to precious metals as part of your inventory. So stick around.
Before we start this blog, let us address what’s on people’s minds: “You can’t eat precious metals!” or “The value of food will be higher post-collapse.” Both of these are true. Food and water are the ultimate resources in the worst of situations. Within your supplies, however, we think there is a place for some precious metals which we’ll discuss in this blog. If at any time you’re interested in picking up some of the precious metals we discuss, we’ll post a link in the description section and pin a comment below.
So that being said, what is the value of precious metals? What we’ll do in this blog is look at some of the uses of precious metals in the prepper’s inventory, some of the applications of precious metals in an SHTF situation, what mix of metals is right for you and your inventory, whether these timeless metals have a place in your prepper’s inventory, where you can purchase the metals, and where to keep them. Right up front, we want to let you know we are not a financial advisor. We are not an economist. We are not a scientist. As with all things, we try and look at all things, including precious metals, from an objective prepper’s perspective. Before engaging in any scientific experiment like water purification or electric wiring, please do your own research and consult with an expert. And, obviously, before engaging in any investment strategy, if you choose to use precious metals in this way, consult a financial expert with experience in the field.
Paper Currency and Precious Metals
From a prepper’s perspective, we have to know the history of paper money versus precious metals to understand how their values could change in a larger global crisis. To understand the value of paper money versus precious metals, we need to have a brief history lesson. Without providing you this background, you won’t really understand the value of precious metals. Paper currency began as vouchers of credit, usually backed by precious metals or a sovereign’s promise of value. The first known appearance of paper currency was around the 7th century, during the Tang Dynasty in China. Paper currency began to appear in European countries around the 11th century and in America as early as 1690. The fundamental reason paper currency became a popular means of payment is that it was lighter, of course, and it was, therefore, also easier to hide and secure. Still, it typically represented the wealth of precious metals underpinning it.
During the 1860s, silver was being mined at such high rates that the U.S. government began issuing certificates in 1878 under the Bland-Allison act. Under the act, people could deposit silver coins at the U.S. Treasury in exchange for certificates, which were easier to carry. This representative money could also be redeemed for silver equal to the certificate’s face value. The “Gold Standard” was a monetary system in which the standard economic unit of account is based on a fixed quantity of gold. It was widely used in the 19th and early part of the 20th century. For every dollar in circulation, there was a precious metal supporting it, deposited in a vault somewhere, hopefully secure. At the very least, perceptively secure enough to lend its intrinsic value to the paper note representing it. Even the term, “Gold Standard,” which most people don’t understand the original meaning of, has become a phrase for the best, most reliable, or most prestigious thing of its type. To be as “good as gold” and “worth your weight in gold” are just a couple of the phrases that allude to the intrinsic value of precious metals in people’s minds.
America kept this Gold Standard until, amidst the Great Depression and fearing people would completely deplete the U.S. gold supply, Franklin D. Roosevelt severed the dollar’s tie with gold. In response to mounting unemployment and spiraling deflation like what we are experiencing this very same day, and needing to keep interest rates low, the U.S. government had little option but to pump more money into the economy. To do this they needed to break the tie between paper notes and their supporting precious metals. The gold standard completely disappeared as any standard in 1971.
Without this underpinning of the currency, paper money floats on its own global exchanges backed only by the government’s word of creditworthiness. It only has perceived value, and that value can evaporate. As other industries like fossil fuel or banking falter or fail, so too does the dollar. As governments individually fail and their currency becomes worthless, the precious metals remain valuable on a global market and in exchange for locally acquired, tangible goods and services. Precious metals, quite the opposite of paper money, experience a surge in value when economic uncertainty looms over a nation or the world. Precious metals not only retain their value, they typically gain in value as economics become more uncertain. When a loaf of bread costs $20, the dollar is perceived as valueless. How much would a loaf of bread cost in troy ounces of silver, though, where the perceived value and listed value of the precious metal, even with the reduced capability of exchange on a market, is intrinsic and higher?
Where can I Obtain Them?
Not everyone can rush out and purchase all the precious metals they want or need, so we recommend using a bullion company where you can purchase incrementally as your own finances allow. Local coin stores may be a good option, but you have to also account for the added security measures you have to take when others in the community see you purchasing from or frequenting these shops. The wrong person could see you make a purchase and then know that you have those metals, likely in your home. We had this very thing happen to a close friend a few years ago. He purchased precious metals on a somewhat regular basis from a local store only to have his house broken into and all his precious metals stolen. It was obvious someone knew he had these items despite the fact that he had been very tight-lipped about it.
As we mentioned earlier, security is paramount, so having the metals shipped to you from a reputable bullion distributor keeps nefarious eyes out of your business. We have recently used a website which we’ll provide a link to below for my precious metals, as they can either safely secure them for me as a hedge against inflation and economic collapse, or they can ship them to me. Personally, we do not keep more than a few ounces of silver minted coins at my house, but we’ve got precious metals stored at various locations which we’ll discuss more momentarily. We’ll also put a link to some very useful resources which have a tremendous amount of well-researched information for everyday people as well as investors. We definitely encourage you to educate yourself on your options. Know the facts and prepare accordingly.
A Timeless Allure Creates Intrinsic Value
For the layman, hyperinflation is when the prices of goods and services rise more than 50% per month. At a rate of increase that high or higher, the dozen eggs you buy in the morning will be marked up in price by the evening. This brings us to the real value of having access to some precious metals in your prepper inventory. Preppers understand that precious metals retain perceived value. Where currency can literally “not be worth the paper it’s printed on,” as they say, precious metals are looked at as the ultimate rebound commodity. If things ever get better, precious metals will have retained value. If things stay horrible, precious metals will still have value. This perceived value guarantees that, minimally, precious metals can always be used as a commodity of trade. There’s nothing in the historical record as far back as when metals were first mined and extracted from ore to indicate otherwise. Even before mining and extraction techniques were discovered, the nugget stones themselves had value for trading.
In a grid-down situation, silver and gold coins will have significant value because they hold the added value of their precious metal assay, or purity, and the stamp of authenticity lent to them by their coin form. If someone hands you a lump of shiny silver and an equivalent amount of American Eagle silver coins, you’re more likely to trust that the coin is silver and not just shiny metal. When it comes to bullion, the same is true. Coin bullion, while not used to make everyday purchases, is legal tender because it is minted by a government mint. It has and retains more value, typically than just bullion alone. While precious metals may be counterfeited, the stamping of a country’s mint mark is a type of certification of authenticity.
Most people could not tell the difference between a lump of steel, platinum, or silver if you handed them the three metals. Old coins or bullion coins, on the other hand, retain a sense of value, and can, therefore, provide greater trade value through a crisis situation. Old coins like Roosevelt and Mercury Dimes, Washington Quarters, and Walking Liberty Franklin and Kennedy Half-Dollars minted in 1964 and earlier are 90% silver. The value of most circulated coins minted in the 1920′s through 1964 is primarily from their silver content. Even when the currency value against the paper dollar is diminished, coinage is still a trusted commodity because of its precious metal content.
Regardless of shape, though, precious metals retain perceived value, it is for this reason alone, that preppers should consider having some forms of the precious metal in their inventories.
Properties and Emergency Applications
Any search of the web will reveal that precious metals seem to each have their unique set of applications and attributions. From the alleged health benefits of colloidal silver to the anti-microbial and electrical conductivity properties of silver to the malleability and reflectivity of gold, each has a range of scientific applications. Whether you plan to build a copper-silver ionization disinfection process, use copper tubing for water desalination and purification, create an electroplater, or a battery, there are a multitude of uses for precious metals. The purer the metal the better results you obtain from the process, which is why the high assay value of bullion provides you what you need for any scientific application.
When prepping with precious metals, research a few applications for the more common application: water purification, electric generation, electroplating, and anti-microbial treatment of items. Without the foreknowledge of utilizing the metals, they would be useless to you except for bartering in a global meltdown. Through research, you will be surprised how critical pure precious metals can be, as you rebuild or barter your way through a crisis. Remember always that there is at least the possibility that banks will not be functioning in the aftermath of a crisis. Paper assets and currencies will have zero value. In this scenario, it will be essential to have at least some of your financial assets in a physical form, but the question is how much?
How Much is Right for You?
Precious metals come in coins, ingots, bars, and rounds. As mentioned previously, minted coins hold the most trade potential, because of their intrinsic value. It is much easier to trade a minted coin in a small amount than it is to trade a 100-ounce bar. In a full societal, global collapse, precious metals will be almost entirely worthless, and you can’t eat them or drink them, so the amount and type you have will depend upon the level of prepping you are doing. Initially, in a grid-down or other catastrophic situation, people will want to barter for food or services–beans, bandaids, and bullets, as they say.
Typically, financial consultants will suggest you have 10-20% of your assets in gold and silver. This is a hedge against inflation and provides stability in uncertain times. The collapse of Venezuela and the former USSR left precious metals as the only tradeable commodity because of hyperinflation. This was because precious metals still had global value despite the country they were in. Many a bad ruler has tried to flee their failing and revolting countries with hoards of precious metals when their own currency wasn’t worth the paper it was printed on. As a capital growth mechanism, it is not. You will likely only get the same rate of return as what you invest because while it does go up over time, it moves slowly and in stable economic times it can actually decrease in value.
While silver bullion and silver coins, old or newly minted, provide the greatest utility, you do want to make sure that you are securing it and not revealing you have it. Before taking possession of any precious metals, make sure you have a plan. In the past, people buried their metals, close to their house where they were confident others wouldn’t find them but they could access them easily when necessary. A secure but hidden home safe is a possibility for some of your inventory, but it’s also the first place a bad guy is going to want to look. Wherever and however you secure your inventory, do make sure you have a plan and consider spacing your inventory out. Do you have a bug out location on land you own? Perhaps some of your inventory could be safely stashed there.
Decide how much of each metal and what type you feel is enough to adequately prepare you for an economic collapse, a grid-down situation, or full-on Mad Max scenario, and build that stash.
To review the points in this video, precious metals can be a solid addition to your prepping inventory. How much or how little depends on your level of preparedness and what you see on the horizon. Paper currency often loses all value, but precious metals are able to retain value for longer. In a fully deconstructed world, precious metals hold little value over beans, bandaids, and bullets. After all, you can’t eat metal, and prepping for your survival should come first. If you are scientifically inclined, precious metals, with their high purity, can be used in a variety of applications. If you are adding them to your prepping inventory for this reason, make sure you have the printed materials and maybe even make a sample build to guarantee yourself you have the knowledge you need to utilize the metals safely and effectively.
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