Having an interest in history, I’ve been doing a good bit of reading on financial systems dating back to the Old Testament times (7th century BC) as well as more modern societies prior to fiat currencies (fiats are currencies declared by a Government to be valued at a certain amount but are not backed by any physical commodity).  These include the Vikings (first known coins 995 A.D), ancient Romans (500 B.C), and ancient Chinese empire (770 B.C).  The vast majority of currency in history has been based on the use of precious metals (PM) as an intermediate currency.  The reasons are fairly simple:

  1.   Coinage is durable.  There are still coins in existence from the above mentioned cultures.  Even if a coin has a lifespan of no more than 100 years in circulation before needing to be re-minted, the precious metal it is made of still holds value.  Chickens die, food spoils and guns rust.  Gold doesn’t.
  2. Fiat currencies fail.  All fiat money is based on a governmental guarantee that your cash is worth something.  It isn’t backed by gold, nor is it redeemable.  When a government fails, all of that currency is paper.  Look at Soviet Russia in the period of 1918-1921:  hyperinflation ruined the ruble and it failed as a method of storing wealth.  A mountain of those rubles would be worth whatever a mountain of toilet paper and firestarters is worth.

So I’d like to take a look at PM’s regarding “the end of the world as we know it” (TEOTWAWKI) from a few different angles.  I am not advocating PM’s as a sole method of storing value.  Prepping is about insurance:  the more things you’re prepared for, the more likely when one of them befalls, you will be equipped to handle it.  I’ll tackle such arguments as “you can’t eat gold” later.

Before The Fall

You run into two major theories here, both with historical precedent.  Either you have a slow decline leading to spiraling hyperinflation before the whole mess crashes, or you have a major event that sends a massive number of people into the bronze age.  (Note: I’m intentionally disregarding regional disasters such as major earthquakes or hurricanes.  Those don’t directly cause currencies to fail, nor do they change PM’s value as a barter item.)

With a slow decline, your currency becomes less valuable by the month, day or hour (in extreme historical circumstance).  PM’s purchased before the decline gain value in direct opposition to the failing currency.  When we say the value of PM’s are up or down, we’re really saying the inverse:  the dollar is down or up.  The value of PM’s relative to the American dollar isn’t the same as the value of PM’s relative to the Yen or Euro.  Notice when a country has financial troubles “we buy gold” signs pop up everywhere?

With a cataclysmic and rapid departure from the world we know, the likelihood of using your old currency to buy what you need is low.  How much cash do you have in your pocket right now?  Don’t count on using your ATM card when there is no internet.  Silver and Gold have been treated as valuable since before the Roman empire was an itch in southern Europe’s skinny jeans.

During The Dark Times

Bad times are here.  Maybe one country has fallen to accident, war or disaster.  If it’s a superpower, the rest of the world will be feeling the crunch financially.  In this scenario, the rough days could number in the years before a semblance of civility is restored nationwide and a new government is implemented.  Humanitarian aid and multinational involvement would be likely if war is not a factor.  PM’s are valuable in other countries right now, that wouldn’t change if they’re still up and running.  A fistful of benjamins would be worth a fistful of nose blows.  Food is something you will (shockingly) need to survive.  Probably don’t want to trade much of that away…  Ammo has uses defensive, offensive and for sustainability.  That’s good for trading IF you really don’t need it.  Ostensibly, nearly every item with barter value is directly related to survival.

A Brave New World

Take a look around the world today.  Do you see any nations or regions that were thriving recently and now resemble a terrible Mad Max reality?  Nope.  Even with a full global meltdown, anything short of an extinction event will leave behind a significant number of people.  Wherever there have been humans, there is a tendency towards grouping, commerce and mutual reliance.  Don’t expect some long-running Book of Eli business.  Even if that were to be a reality, there are a mass number of variables, too many to account for.  A sharp brain and strong body are always valuable assets.  If you’re looking past the big slump in the middle, what’s the plan for securing wealth now that will stay valuable until then?

I’m no definitive expert on this matter.  This article is not the be-all-end-all conversation that will zip up every internet thread regarding PM’s.  I am someone who has been in a country where the local fiat currency was nearly worthless.  I have also been to a few countries where I exchanged for some of the local currency and now that currency no longer exists as legal tender.  Frame it as a memento or give it to the kids to play with.  It has no intrinsic value.

You Can’t Eat Gold

Now I’d like to give my take on some of the common arguments against having PM’s as one part of the prepping plan.  I’m emphasizing that PM’s should be considered only one part of the solution because number one on the most heard arguments against PM’s is

  1. “You can’t eat gold”.  Right.  I don’t want to eat gold.  I want to eat food.  I don’t want to trade away my food.  I can’t eat bullets, but I can use them.  I don’t want to get rid of those either.  The main point of using currency/PM’s is to be able to store value when you’re not engaging in commerce or have no direct trade options.  You have a lot of one item but are going hungry.  You would like to acquire some of my many chickens.  I have no need for that item you have many of, nor for an IOU.  PM’s have been used widely though the last 9000 years of human history.  Even if there is a system of commerce based on trade of goods and labor, do you think there won’t be even one person who thinks PM’s will be worth a trade?
  2. “What are you gonna do, carry 30 lbs of silver around?”  Nope.  No more likely than carrying 4 extra guns to trade or herding a dozen chickens around in a nomadic lifestyle.  A single  .1 ounce gold coin is roughly the same weight at a penny (2.8 grams), yet worth about $121 bucks today.  A 1 ounce gold coin is about the same weight as a pair of JFK $.50 pieces, yet worth about $1600 right now.
  3. “Gold and silver aren’t valuable because they’re just shiny metals”.  Thousand of years of human history would beg to differ.  Even if you take out all space age and industrial uses, silver and gold are still essential in medical and dental uses.

 

In closing, I agree with the naysayers that “PM’s are only valuable only when we all agree they are.  9000 years of recorded human history says that someone will invariably think that they are, or will be, valuable still.  PM’s do not replace beans, bullets or survival equipment.  They sure don’t replace knowledge and skills.  Precious metals give you a way to store wealth and a way to barter a nonessential item that can be easily transported and hidden.