Dear Mr. Rawles,
Regarding the use of gold as a store of value, it’s important to realize that gold often functions as a fiat currency. It does have intrinsic value for jewelry, electronics, rust-proofing, and some chemistry applications but the vast majority of its value comes from the shared expectation that people will accept it as being valuable in the future. The only difference from fiat dollars is that it’s harder – but not impossible – to increase or decrease the gold monetary supply, and that supply isn’t controlled by any government.
In a disaster situation things get even worse, because if the lights are out you probably don’t need gold for jewelry, electronics, or chemistry, and there are less conspicuous ways to rust-proof things than to gold plate them. The only significant value of gold in that situation will be the expectation that others will value it in the future – it will be a pure fiat currency. Contrast that to prison currencies like cigarettes, which hold truly intrinsic value but are still used as money for trading.
I’m not saying that it definitely won’t be useful – fiat currencies have worked fairly well since the late 1960s and there’s no reason to believe that gold cannot function as an unregulated fiat currency. However, all the preparedness sites I’ve read appear to see gold as having intrinsic value, where in fact only usable items and resources have truly intrinsic value. (Food, ammo, coal, whatever)
I know personally that given the choice between trading MREs for gold versus trading for bullets, I’d have a heck of a lot more use for the bullets – regardless of now or after a crash.
Thank you for the time you spend maintaining your site. When my own personal finances aren’t so dire I certainly intend to buy your books. Sincerely, – Daniel
JWR Replies: I agree that gold will have only marginal utility for barter during an economic collapse. It will only come into its own in the recovery phase. Gold can act as a “time machine”, preserving your buying power from now until the far side of a currency collapse. (When it presumably could be converted into a new, stable currency.) But don’t expect it to do you much good in the middle of a crisis. (You are right that common caliber ammunition will be a preferred barter item.) I ‘ve always considered silver preferable to gold for barter, for the reasons outlined in my novel “Patriots: Surviving the Coming Collapse”–most notably that gold coins are too compact a form of wealth for efficient barter. Silver dimes and quarters are much more practical.