Precious Metals in Context: Prudence, Moderation and Balance, by Gentleman Jim from Colorado

As I read the occasional letters and articles on SurvivalBlog about storing/using precious metals (PMs) during a TEOTWAWKI of whatever sort, I must conclude that every single writer is absolutely correct–and yet also mostly wrong. You might ask: How can everyone be right and wrong, simultaneously? It’s because most preppers seem to anticipate and plan fairly narrowly for the use of PMs. IMHO, if you’re taking such a narrow lane down the preparation highway, you’re not thinking big enough.

Any situation following a currency collapse will be complicated by varying degrees of social disorder, economic breakdown, extreme paranoia among the population, (hopefully) temporary increases of theft and violence, etc., and thus will follow certain micro-unpredictable, yet macro-predictable, patterns. Saying it in a less scientific way, it is nearly certain that “big-picture,” long-term trends for currencies in crisis, and especially the consequences of certain governmental actions, are extremely predictable. There have been more than 500 currency collapses in modern history (most recently in Zimbabwe, that I’m aware of, and seemingly ongoing for the US Dollar). Thus, economists and financial gurus can predict with fairly good accuracy what patterns will emerge during any currency crisis–whether it something as simple as hyper-inflation, devaluation or the wholesale destruction of a nation (and thus its currency). That makes such events macro (big-picture)-predictable.

Still, every civilization, society, currency and situation has unique characteristics and millions of variables, so certain events common to currency failures and thus almost certain to happen (macro-predictable) will still be hard to predict on a micro (small-scale) basis or timeline. In other words, economists can predict an abandonment of fiat currencies, they just can’t predict the day, nor usually even the year. They can anticipate reliably that wheelbarrows will at some point be used to carry paper money to the grocery stores, but they just can’t predict which person, on which day, at which store, in which city, will start the trend. Nor exactly when/how that trend will end, as the currency becomes so worthless that even a wheelbarrow-full isn’t worth the effort of taking to a store.

Similarly, centuries-tested stores of value like gold and silver are almost certain to hold their relative value through almost anything crisis. Will gold and silver prices go up and down? Will governments make them difficult, illegal or even dangerous to one’s health to hold them? Sure; but look at this way: if gold and silver were good enough for the Phoenicians to trade in; for many Jews to use to escape Hitler; for Marco Polo to use in his travels; for ancient, medieval and modern rulers to bribe the guards and spies of opposing rulers; for royal families to use to pay the ransoms of hostage family members; for Alexander the Great to exact in tribute from besieged cities; and for defeated Nazis to spirit away to safe havens after WWII. So it is a good bet that they’ll be just as useful in any future scenario you can imagine. I could be wrong, but you shouldn’t bet against that over the long haul.

Yes, a number of negative trends (take your pick: currency failure, government failure, world trade imbalances, food shortages, major droughts, out-of-control crime, oil shortages, nuclear terrorism, pandemic diseases, revolutions, major wars, civil wars, etc., etc.) could in theory climax simultaneously, causing gold or silver to be un-tradable for short, perhaps even moderately-extended, periods. (Note: I did not say “value-less.” Just un-tradable. Folks will hunker down and drive off potential threats, and food, water and ammo will be the needs in the now. Over any period of more than a few months, though, society will demand a currency to enhance and ease barter, trade and commerce.

Yes, there may be short transition periods when precious metals will be temporarily under or even un-valued by some people, in some regions. But survivors must be pragmatic and flexible when they’re hungry or in danger. Since nearly all Americans have at least some gold or silver jewelry, it seems likely the mental transition to gold or silver-based barter or currency wouldn’t be difficult for most. Look at this way: When we travel overseas, the local currency (be it the Euro, the dollar, the Real, the Yen, the Renminbi, the Hutsi-Tutsi or whatever) always confuses us for a few days, until we get a feel for what it buys in real, local terms. Mentally converting from our “home” currency adds additional confusion, but usually not for long. Don’t you and nearly all other foreign travelers very quickly overcome confusions over the local currency? Within a few days, we’re bargaining at the bazaar or market and have a very good handle on what something is worth, and whether we’re getting charged “gringo prices.” Surely a transition away from the dollar and into silver or gold, in whatever form, can’t be too much tougher than adapting to foreign currencies, when the need arises.

Yes, there may be short periods when guns and ammo are worth far more than silver, and possibly even gold. But if that holds true for very long, you’re probably going to be dead anyway, unless you can get access to military-level armaments and armor. (Think about it; who’s going to own all of those mortars, tanks, Apache helicopters, SAWs and F-18s if the government collapses completely?) On the other hand, in times of outlaws the common folks tend to band together and get rid of the outlaws. It might take a month, a year or a decade, but it will happen. Still, the key thing to remember is that common folks are not trying to make the world safe for guns and ammo; we use guns and ammo to make our world safe for living, trading and improving life for our families. When that point is reached, the relative value of guns and ammo will drop, just as it did in the frontier West, and the relative value of easily-exchanged commodities like gold and silver will go up.

Yes, there will be times when a bushel (heck, even a cup) of wheat will be worth more than a pound of gold. But almost every civilization since the dawn of time has soon invented a means of exchange–a currency. When that happens, things tend to be a bit more peaceful, farmers are farming and gunsmiths (and all the other trades) are buying food. Farmers that are farming peacefully = more food grown = drops in commodity prices. (As an aside, it seems probable that an effective portable water filter will be worth more than either wheat or gold, at some critical points in most TEOTWAWKI scenarios. Huge municipal water filtration/treatment systems are a product of peace, order and stability–not social chaos. We can live a long time on relatively little wheat or other foods, but only a very short time without pure, clean water. Remember, you won’t be carrying 55-gallon water barrels anywhere–so you’re going to need a sturdy, effective, long-lasting and portable water filter.)

You shouldn’t bet your (and your loved ones’) survival on a single commodity for future barter purposes, whether that be gold, silver, wheat, rye, 9mm, .223, lead, water, gunpowder, canned meat, spices, guns or whatever. IMHO, a reasonably proportional stash of precious metals in multiple forms increases flexibility, reduces overall risk levels and markedly improves your odds. Quite honestly, there is no single precious metals solution for every situation and need. Gold is too valuable for most day-to-day situations; silver can be too low in value for some needs. Why have only a few dozen Silver Eagles, when you can balance your preps and expand your flexibility by also owning a couple of Gold Eagles, maybe some Maple Leafs, and a good stash of 90% silver pre-1965 U.S. coins? And, why not a few reasonably-sized silver or gold bars or ingots, if that is in your budget and makes sense for your situation? You should tailor and balance your holdings to fit your budget, region, lifestyle, perceived risks and survival strategy.

* If you anticipate a “drop everything” evacuation, you’ll be leaving behind most of your heavy silver bullion bars, and your stored items in general, due to weight limitations. So, either don’t buy them, or bury them some of your stores in locations you can retrieve from later, or be prepared to hide them quickly in some other way.
* Rare or collectible coins? Only if you have a very generous budget to work with, and you believe that hyper-inflation is the biggest, and almost-certain, risk out there, and are focusing your preps on long-term horizons.

Just as you plan for redundancy and back-up solutions in other areas of preparedness, you should apply it to your precious metals caches. There’s a reason you have both power tools and hand tools; several varieties of rifles, if possible; specific handguns for specific purposes (your concealed-carry pistol probably is not your open-carry pistol); and spare parts for just about everything. Most would agree it is wise to have a multi-fuel generator and solar power and some micro-hydro power too. You prepare a defensible retreat, but also also pack bug-out bags just in case, right? Many of us have both gasoline and diesel-powered vehicles, if we can afford it. So why wouldn’t the same logic apply to your gold and silver stores? With many different “tools” in your PM toolkit, you can pick the right “tool” for whatever situation you encounter.

Now, back to Micro and Macro: While most of us may encounter micro-situations where precious metals hold little immediate value–in the macro sense, those situations will be relatively rare. Indeed, the odds are much in favor of gold and silver retaining important value in any emergency situation. If the ancient Romans, Greeks, Egyptians, Spanish Empire and many other civilizations over millennia have valued silver and gold so highly–why would you want to bet against it for the day after tomorrow? Next month? Next year? To me, the odds clearly lay with gold and silver. Yes, I still have appropriate firearms and ammo, and some reloading equipment, too. I’m just not going to bet everything on firearms and ammo, in isolation. Just like I’m not betting everything on having only food storage. The common-sense rules of prudence, moderation and balance dictate otherwise.

In short, never put all of your preparedness eggs in any single basket. For most of us, that means we should pursue a balanced and reasonable cache of silver and/or gold, in multiple forms, for multiple potential uses, along with our other balanced and reasonable preps.

Blessings to all, – Gentleman Jim from Colorado