[Falconoffury]

If the depression gets really bad, inflation would go through the roof and money wouldn't buy much. Precious metals would be a good investment. I just want some advice on how I can store them.

I was thinking of getting a safe for my home, but it's a town house, and I wouldn't be allowed to bolt something like that to the wall or floor. I'm afraid if it's not bolted down, a thief could walk off with the whole safe.

I could rent a small storage garage, but I'm afraid that the government would try to seize my storage in times of emergency.

I've heard that you can buy precious metals in another country and they can keep it safe for you. I don't really think this would be worth it if the lines of transport break down. I may one day have to trade silver buillon for a few weeks of food. I'll need to keep it close.

So, what would be the best way to store precious metals?

[BabyPeanut]

Gold and silver are only valuable if there's an economy to support them. In a chaotic anarchy they'ed be worthless. You'd be better off buying survial rations.

[gnm]

Concrete. embed it in a wall with concrete or into the floor of the garage or some similar place...
With only the door showing its gonna be nigh impossible to break into. And cover that with some sort of false front or fitting camouflage.

-G

[trespam]

I'll store it all for you. Whenever you make a purchase, just ship it to me. I'll provide you with a PO box. My name is John Doe by the way.

[Falconoffury]

It's not likely that there will be a complete crash on day 1. Inflation would be horrible, but there would still be an economy. While everyone is spending hundreds or thousands of dollars on basic food supplies, I'll be trading metals which costed me a fraction of what people are spending in that situation.

If there is a complete and total meltdown with no warning, it will just be a matter of surviving the starvation until some balance comes back. There will be likely a long period without currency. Trade will be like a bartering system. It will give me some trading leverage to have precious metals while US currency is nothing better than tinder.

The concrete idea is an excellent one! Thieves wouldn't normally break concrete bricks in search of stuff. I think I'll do that.

[aflurry]

I have seen alot of comments from people purchasing precious metals, gold and silver, as a hedge against market and currency volitility that may come with PO. Can anyone recommend some reading on exactly why this should be true?

I understand that if companies begin failing because of changes in the economic structure that supports them then equity securities will become worthless, and if governements destabilize and threaten to default on loans then debt securities become problematic. and i understand the precarious position of the US dollar right now due to an increased likelihood of either of these events.

And further, I understand that durable commodities such as precious metals offer a third alternative way to store wealth. So if people have money and the other two forms of investment become unattractive, there will be a run on these commodities just by default.

However, outside of jewelry and few industrial applications, there seems to be little inherent value to gold and silver. I find the arguments for purchasing fertile land more convincing. The metals are more portable, and seem to be symbolically attractive to people. But what is it particularly that makes people think they will hold their value in volitile times?

I would like to find something theoretical to read from an investments perspective but also from a more long term historical perspective. any ideas?

[EddieB]

Well, here's my two cents, see if it makes sense to you. I decided to buy gold (1 ounce krugerrands because they have the lowest premium/ounce, DO NOT waste your money on numismatics) because it seems to me the likely short-term outlook for PO is something akin to the 1970's - nasty stagflation. I'm not expecting gold to jump up to thousands of dollars an ounce, but I do think it will appreciate somewhat, and at least hold it's purchasing power for basic goods better than dollars. I think there are few if any places to put your money that will preserve the purchasing power of the 1990's dollar in terms of real goods. Things have been cheap for a while now and as energy prices rise EVERYTHING will just get more expensive. I'm hoping gold rises and then I sell it to do the stuff I want to do now, but can't totally throw myself into because of disbelieving family members... I don't know about silver, many precious metal brokers try to get you to buy it as if the fiat system collapse is going to occur tomorrow. I don't expect to devolve into a barter economy over-night, gold takes up A LOT less space...
I agree that the best investment for the long run is a piece of fertile land with water access and nice neighbors...

[Doly]

Gold has been traditionally used as money because it has a number of useful characteristics for that purpose:

1) It's rare and it takes a long time to extract, which makes it valuable. Besides, there's no way of getting a lot more in a short period, which makes it resistant to fluctuations.

2) It doesn't decay in any way.

3) It doesn't take up much space.

4) It can be easily divided.

5) You can't forge it convincingly.

You may be able to think up some other things that have all the required characteristics, but they won't have the long historical tradition of gold.

[aflurry]

Thanks EddieB,

So it sounds like your perspective is that gold is attractive as a third alternative mainly, that investment demand is going to go somewhere, and if two other main investment vehicles become unattractive, people will take the dollars they have and put them into gold, helping it maintain a sufficient level of demand to at least retain it's value.

I like your points about the perception that the whole system will devolve into a barter economy overnight. Investments in metals to assume a working, if perhaps chaotic market economy. Just as land purchases assume a continued respect for property rights etc.

This board can become a little science fictiony at times. Because PO is such an unknown territory for the modern economy and way of life, it raises the level of fear. It becomes easy, and maybe tittilating in a way to imagine a quick descent into Road Warrior land. But I think this short/medium term thinking is more productive.

I am still thinking there are more detailed theories about gold in particular though. The metal has had a high level of value throughout history and in many cultures. Even in hard times when practical concerns should take precedence, gold has been valuable. Can anyone point to a period when gold prices have sunk dramatically, and what the causes?

[Geology_Guy]

Before there were big complicated governments and when most of our ancestors were living as nomadic tribes somewhere out on the steppes of Asia and plains of Africa and the jungles of the Americas there was money.

Nobody told people what money was-they just sorted it out for themselves. Many goods were bartered, but gold and silver were money. Timbuktu was a large African Kingdom that sold and traded salt and gold.

Nobody had paper money because who could trust a piece of paper and also the Egyptians were holding the secret of paper closely.

Gold does not rust or varnish and it's very compact. Many thousands of items were tried as money, but gold won out (sea shells were a big one).

Its true that you can eat gold or silver, but for many reasons they are worth a lot.

If you believe complicated electronics have a future no metals are more useful than silver and gold. Silver has the #1 electrical conductance of all metals and gold is #2. Also gold has the highest ability to be spun into very thin wires (it's malleable).

I myself would put a good piece of land where I can grow my own food at the top of my investment list, but a few Kruggerands hidden away never hurts.

[Geology_Guy]

Sorry-that was can't eat gold or silver-except maybe if you were King Midas.

[aflurry]

Doly,

Those points do fill in alot of gaps in my understanding. People need a portable, durable surrogate for goods. It is interesting that gold has survived to the degree that it has in the modern world when first printed currency, then debt ledgers, accounts payable, and ATM cards have replaced this function so completely.

Gold almost seems to be this underground currency-in-waiting in many minds. Like when we spiral back down to reality, we will come back to gold. I am thinking of those radicals who belive the split from the gold standard was our fall. I know a few. They speak about it almost as a spiritual connection between gold and value. strange.

A:

[MicroHydro]

Also consider this:

Stated US gold reserve (Ft Knox) 261 million ounces.

US Population ~300 million

That would be less than an ounce per person held by the government.

[epononymous]

I believe I read somewhere in the past year or two (either MSN or TheStreet.com) that the amount of gold that is produced each year well exceeds what is needed for all industrial and luxury uses. In theory excess supply should push down the value and cause production to slow, but it doesn't because all of humanity seems to agree that gold is inherently valuable simply because it's gold. I suppose that could change but it seems to be so ingrained in our way of thinking that we'll never see that change in our lifetimes. IMHO

[Mercani]

God created gold as money for humans.

Governments print dollars, euros, francs, yens, etc.

Whom do you trust?

[aflurry]

not sure how i feel about the dubious "god made it..." explanation. doesn't seem to do any real explanatory work. not sure who told you god made gold as money either, i heard he made it as tooth coverings for rappers to wear and look fly.

however epononymous' comments that gold does seem to have a hold on our imaginations and fundamental idea seems to hold true over time regardless of the explanation. it has been regarded as valuable pretty much forever. a fact that seems to go beyond it's mere scarecity.

can anyone recommend a good economic analysis of gold as a commodity? i am interested in bullion itself but also in options and futures and the relationship between the value of gold and the value of other investment vehicles.

[pup55]

I never thought all that much about holding physical gold or silver because in a crisis your ability to use it is dependent on your ability to convince somebody to exchange something to you for it.

First, you will have to convince them that it is "real". This may take some doing, because a lot of this stuff comes in all kinds of different forms, and not many people can tell "real" silver from some cheaper alloy. The silver and gold dealers know this, but who else? Not me, that's for sure. Also, there will surely be some con artists out there trying to circulate fake stuff which will make everyone suspicious of everything, especially with no court system and no cops to act as a deterrent.

Second, you will have to negotiate an exchange rate. How many bags of beans can you get for a gold-colored coin, especially if the guy with the beans does not 100% believe that it is a genuine krugerrand? With no uniform exchange rate, and no uniform currency, all transactions would have to be negotiated individually.

So, your marketing and negotiation skills are going to be put to the test on this.

The whole thing seems kind of messy to me. Things would have to get pretty far gone for this to start to make sense.

If you believe that we are slipping into anarchy, just buy a gun like k_semler, and swap ammo for goods. I bet 10 rounds of AR-15 ammo will get you 10 pounds of beans, no problem.

[aflurry]

but this is the thing... if we are slipping into anarchy then it's too hard to say what we may face day to day... we don't even know what anarchy really means outside of some dramatic hollywood representations of it.

and honestly, it is too seductive and easy to imagine some impending doomsday where the only tough choices are bullets or earthworms, the more moderate scenario is the more difficult one to grasp, is a more arduous and difficult and likely one as well. and i'm not even saying the hard fall is not going to happen, but so what? we'll figure that fantasyland out if and when we get there. i personally can't wait...

but what about the scenario where economies stagnate but remain intact, where markets struggle and deflate but remain in place, currecies fold and are replaced - happened in brasil and mexico several times over, potholes don't get fixed, but police still patrol. people may cling even harder to their institutions when they are scared of scarecity. the german currency collapse between the wars didn't seem to weaken the law and order contingent. i think we will have a legitimate market for quite a while, esp in commodities.

so... anyone know what they are talking about in this area? i certainly don't. want more info.

[pup55]

Actually I was down in argentina about 2 years ago, while they were still recovering from all of that economic meltdown.

There are details of exactly what happened elsewhere on this website, but to make a long story short, in a period of about two weeks, the currency became worthless and a lot of people lost all of their pensions.

It seemed like the people that came out more or less OK had their wealth in something besides the local currency. Most of those guys were working for big multinational companies anyway, and a lot of them, not all, had places out in the country where they could get out of town and lay low during all of the street rioting, power outages, summary executions, etc. A lot of them had some non-bank reserves of dollars plus european currency but mainly had it in land or other stuff and tried to keep the minimum in the bank.

The people in these places (Argenina, Mexico, Brazil to some extent) know full well about what happens when the currency and/or government goes to hell, so they don't trust anybody, especially the government, and keep their assets in non-currency. Land is a favorite. This is not 100% foolproof, as there are some examples of land confiscation, etc. but by the time you buy a little farm, get a tractor, make a few improvements, and run some livestock, that's almost as good as a savings account. If you have to pay somebody once in awhile to come and check your livestock while you are in town, still better than having it in the bank.

[aahala]

Some truth is true because of physical and some truth is true simply
because people believe it. One truth is not higher than the other, but
the former is not as subject to change in beliefs.

Why are silver and gold a store of value? Why is our paper money
a store of value? It's our belief, and as long as our beliefs don't
change, these are still the facts.