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You Can’t Eat Gold?

Wednesday, 12 September 2012 18:17 Written by  Matthew Conlan

Often, when one party expresses an opinion in favor of the benefits of acquiring gold, the opposing side will express disapproval with the glib retort: “You can’t eat gold.” Intended to convey a practical perspective, this flippant response betrays a breathtaking level of historic economic ignorance, and I would argue, a poor ability to quantify future risk vis-à-vis the coming financial collapse and ensuing struggles.  

I would challenge all of my fellow preppers to consider whether they have any nuance in their future outlook or do they merely see two stark future possibilities: status quo or Mad Max. That is to say, do they believe that the only future outcome is a complete societal breakdown and return to subsistence living with a barter economy, or could there be varying degrees of struggle that are less severe? Do they envision black and white or shades of gray?

Epic natural disasters and Black Swans aside, I have always maintained the origins of the upcoming collapse would be financial in nature, emanating from unsustainable debt and years of reckless Government spending. Granted, it will be more severe than previous financial crises because it is Worldwide and the numbers far larger than anything ever known. The simple truth is that national economies and financial systems collapse (default, restructure, and/or hyperinflation) with regularity and rarely result in Armageddon, though there are often political and violent revolutions. Examples abound: Hungary 1946, Argentina 2001, Brazil 1983, Mexico 1982, Iceland 2007, and so on with many additional examples often by repeat offenders (Greece, Zimbabwe, and Argentina to name a few). Yes, the most famous Western example of hyperinflation which occurred in Weimar Germany (1921-1923) arguably led to the rise of National Socialism and ultimately the bloodiest war in human history, producing Mad Max in various bombed out cities of Europe, Japan, and the Western Soviet Union. But this is one of the exceptions and it didn’t apply to many of the victors of that struggle. And while I see war as a definite possible outcome of our current economic crises and much higher crime and lawlessness as a probable one, I place the likelihood of a stone-age societal breakdown almost in the “nil” category.

First, in all possibilities of financial collapse and ensuing hardship, from mildest to most extreme, the wise prepper should have a supply of “junk” silver (pre-1964 U.S. Silver coins) for day to day barter and wealth preservation purposes once his basic survival preparations have been met. In the milder scenarios where paper money survives before evolving into a value standard (i.e. Gold, Bi-Metallic, Silver Standard, etc.), this action will preserve and possibly increase purchasing power in what will likely be a super-inflationary environment. The amount invested here is a personal decision based upon risk assessment and budget. One cannot eat silver either (or survival tools and guns), but the average prepper can recognize the practical value of its possession in a crises environment. For those with very limited budgets who can only afford a few silver coins, yes, gold should not be considered, and the “you can’t eat gold” argument makes sense. This is not my target audience. For remaining personal savings and wealth, I’ll raise some practical considerations for the prepper who has dismissed gold as impractical.

Most do not understand gold and the nature of a gold standard. Much of this is understandable because gold has been out of the public consciousness for over four decades (Bretton Woods II until 1971) and longer in terms of actual public use (Gold Exchange Standard until 1934). Gold is money. The concept is simple and profound, and often overlooked. Gold is the most concentrated form of money that is liquid (as opposed to silver), easily exchanged and off the grid (as opposed to farm land and real estate), permanent (as opposed to barter goods such as livestock, grain, freeze dried food, whisky), and fungible (as opposed to diamonds). Platinum and palladium are industrial metals with no history as money (though now coined in some countries) and are difficult to verify. In the short (daily, monthly) and sometimes medium (2-5 years) term, gold does not correlate well as a hedge against inflation and can even increase in value in a deflationary environment. Rather, gold is a bet against Government and fiat currency systems. It correlates to faith and trust. It has a seven thousand year track record as money and dwells in Mankind’s DNA. Chinese, Indian, and other ancient cultures that have experienced multiple failed currencies in their histories understand this. When you hold a gold coin in your hand, you will understand instinctively why men have killed, stolen, and waged war for it.

The other fatuous comment I’ve often heard when talking about a Gold Standard sounds something like “You can’t pay for gas or groceries with a gold coin.” As a nation, we have no collective memory of how this would be practically implemented and limited imaginations lead to such statements. In broad terms, all that a “Gold Standard” means is a monetary system backed by gold. That is all. It can assume almost any form with different dynamics so long as it meets this requirement. Paper or electronic money backed by gold would suffice. The other absurdity often uttered is “There isn’t enough gold in the world for a Gold Standard.” Again, this assumes physical possession on one’s person for transactions. One ounce would be sufficient if each molecule were valued at thousands of dollars.

Preppers think long term and take bold action where most choose to remain blissfully ignorant. Many do so while being mocked and lampooned, often branded “extremists” merely for using common sense and being proactive.“The strongest man in the world is he who stands most alone” as Henrik Ibsen once wrote. I would ask these same forward thinking individuals if they’ve ever considered planning for the return to normalcy when tough times end. Do they think hardship will be a permanent state or do they recognize that seasons change and survival in good times may require a different kind of preparation? I submit that preppers should prepare for all kinds of upheaval.

Disclaimer: I am not a financial advisor and encourage everyone to perform his own research before making any investment decisions.


Last modified on Wednesday, 12 September 2012 21:52
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  • Comment Link texican Sunday, 23 September 2012 16:30 posted by texican

    If the scenario is such that civilization comes back, without a large loss of life, then yes, gold is where it's at. If it's a short term problem, where everyone survives, it's really not a TEOTWAWKI... (by definition) Real TEOTW, a large percentage of the population dies, and most all of them have gold and silver (teeth, rings, watches, etc.) on them, which could be 'collected' if one wanted to be 'rich' in some PAW scenario.

    No gold here, just silver. Lots of lead, brass, steel, sawmills, multiple tool backups, and barns full of supplies... that I'll need for living, regardless of where the economy, country, or civilization goes...

    Granted, everyone should have some PM's... prefer junk and numismatic silver, here... actually have bartered goods for junk silver (and prefer it that way)

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