In today’s uncertain economic times investments in precious metals can provide stability. Gold has been the traditional investment vehicle to hedge against inflation. Silver is great, and if bought in large quantities, it may provide a decent return on your initial investment. It can also be used as a means of barter if times get really tough. The barter aspect will be the main point of this post.
In the survival community, most investments in silver revolve around pre-1964 US coins with no numismatic value, commonly called junk silver. This can be bought in bulk from many different sources. Many out there believe that after serious economic meltdown (hyperinflation), you will be able to use this junk silver as a barter item for food or other essential supplies. My view is that most people will only look at the old value of the coin; a dime, a quarter, a half dollar, or a dollar. You can argue with someone until you are blue in the face and explain that pre-1964 coins are 90% silver, they are just going to see 10 cents, 25 cents, 50 cents, or one dollar; and they will apply their old notions of monetary value to the trade. This may even happen with modern Silver Eagles. At the time of this post a 2009 US Silver Eagle sells for about $19. A 2008 Eagle will cost you about $30. These coins are legal tender and are marked on the face with a monetary value of one dollar. So, you are paying the current spot price on one ounce of silver, plus a premium markup for the numismatic value of the coin. Again, in a barter system, people will only see “one dollar” and apply their preconceived notions about what goods and services used to cost. And, with hyperinflation, when it takes 500 Federal Reserve Notes to buy one loaf of bread, one dollar in official minted silver will be the same as a one dollar Federal Reserve Note. I would recommend staying away from actual minted coins at all costs.
I have had discussions on other blogs about hyperinflation and the role of precious metals in that kind of situation. If you own silver, it can be sold for paper money at the current spot price. Then that paper money can be used to purchase needed items. The guy at the gas station probably isn’t authorized to give you a full tank of gas for an ounce of silver, but if you sell that ounce of silver for 1000 Federal Reserve Notes, you can take the cash to the gas station and make your purchase. After hyperinflation sets in, there is the possibility of societal collapse, commonly referred to as (TSHTF) The Shit Hits The Fan. This is when the barter system comes into effect, and your sliver will be used in direct trade. Anyone smart will not only plan for hyperinflation, they will also plan for the worst case scenario.
So, what to buy? There are a lot of sources out there that are available. American Precious Metals Exchange, MonEx, and North West Territorial Mint are all places to start. My recommendation is to choose Credit Suisse, PAMP, or Pan American Silver rounds or bars in small weights. Stick with one ounce rounds for silver, or possibly a few 5 or 10 ounce bars. If you can find gold in 1/10 ounce denominations, it will probably be your best bet. You may choose to get some ¼ ounce, ½ ounce, or full ounce bars just to hold on to if you are not worried about hyperinflation, but 1/10 ounce will be the easiest to sell during tough times. Anything bigger than one ounce in gold is just foolish if you are planning for a survival scenario. A 100 ounce gold bar, while being a great investment as a hedge against inflation, will be pretty hard to sell in a TSHTF scenario. Also, stick with standard weights that people will understand. Ounces and fractions of an ounce are best. Trying to do the math on 3 grams compared to an ounce will just be confusing if you are trying to barter with Earl and Emma down the street.
Now, for the scams. I would be wary of anything that seems too good to be true, especially online sales. Many people have expressed their displeasure with North West Territorial Mint. They have silver on about a four month back order. I have used them in the past, and besides the long wait for your product, I have no complaints. The biggest scams I have run across recently are the Free Lakota Bank and Midas Resources.
The Free Lakota bank is not affiliated with the Lakota Nation of American Indians. That just seems like false advertising to me. Midas Resources has a good video on their homepage that explains fractional reserve banking to kindergartners. If you don’t understand how the system works, you can check it out there. However, this is where the good stops. Midas has been in lawsuit after lawsuit for its shady business practices. It’s just too fishy for me. There are plenty of other places to buy. Shop around.
Finally, I should discuss privacy and storage. In 1933, President Roosevelt signed Executive Order 6102, outlawing the private ownership of gold. Coins with numismatic or rare value were exempt from this as they were seen as collector’s items and not bullion investments. This was Roosevelt’s way of allowing his rich friends to keep their gold. The average man at the time didn’t have the money to invest in rare gold coins, but the rich did. Talk about helping out the working man! Anyway, gold across the country was confiscated. Gerald Ford rescinded this order in 1974, allowing the public to once again own gold. I don’t really want to get into the entire history of gold, the gold standard, and the Federal Reserve in this post. I would highly recommend looking this information up and doing a study on it for yourself.
My only point here is that confiscation has happened before, and in the time of national economic “crisis”, it could happen again. For this reason, many people do not feel comfortable making online purchases for precious metals. This leaves a paper trail that can ultimately be traced back to you. In many cities there are stores that specialize in selling precious metals. Some will give you a good deal, and some will rip you off; you just have to shop around. There are laws that require purchases over a certain monetary value to be documented by the dealer and filed with the US Treasury Department. If you are concerned with your privacy, I would recommend purchasing your precious metals in small quantities from local dealers who will agree not to take your name or print it on a receipt. They will usually charge you a higher premium on the spot price, but the privacy may be worth it.
Storage is another concern. A safe deposit box at a bank would be everyone’s first thought, but this raises one big issue. During an economic crash or a total SHTF scenerio, the government may call for national bank holidays. This is the one time you want to make sure you have your precious metals close at hand, and during a time like this, your bank will likely be closed. This leaves you with a couple other options. 1- Keep it in your house. If you have a safe or a really good hiding spot, this may be a good choice for you. Remember though, criminals can crack safes, and they know all the typical hiding places in a person’s house. That fake can of Campbell’s soup with the false bottom may not be the best place to put things of importance. 2- Keep it somewhere NO ONE but you can find it. A one foot length of 4 inch diameter PVC pipe, two end caps, some pipe glue, and a post hole digger can hide just about anything. I will let your mind do the rest of the work on that, but the possibilities are endless. If you choose the PVC option, be sure to pre-wrap your silver in a Mylar plastic sealing. PVC has a tendency to corrode silver if left in contact during long term storage.
In summary, precious metals can provide stability for you and your family. Not just financially, but also mentally and emotionally. Knowing that you always have a small backup stash can go a long way in tough times. Whatever you buy should be extremely personal. Keep it quiet and keep it away from prying eyes. In the end, you can’t eat your precious metals, and no amount of gold or silver will buy food for your family when the entire town is starving. So before investing, be sure you have some food saved up. Don’t break yourself making these purchases. An ounce of silver per month will go a long way after a few years. If you want to plan for every eventuality, precious metals are a must. Be smart, and invest safe. See you at Galt’s Gulch!