Paying in a Broken World

By: Tom Chatham

It is a common reaction to ask, how much is that, when we see something we want or need. The question is answered with some monetary figure that people will recognize and use to determine if they can afford it. But what happens when the monetary system we know becomes so dysfunctional that common monetary values mean little.

This could happen due to massive inflation, currency collapse or a frozen banking system that prevents you from accessing your funds. If you have no way to pay for something, it does not matter how much or little it costs. It will be out of your reach unless you have some means to pay.

Some people keep cash on hand for just such a problem. They know they will be able to pay cash when everything else stops working. That will work for a time but eventually paper currency will be looked on as a diminishing asset as physical goods become more valuable to those that need them. Paper currency is not much different than a check you write on your account. If the account is empty your check is no good.

The same can be said for those entities that issue paper money. If they are bankrupt or shut down, the value of their printed certificates will be worth the same as the bad check. Nobody will want to accept it after they realize it may not be honored for the value it supposedly holds. While a local store may accept it out of habit, eventually businesses will figure out the truth.

In times like this alternative forms of money may become more viable to local individuals such as gold and silver. But, that may take some time and most people will not own any of these precious metals for trade. Some may resort to direct barter with some of the things they have amassed over the years to get the necessities they need and under these circumstances values will be variable and disconnected from reality at times.

Some people have stored barter items for this eventuality rather than precious metals and there is nothing wrong with that if it gives them the feeling of safety they desire. One of the reasons they desire goods instead of metals is the fear that governments will call in precious metals as they did in 1933 and that is a legitimate fear but must be taken with some reflection on the facts.

In 1933, gold and silver coinage was the circulating currency in the nation meaning most people had some in their possession. That is not the reality today as very few people have any knowledge of the value of metals and do not have them in their possession. The fact that the government can call in metals does not mean they will be able to relieve you of them.

In 1933, on the river where I grew up, there was a store on the bank of the river that did a good business with all of the ships that came by. When the gold was called in in 1933, the store owner did not want to turn it in so he kept it hidden away. At the time he had a small chest full of gold coins. He kept that chest of coins until the 1970’s when gold was legal to own again and then he sold it for a good profit. This is a true story and just one example of how hard it would be for the government to call in all of the metals in private hands.

It does not matter what you hold your savings in only that it will retain value when conventional paper currencies become a despised possession. When that happens you need the ability to buy the things you need with what you physically have on hand. The question you must answer is what will you have on hand when that day comes.

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Posted on July 29, 2015, in Economics, Preparedness and tagged , , . Bookmark the permalink. 14 Comments.

  1. In 1933, the point of removing gold from circulation wasn’t so much as to GET gold as it was to remove the connection between gold and paper. They were wildly successful in that effort, since now, almost NO ONE has a clue what money is, and isn’t. The whole point was to shift to a debt based paper currency that could be manipulated at will….something not possible as long as gold was in the picture.

    At some point, paper currencies all collapse….doesn’t matter if it is the French Assignat, the Continental Dollar, Wiemar Germany’s Mark, modern day Argentinan Peso, or the good ole USA ‘federal reserve note’. They all have a limited lifespan, and all return to zero at some point. I can’t say if that is this year, or 100 years from now. My gut feeling is sooner than later, but who knows how long they can keep the game afoot. A $20 US gold eagle from 1913 that could be cross exchanged for a $20 paper bill, today goes for $1100 paper ‘dollars’, (along with the related costs of all goods), and who alive in 1913 would have thought that possible ?

    There is no LONG term planning of savings possible when you have inflation built into the pie.
    The FED has a publicly stated goal of 2% inflation. That means the value of a ‘dollar’ today will be cut in half in 36 years……and that assumes inflation is JUST 2%. If real inflation is running 4%, that time drops to 18 years. So, one should buy gold/silver throughout their lifetime for old age if for no other reason than the built in depreciation of money.

    BUT if we do get to a point of complete, sudden collapse of paper currency, things certainly will get ‘interesting’. As you say, in the short term, some paper currency in hand will rule. But I suspect that will be very short term (a matter of weeks at best) IF the collapse is nation or worldwide. The situation in Greece is not representative. They have a banking crisis, but the Euro is still good….the Greeks simply don’t have enough physical Euros, and allowing them to pull out what the banks have would finally collapse the banks. The same thing as Katrina was a big deal IF you lived in southern Louisiana, but not if you didn’t.

    So, yes, we’d probably return to a barter economy. The Greeks already have (according to Zero Hedge). Unfortunately, barter is extremely clunky to use. Money allows us to produce today, and save for tomorrow. I grow a crop of watermelons, sell them for a silver dime each, and save that until winter when I need to buy cough medicine, or pay my property tax bill, or pay for a repair to my tractor, etc. I can’t save melons for 6 months to barter them later.

    OR I need a box of .22 shells, but only have my watermelons to trade….and nobody with .22 shells wants water melons today at “Barter Town”.

    OR I need to order parts for my tractor from a place 500 miles away, and they want MONEY…..not live chickens.

    Barter works, but it’s clunky. That is the whole reason man invented money. Unfortunately, man also forgot the properties of money…..one of which is “a store of value”….that is, you could stick it in the cookie jar today, come back in 20 years, and it have the SAME value as the day you left it. The bankers had to get rid of THAT property in order to be able to profit from manipulating their money substitute to their advantage. They literally make up theirs out of thin air, and you can’t do that when your money is tied to some real commodity.

    • Everyone has their own plan to deal with possible financial problems in the future. They have a plan they think will work best for them in their particular circumstances. I am of the opinion that it is best to be diversified. I like to have some cash on hand, store some extra supplies, hold some silver and have a backup income plan, like chicken and hog production. Diversification allows you to be more flexible with whatever comes down the road.

  2. My grandfather did the same thing as the store owner. He sold insurance, health, home, etc. and had amassed a small fortune of Gold and Silver. He turned none of it in. In those days he carried upwards of 200 dollars on him in his wallet which would be like having 2K dollars on you nowadays.

  3. Reblogged this on wchildblog.

  4. Alfred E. Neuman

    Reblogged this on The Lynler Report.

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