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.
By: Tom Chatham
Many people dream of the day when they are wealthy and can leave the workplace behind to enjoy life. But what are they really thinking about when they dream of wealth? What is their definition of wealth? How do they know when wealth has been achieved?
The modern definition that many people would use would be the accumulation of enough money to do what they want without working anymore. To that end, most people build up a savings account, pension account, stock portfolio or other type of retirement account. What do these things have in common? They all represent digits in some computer somewhere. If you had one million dollars in a bank account you might consider yourself moderately wealthy. But what would that mean? If the bank suddenly lost your account information would you still be wealthy? If you had one million dollars in cash and the money suddenly became worthless would you still be wealthy?
Money in the form of cash, computer digits and other types of paper are merely a means to store current excess production for later use. This type of storage carries a considerable amount of counterparty risk and is not necessarily the best means to save for the future.
This type of wealth is potential wealth. That means it does not become actual wealth until you actually use it. A dollar in your pocket or a dollar in the bank is nothing more than a claim on goods. Until you actually cash it in for something it does not matter how many dollars you have in storage. Once you cash it in you become wealthier. This is achieved by getting possession of physical goods. Something you can use for some purpose.
If your neighbor has a million dollars in the bank, a large home with a mortgage and a new Mercedes bought on credit, and he suddenly lost the million dollars for some reason, what would his net worth be? If you lived down the road and owned two acres of land with a clear title, a 35 foot travel trailer and an old pickup truck, and the banks closed or money suddenly became worthless, who would be in the better position?
You can be sure the bank has paperwork showing he does not own the home or the new car so what would they be worth to your neighbor?
True wealth is the possession of real goods. Some people buy more practical things but all physical goods represent your true wealth. Those that are practical will have goods that are not only useful but can actually earn more dollars which can be used to obtain more real wealth. These can be classified as capitol goods. Goods that are worth potentially more than the purchase price. Things that have production capability like an ax, a sewing machine, a set of tools, machining equipment, knowledge, farming equipment or livestock are things that have some capability to generate money.
Land that can be built on or farmed, an old truck, a rifle, a wood stove, quality furniture, art or antiques, gold and silver, a wood lot and even a pile of scrap metal all represent true wealth. They are physical things that you can hold and use and trade for other things at some future date. When the wealth that many people think they have suddenly disappears and the computer digits no longer exist, the only true wealth that will exist will be the things that people physically hold in their hand and own free and clear. If you want to know how wealthy you really are just look around you at the things you really own. In the end that is the only real wealth you may have if all of the potential wealth you entrust to others suddenly disappears into the make believe world from which it came.
By: Tom Chatham
For those that are preparing for the worst in economic terms there are always the decisions of what to get now and what to get later. Your current economic situation may only allow you the option of buying necessary equipment and supplies at a slow pace. Primary items that you should buy first are food, water, fuel, clothing, household and sanitation supplies and if possible some type of shelter, either a primary structure or an alternative shelter you fully own. Only after taking care of these necessities should you put some of your money into silver or gold for wealth preservation. After these items you will want to acquire any large items you think you will need. If you cannot afford all of the items now that you feel you will ultimately need what are your options?
There is one option that while not perfect or guaranteed may work to your advantage in the near future.
When an economic collapse begins it will likely happen slowly over a matter of weeks or months. As paper assets are destroyed deflation will occur in some areas while inflation will occur in others. The things that are likely to see inflation immediately are those things that people cannot live without like food, water, fuel and clothing. Those things that can preserve wealth such as precious metals are items you should already have in your possession before the bottom drops out of the economy.
Those holding hard assets not considered wealth preserving but more like consumer goods will be liquidating those items to acquire inflating assets they must have like food. For those that have a store of wealth that can be liquidated and used to purchase other hard assets it could be a good time to leverage your limited wealth to acquire those items you could not afford before.
When paper assets begin to fail those that are holding mainly paper will rush to get into hard assets like gold and silver to preserve their wealth. This will rapidly bid up the price of these assets due to their very limited availability. The price of precious metals should appreciate much faster than inflation. Eventually gold and silver will go into a bubble before they drop a significant amount. This grey area between the metals inflated price and the actual inflation rate will give you extra buying power for a short period of time. This is the economic sweet spot. You may elect to liquidate some of your metals at this time to purchase other hard assets you are in need of but were unable to afford earlier.
Any prolonged economic collapse will make many goods hard or impossible to find as time goes on so buying in this grey area will assure you have what you need and at a price you can now afford. As the collapse gathers speed, those that cannot buy metals will shift into other types of hard assets just to be out of paper so you must act before this happens.
What type of hard assets will you likely be looking for? Things like tools, machinery, livestock, land and equipment you will need to care for your family longterm. These are the expensive items you may not be able to afford now but want for longterm viability. While it is best to get them now you may not be able to so a plan such as this may be your only hope. If this situation does not appear for you to take advantage of you will still have some precious metals to barter with at a later date and possibly acquire some of the things you need.
So for those needing to make large capitol purchases but lacking sufficient funds at this time, holding your funds in precious metals may be the best plan. Gold is good but silver may see the most increase over this period and is much easier for individuals with limited funds to accumulate. When trying to gage the market to get the most from your assets, don’t try to liquidate at the top of the market because you are likely to miss it. If you can get within ten percent of the top you have done well so don’t push your luck and try to squeeze out the last little bit. This will allow you to sell some of your PMs and get what you need before the prices begin to decline and panic sets in.
While not perfect this opportunity will allow you the possibility to get things that will be more important to you than precious metals as the crisis unfolds. There are no guarantees for the future so each person must decide for themselves how best to use their limited assets.
By: Tom Chatham
If you talk to a number of people preparing for bad times eventually you will hear this comment. While it is an accurate observation, it misses the point of a well rounded plan. If you have some wealth and your plan for catastrophic situations is to buy and hold gold and nothing more then essentially you have no plan. That is what this comment really means.
For a person that feels the need to prepare for situations that force you into a survival position you need to place your eggs in several baskets. You need to take care of absolute needs first to get through the situation you perceive. A person needs food, water, shelter, clothing, sanitation, security, heat and light as a minimum to get through difficult situations. You need to determine how long the situation may last and how extensive your preparations need to be to get you through it.
In a normal functioning world a person may be able to get by in a situation with just money. Someone displaced by a hurricane can relocate to an undamaged area and just buy what they need until things are repaired but what good is money if money as we know it collapses?
That is the problem with other than normal disasters where supplies are in short supply and those with them refuse to sell at any price. A proper plan addresses this type of breakdown and prepares you for it. So why do so many people say buy gold and silver if it may not buy what you need in a catastrophic disaster?
Gold and silver are a way to store your EXCESS wealth until the situation stabilizes and commerce resumes in some form. You should not be dependant on PM’s to acquire goods DURING the crisis except in emergencies where something out of the ordinary may be needed such as a tire for your car or medicine for an unexpected illness. The things you must have to satisfy day to day needs should already be in your hands when this type of situation emerges.
This does not mean you may not be able to buy goods at all. Producers such as small farmers, fishermen and producers of other goods that people need may still have a production capability and will still need to sell those products to earn a living. Those that have a medium of exchange they will accept will allow the purchase of these items to bolster the items you already have and extend your supplies.
The value of gold and silver become important when the situation stabilizes and you want to improve your living position. They allow you to preserve your wealth and take advantage of bargains when others are unable to buy and acquire property, equipment, businesses and income producing investments such as rental properties. They allow you to get your hard earned savings from back there to up here where they will be needed to insure a good retirement. Precious metals are your life raft when everything else sinks. They allow you to stay afloat along with your other floatation supplies and reach safety.
When someone asks you if they should buy PM’s to get them through difficult times you should ask them what their plan is for food, water, shelter, clothing, sanitation, security, heat and light. If they say gold then you are correct for stating, you can’t eat gold.
By: Tom Chatham – Author of The American Dream Lost
As one of the financial capitals of the world, New York has some of the worlds’ largest financial companies. Among them is the NY branch of the privately owned Federal Reserve Bank. This bank is actually owned by some of the largest banks in the world. As a center of global finance, it only made sense in the past to store some of the gold from many countries there so trade imbalances could be quickly satisfied by moving gold from one pile to another. The Federal Reserve operates on the confidence of other central banks around the world.
As of 2010 the NY Fed had something on the order of 200,000,000 troy ounces of gold in storage for many different nations. It has become common knowledge that many of the worlds’ banks and institutions have leased out and sold literally tons of gold in the last several years. The gold stocks have been moved around so much the last few years, at the very least on paper, that rightful ownership of much of it is now in question.
Since the Fed is merely storing this gold for other countries, they have the right to withdraw it at any time and repatriate it to local bank vaults, at least in theory. With the U.S Dollar coming under pressure in the last few years and the reserve currency status of the Dollar now in question, many governments are now contemplating the return of their gold to backstop their own currencies if something happens to the dollar.
Recently Germany decided to bring some of their gold home and decided to repatriate about 374 tons from France and 300 tons from the U.S. The Fed is currently holding about 1,500 tons of Germanys’ gold. Since Germany is only asking for 20% of its gold back from the Fed that would seem like a small matter to resolve. For some strange reason, Germany will have to wait 7 years to get that amount out of the Fed. This raises some very troubling questions.
Some people have speculated that much of the gold has been leased or outright sold and very little remains in the vaults. The fact that no one is allowed to audit their gold stocks is also a troubling sign. Let’s just suppose for a moment that the gold has been sold. What would that mean?
Keep in mind that the Federal Reserve is a privately owned bank. It is owned by some of the largest banks in the world. If they sold this gold the parent banks would almost certainly have to know about it and approve the transactions. Also keep in mind that this gold is owned by governments henceforth the citizens in many cases and not the banks themselves. If the banks sold this gold they profited from it immensely, at least until they have to replace it. With the price of gold at near record levels it would be devastating if the banks have sold all of that gold and had to replace it at much higher prices. That presents another problem.
If the Fed had to buy large sums of gold to replace stocks, what would that say to the markets? The bankers have always called gold a barbarous relic and don’t consider it real money. If the Fed suddenly started buying large sums of gold it would signal to everyone that they consider gold more valuable than the money they print. Remember, the Dollar is the world reserve currency so why do you want to own any gold? If they sold the gold, and printed money was just as good, then they could just replace the gold with currency, right?
With the large amount of gold in the vaults, 300 tons should be an easy matter to fix by just buying it back from the current owner with newly printed money and no one would be the wiser. That would be easy unless the gold is not physically in the vaults. If it had been removed and was somewhere else in the world, they would have to go into the world markets to buy it back, thus exposing themselves. Some have speculated that much of this gold has ended up in China, and if so, they probably won’t want to sell it back anytime soon.
So, you are a banker that has sold 1/3 of a trillion dollars in other peoples gold and now they are starting to ask for it. What do you do now? If they accept cash instead you’re ok but they don’t want cash, they want the hard stuff. Buying back all of that gold would be impossible because once people realized you were printing more money to buy it they would refuse to sell at any price. That is if you can even find that much gold to buy.
But why would you need to print more money? What happened to the money you got from the original sale? Gee, maybe you shouldn’t have given everyone all those multi million dollar salaries every year.
So what happens when you tell everyone you don’t have any gold to give them? They won’t come after the U.S government because they have no control over the Fed. They will come after the bankers with a vengeance. So as a banker how do you save your neck without having to give the gold back?
I’m sure everyone has seen the James Bond movie Goldfinger. The arch villain wants to destroy the U.S. supply of gold in order to make his gold worth more. How do you destroy gold? With a radiological bomb of course, making it radioactive for a very long time.
If a “terrorist” group made its way into the NY Fed vaults and exploded a radiological bomb, everything in the vault would be radioactive for a very long time. If the blast was contained in the vault and only irradiated the contents, it would be an easy way to eliminate gold that does not really exist. This would let the bankers off the hook as none of the gold could be removed or even audited. Would someone do something like that for real? What would you be willing to do if you stole 1/3 of a Trillion dollars in gold and wanted to cover it up?
Could a bank stage something like this? Not on its’ own, but with the help of a major government that it basically owns, it would be a simple matter. Would the U.S. government do something like this? Why not? It would get the bankers off the hook and provide the government with a crisis to institute even more measures to lock the country down. We know the government has no shortage of lame plots that it is willing to feed to the gullible public and they have little concern about any casualties.
Is this speculation? Of course. But if the gold is really gone, how will they hide it? I suspect that it is gone and the crisis that is building will reveal it sooner rather than later. Where do I think it is? To allude to an old song, all the gold in New York City, is in a bank in the middle of Switzerland in somebody else’s name.
By: Tom Chatham
When fiat money collapses, the world monetary system will be forced back into a gold backed currency. Those holding gold will have preserved their buying power and wealth while those who held paper assets will lose everything. Those holding gold will have opportunities and the ability to write their own destiny, but what if they discovered after the fact that most of their gold was fake? What if the millions of people that hold precious metals were in a position to force banks and governments to issue real currency but then lost that ability due to the false securities they held?
When the fiat currencies of the world revert to their intrinsic value of zero, those in control of the printing presses will have to overcome the peoples aversion to paper money. If a large enough segment of the population had the ability to shun a new paper currency it would limit the power of the banks and governments. To overcome this impediment to their printing of a new fiat currency, it would be necessary to eliminate the possession of precious metals in the population. The outright confiscation and outlawing of gold possession would be ineffective in most cases and would likely be met with widespread revolts from the people. So how would you take away their gold without causing a riot?
If the gold people thought they had turned out to be fake, the banks and the government would be off the hook and the people would not have the power they thought they were preserving. Even if some of the metals in private possession were real, it would be difficult to exchange them for fear of their authenticity by the receiving party. By flooding the market with fake bullion, only those that were in a position to verify the authenticity would be in a position to use it. This would preclude most of the general population.
In one bold move, the ability of people to use gold as currency once again would be destroyed and the banks and governments would retain the ability to force a new paper currency on the people thus ensuring their continued dominance. Let us take this one step further and imagine that a select group of people or countries are doing this not to their own citizens but to other world governments. When the fiat currency these governments use is reduced to zero and they attempt to create a new gold backed currency but find their gold is fake, what will the new currency be backed with that will make it acceptable to the world at large?
This lack of value will make these nations subordinate to those that have actual gold to back a currency and even subject to control by these nations or groups. Given that a lot of the gold in the world has been sold, leased, loaned and created out of thin air through the use of ETF funds, it is difficult to know exactly where all the gold currently is and who actually owns it. When the music finally stops, those that hold the actual gold will make the rules.
Fake gold coins have turned up in the U.S. over the last few years in the form of rare coins and bullion coins. Ten gold bars were recently found in Manhattan with tungsten cores. Fake gold bars and coins have been found in America, England, Germany, China, Ethiopia, South Africa, Vietnam and Australia. Germany has recalled some of their gold from New York and London to verify its authenticity and possibly for safe keeping. Venezuela has recalled its gold holdings from overseas vaults. Many countries around the world have been building up their gold holdings at a furious pace and China is recasting some of its gold into smaller ingots possibly to insure its authenticity and to back its currency. Some people have claimed that a lot of the gold in Fort Knox is fake which would be devastating for the U.S. if it ever had to back a new currency with gold.
Anyone who follows the gold market knows something insidious is taking place on a global scale and only time will tell what the ultimate plan is. For those buying gold, it is wise to buy from a reputable dealer who can verify its authenticity. Silver is a monetary metal similar to gold but on a smaller scale. Many of the things we see happening to gold will eventually happen to silver as the price increases and fiat money is devalued. Holding circulated pre ‘65 U.S. silver coinage may be the best defense against fakes but it is still no guarantee. Those seeking to preserve their wealth need to be vigilant in the coming years.