Gold As A Medium Of Exchange After Fiat Money Destruction

[hyperdimension]

I own no physical gold, but I am curious from those who have bought physical gold of how they would use it if there is ever a future situation in which fiat money becomes worthless pieces of plastic and paper.

What is the smallest "denomination" of gold, and what can it buy?

How would you pay for a small plate of food with gold?

For those who own bars, if the time comes that gold becomes a medium of exchange, I'd imagine that you'd have to go to a goldsmith and get it melted and remoulded into tiny coins or pellets so that you can buy everyday items.

[FritsSikkink]

It is not going to happen.

[brit1984]

OP... genius... sarcasm at its best... and sensible to start a new thread rather than trying to add this point of view to the many threads where wannabe commodity-brokers are championing an investment in gold as protection against doomsday...

[bendix]

I can't imagine there are many TV members who own 'bars' of gold.

I recall being in a heated discussion with a silver obsessive on another 'financial' forum recently in which he poured scorn on anyone else who didnt share his vision that his was the only way forward, all other investments were stupid, the world was going to end and his huge stash of silver coins would save him from armageddon.

I asked him how deep his commitment to silver was. It seems he was buying one ounce a month - a heady 20 quid or so - and that he was proudly the owner of no fewer than 80 coins.

Absolute chump change.

Ive noticed this a lot with single asset class obsessives. When you drill down to their exposure, it's usually next to nothing.

[farang000999]

gold is already a medium of exchange. everything is. you can go and buy a home here with gold or anywhere else if the owner will accept it in trade. stop being silly.

that said, obviously gold is not realistic to be used as a common medium of exchange.

even if we have a gold backed currency, it will be in the form of paper gold certificates ala 100 years ago.

this is quite unlikely though... why? because if we have a gold standard the government cannot steal from it's people through inflation...

what happens is as follows:

they destroy the currency and then they start again from scratch and destroy it again

if you want to hold paper money than have fun.

ben bernanke has basically said he will drop dead before he allows deflation to take place. he plans to monetize the debt. so i guess you think he is a liar?

i think it takes a TON of balls for people to hold paper money and to short stocks. much more than those who are buying gold.

we will see what happens but it just takes huge balls to stand up to Bernanke/Central Banks/BOJ/etc who is looking you in the eye saying he is going to fuc_king destroy the USD/Yen/paper money and for you to stand your ground.

[12DrinkMore]

I can't imagine there are many TV members who own 'bars' of gold.

I recall being in a heated discussion with a silver obsessive on another 'financial' forum recently in which he poured scorn on anyone else who didnt share his vision that his was the only way forward, all other investments were stupid, the world was going to end and his huge stash of silver coins would save him from armageddon.

I asked him how deep his commitment to silver was. It seems he was buying one ounce a month - a heady 20 quid or so - and that he was proudly the owner of no fewer than 80 coins.

Absolute chump change.

Ive noticed this a lot with single asset class obsessives. When you drill down to their exposure, it's usually next to nothing.

Maybe he has total exposure with his savings?

Possibly an English teacher in Nackon Neverheardof.

[brit1984]

I can't imagine there are many TV members who own 'bars' of gold.

I recall being in a heated discussion with a silver obsessive on another 'financial' forum recently in which he poured scorn on anyone else who didnt share his vision that his was the only way forward, all other investments were stupid, the world was going to end and his huge stash of silver coins would save him from armageddon.

I asked him how deep his commitment to silver was. It seems he was buying one ounce a month - a heady 20 quid or so - and that he was proudly the owner of no fewer than 80 coins.

Absolute chump change.

Ive noticed this a lot with single asset class obsessives. When you drill down to their exposure, it's usually next to nothing.

Do you mean like Warren Buffett?

[hyperdimension]

OP... genius... sarcasm at its best...

I didn't intend to be sarcastic, but thanks for calling me a genius. I've been reading a lot of the stuff on Zero Hedge which discusses the shenanigans going on in the financial system, such as the US dollar's devaluation that has been caused by the Federal Reserve's "quantitative easing" (increasing the money supply by printing more money). Every time they increase the money supply, each US dollar becomes worth less due to the dilution. Gold is seen as a good store of value (as gold has historically been treasured, and still is, in many different societies) and as a hedge against fiat money devaluation. So I am genuinely curious of the practicalities if gold becomes widely accepted as a medium of exchange, with or without government backing.

even if we have a gold backed currency, it will be in the form of paper gold certificates ala 100 years ago.

That assumes that the government would introduce paper gold certificates that will allow for small purchases. But how about before that happens, or when there isn't a properly functioning government? I think in such a situation, there would be bartering going on. But using gold as a medium of exchange would be more convenient than bartering other goods or services, because the goods and services that you offer may not be desired by the provider of the goods or services that you need at a particular moment.

So what is the smallest "denomination" of gold available, and could you take it out and use it to buy everyday things if the fiat monetary system ever does collapse?

[Rancid]

My brother and I hold physical bars of gold and silver at about 5% of net wealth, we also hold unencumbered real estate and cash. The PM isn't for selling in black markets following some imagined Armageddon (probably cigarettes and booze better for that), it is for future appreciation as zombie governments continue to monitorize debt and devalue currencies, or maybe we are wrong and as some punters here seem to think all the printing will make paper money more valuable, if we are wrong so be it (leave it to the kids). But if we are right...

The paid financial geniuses in the MSM with their stated portfolios of what? all seem to think that the US, Japan, EU and others printing money is a good thing, hey they may well be right short term. But we don't agree so are taking out some insurance, insurance that is worth a lot more now than when we bought it (it does fluctuate), guess we are are stupid. We also trade Options as opposed to stocks, leveraged and in and out quick, so no portfolio or substantial exposure to get hammered on in the next crash.

As to ZH, many posters there are Wall St guys, go and read what they are buying up, it isn't equities. Make up your own minds on your research, guess down the track we will find out who was right, can't see why emotion should come into though, it is just a trade.

[rakman]

I can't imagine there are many TV members who own 'bars' of gold.

I recall being in a heated discussion with a silver obsessive on another 'financial' forum recently in which he poured scorn on anyone else who didnt share his vision that his was the only way forward, all other investments were stupid, the world was going to end and his huge stash of silver coins would save him from armageddon.

I asked him how deep his commitment to silver was. It seems he was buying one ounce a month - a heady 20 quid or so - and that he was proudly the owner of no fewer than 80 coins.

Absolute chump change.

Ive noticed this a lot with single asset class obsessives. When you drill down to their exposure, it's usually next to nothing.

Do you mean like Warren Buffett?

More like George Soros.

[w11guy]

You are completely barmy of you think that will ever happen. Just look at some countries where the currency has been completely destroyed (Zimbabwe, Germany) and you'll see that they didn't start using cold to buy food. What do you think's going to happen - that one day Obama is going to say... sorry guys, no more money, start using gold.

Have a think about what you're saying. It's so ridiculous that the luny bin beckons for you.

[g00dgirl]

There are several possibilities, you just need to look at what happened in the past. Read about what happened during recent cases of hyperinflation.

In some countries people really used tiny amounts of gold to make payments for food (

), in other instances there were black markets with foreign currencies and in other cases different commodities were used instead of currency, for example cigarettes were used as a currency in Germany after the 2nd world war.

In case of hyperinflation, you could make use of gold by paying for larger amounts of other commodities, and exchange those for food or other goods.

You can also store some silver bullion coins in addition to gold if you are worried about having smaller denominations ready.

Article : 21 Countries Have Experienced Hyperinflation In Last 25 Years

http://www.munknee.com/2011/03/21-countries-have-experienced-hyperinflation-in-last-25-years-is-the-u-s-next/

[hyperdimension]

My brother and I hold physical bars of gold and silver at about 5% of net wealth, we also hold unencumbered real estate and cash.

That seems like a sensible proportion in a diversified portfolio. Real estate is good too as it is "real", i.e. physical and has intrinsic value (you can live in it); whereas financial assets, including fiat money, are essentially imaginary; the good thing at the moment is that financial assets can still be converted into real things of value (food, clothing, gold, real estate), but there is always the possibility that one day some or all of those financial assets can simply become worthless. It all depends on the collective perception of the people who hold and circulate the financial assets (including cash, either electronic or as bits of paper / plastic).

The PM isn't for selling in black markets following some imagined Armageddon (probably cigarettes and booze better for that)

But not everyone is into cigarettes and booze. Food would be better (as everyone needs to eat), but can be impractical. Edited May 12, 2012 by hyperdimension

[hyperdimension]

Have a think about what you're saying. It's so ridiculous that the luny bin beckons for you.

Why do you think The Federal Reserve bank of New York and the United States Bullion Depository hold so much gold? Is it because they know that fiat money (e.g. Federal Reserve notes) are actually intrinsically worthless?

From Federal Reserve Bank of New York:

By 1927, the vault contained 10% of the world's official gold reserves.^[6] Currently, it is reputedly the largest gold repository in the world (though this cannot be confirmed as Swiss banks do not report their gold stocks) and holds approximately 7,000 tonnes (7,700 short tons) of gold bullion ($415 billion as of October 2011), more than Fort Knox. Nearly 98% of the gold at the Federal Reserve Bank of New York is owned by the central banks of foreign nations.^[8] The rest is owned by the United States and international organizations such as the IMF.

From United States Bullion Depository:

The United States Bullion Depository, often known as Fort Knox, is a fortified vault building located adjacent to Fort Knox, Kentucky, used to store a large portion of United States official gold reserves and occasionally other precious items belonging or entrusted to the federal government.

The United States Bullion Depository holds 4,577 metric tons (5046 tons) of gold bullion (147.2 million oz. troy). This is roughly 2.5% of all the gold ever refined throughout human history.

If countries and their central banks feel the need to hold some gold, why shouldn't we?

Edited May 12, 2012 by hyperdimension

[geriatrickid]

I think some of you guys living in fear of international collapse need to grow a pair of testicles.

Yes, some national economies will need to readjust, to recalibrate, but that's been going on ever since the Romans and Greeks minted coins. , The gold notion is predicated on there being a systemic worldwide financial collapse. That;'s about as likely as me waking up naked with a katoey. Aint gonna happen. In my case, I have a sharp eyed broomstick flyer keeping an eye on me. In the case of the world economy, there are too many central banks working together. Despite all the negativity we can read about in the media, when push comes to shove, the central banks of China, Russia, the EU, and the USA all come together because they know that if one goes down, they will all suffer.

Do you remember what happened at the peak of the financial crisis, when there was a real fear that the USD would collapse? The Australia Canada, Sweden, the UK and the EU central banks went to work. Even the Chinese were obliged to prop up the USD. The world is too integrated and too dependent on each other to allow such a thing to happen.

[hyperdimension]

In some countries people really used tiny amounts of gold to make payments for food (

I had thought about gold dust or granules as a medium of exchange for everyday items, but thought it would be very impractical. Now I see in this video that people really have used tiny gold granules just to buy food (0.1g for a loaf of bread), and in some cases they even had to dig it up from the ground themselves!

For those who haven't seen the video yet, here it is embedded in a post:

[media=]

[/media]

[g00dgirl]

geriatrickid, it was allowed to occur in Argentina ... I have lived there in 2003 / 2004 and I have seen the heard about it from the people I met. The windows and doors of many banks were still barricaded and there was violence by people who have lost everything.

And I'd rather not have testicles

[gregb]

I think some of you guys living in fear of international collapse need to grow a pair of testicles.

Yes, some national economies will need to readjust, to recalibrate, but that's been going on ever since the Romans and Greeks minted coins. , The gold notion is predicated on there being a systemic worldwide financial collapse. That;'s about as likely as me waking up naked with a katoey. Aint gonna happen. In my case, I have a sharp eyed broomstick flyer keeping an eye on me. In the case of the world economy, there are too many central banks working together. Despite all the negativity we can read about in the media, when push comes to shove, the central banks of China, Russia, the EU, and the USA all come together because they know that if one goes down, they will all suffer.

Do you remember what happened at the peak of the financial crisis, when there was a real fear that the USD would collapse? The Australia Canada, Sweden, the UK and the EU central banks went to work. Even the Chinese were obliged to prop up the USD. The world is too integrated and too dependent on each other to allow such a thing to happen.

The problem with attitudes like this is timeframe. Minus a miracle energy technology or aliens landing to save us from the results of our bad decisions, there will be a prolonged, continued decline and collapse of global industrial civilization. In every country. Period. We are way past the time when collapse could be stopped. We might be able to mitigate it slightly (and we almost certainly will try), but that will only push out the time a small amount. With peak oil now in the rear view mirror and energy and resource depletion stretching in front of us for generations, economic growth is an anachronism. Declining oil production necessarily means declining economies. There is no way around that fundamental fact. Since modern fractional reserve banking absolutely requires economic growth to pay the interest on loans, it means that unless the energy crisis is solved, the government will need to print money to pay the interest on loans. It can not be earned.

Money printing necessarily means devaluation of the currency. Gold doesn't have to become more valuable. It simply needs to remain gold. All fiat currencies backed by collapsing economies will return to their intrinsic value of 0. And no, there won't be armeggedon. This is an exceedingly slow process, and none of us here are likely to be alive by the time the current global industrial economy has completely disappeared. That is something our great grandchildren might experience. But throughout this time, gold will remain the best store of value, for the same reasons it has always been throughout history, minus the last 2 centuries when the bonanza of oil production made us forget reality.

No, as economies bifurcate again into their historical norms with a small number of wealthy nobles and a massive number of poor peasants, healthcare will again become unaffordable to most. Diseases and plagues will rule. There will be wars over the remaining resources, squandering away the few remaining resources we have. This is not armegeddon. This is a reality that will play out over centuries, the way it always has throughout history when civilizations collapse. Sometime in a few centuries the earth will need to get back down to under a billion inhabitants where stability can once again be achieved. That means death on a scale we can't even contemplate today.

I highly suggest anyone who hasn't considered the physics behind what is happening in our world today to pick up a copy of Jared Diamond's book "Collapse: How Societies Choose to Fail or Succeed" so you can understand why we have chosen failure, and get a picture of what the future will look like by examining the past.

During this time, as economists try unsuccessfully over and over to apply the rules of economics they learned during growth years to a physical reality of decline and collapse, fiat money systems will be born and die in the throws of hyperinflation over and over. Gold however, will always be gold. It will always have trade value, as there will always be wealthy, and it is the one asset a wealthy person can always use. He may not be able to defend more lands, and food stores go bad over time, but gold is the perfect wealth. It costs almost nothing to hold.

I hold gold because it is obvious gold is the only thing you can count on during these times. There may be short periods of relative stability during our lives where the fiat currency of the empire de jure seems solid enough, but that is an illusion if you extend your horizon long enough. So I will hold gold, and teach my children and grandchildren to hold gold, and hope for the best. As I need to use it, I will exchange it for whatever the currency is at the time and place I need it, secure in the knowledge that I will never go bankrupt if I have gold and defend it against theft. As I earn money in these fragile economies, I will buy gold and add to my wealth. I find it extremely unlikely in our lifetimes that gold will ever become a direct medium of exchange, but as industrialization fails, semiconductors fab lines become economically impractical, and computers and the trappings of modern life die away, then one of my descendants may eventually experience it.

Technological civilizations have died before in the past leading to agrarian lifestyles, and this looks to be in our far future as well.

[g00dgirl]

Thanks gregb for your post, especially

He may not be able to defend more lands

This is something I had not really thought of yet. Until now I still considered land more valuable than gold (can live on it, grow food) but it is true, unless you have a big family / clan to occupy it, work to grow food on it, defend it, however the circumstances, it might be difficult to get any more use out of it than out of gold, it is just a store of money. For those who have big families, clans, trusted people, land might be a bit more valuable than gold,

but it is also immovable (nuclear accident, climate changes or natural disasters, epidemics) and so there are still some good arguments for gold, even if you had to decide between land and gold.

Having both would be best.

[Naam]

Technological civilizations have died before in the past leading to agrarian lifestyles, and this looks to be in our far future as well.

that's why i decided to be a peasant when my next reincarnation is due.

[hyperdimension]

geriatrickid, have you given any lectures of your ideas to those who have suffered from currency collapse, such as those Zimbabweans in the video that g00dgirl provided who have to dig for gold each day just to survive day to day? I'd like to know what kind of response you get.

[hyperdimension]

In case of hyperinflation, you could make use of gold by paying for larger amounts of other commodities, and exchange those for food or other goods.

I had thought of this too, and it is possible, though it can be an inconvenience if you don't really need the commodity that you exchange your gold for. You could buy a lot of food at once with a single bar of gold, but you'd need space to store it, and you'd want to consume it all before they expire to prevent wastage.

I'm thinking that very small coins would be the most practical form of gold as a medium of exchange as opposed to bars. So what are the smallest coins around in Thailand? I've read that 1/20th of an ounce is available in other countries.

[Naam]

no small gold coins available in Thailand. ½ Baht weight 965 gold with difficulties and premium available. in Europe 1 gram gold bars (~1/32nd ounce) are available but you pay a fancy premium above spot.

[hyperdimension]

no small gold coins available in Thailand. ½ Baht weight 965 gold with difficulties and premium available. in Europe 1 gram gold bars (~1/32nd ounce) are available but you pay a fancy premium above spot.

OK so a ½ Baht weight coin would currently be worth almost 12k baht, which can buy a lot.

½ Baht weight is around a quarter of an ounce, which is 5 times as large as the 1/20 ounce coins like the Australian Kangaroo, which would be worth around 80 USD or 2400 baht.

Why is there no market for smaller coins in Thailand, when other countries have them, and also considering that people earn less and things cost less here?

A friend once told me about his Vietnamese ex-girlfriend whose parents escaped the war and used small gold nuggets to bribe their way out. Can you imagine being in such a situation and all you had that was of value were large gold bars?

[Javabear]

Some people paying attention to this thread may not know that in the US, the State of Utah has made gold and silver legal tender by weight.

[Naam]

Some people paying attention to this thread may not know that in the US, the State of Utah has made gold and silver legal tender by weight.

yeah right! and cashiers at WinnDixie and Publix accept nuggets for pork loin, lamb chops and cauliflower when shoppers are checking out and Home Depot sells plywood and two-by-fours against silver dollars.

[Javabear]

http://money.cnn.com/2011/03/29/news/economy/utah_gold_currency/index.htm

Read this. I know it's only CNN but I figured a second rate source like them would be good enough for TV.

[Javabear]

http://www.nytimes.com/2011/05/30/us/30gold.html?pagewanted=all

Here's one with more on the by weight part of the law.

[Naam]

I think some of you guys living in fear of international collapse need to grow a pair of testicles.

Yes, some national economies will need to readjust, to recalibrate, but that's been going on ever since the Romans and Greeks minted coins. , The gold notion is predicated on there being a systemic worldwide financial collapse. That;'s about as likely as me waking up naked with a katoey. Aint gonna happen. In my case, I have a sharp eyed broomstick flyer keeping an eye on me. In the case of the world economy, there are too many central banks working together. Despite all the negativity we can read about in the media, when push comes to shove, the central banks of China, Russia, the EU, and the USA all come together because they know that if one goes down, they will all suffer.

Do you remember what happened at the peak of the financial crisis, when there was a real fear that the USD would collapse? The Australia Canada, Sweden, the UK and the EU central banks went to work. Even the Chinese were obliged to prop up the USD. The world is too integrated and too dependent on each other to allow such a thing to happen.

let me add a little episode from the 1990s when

-a German asked a bragging American businessman "what would happen to the Dollar if Japan and Germany would throw on one trading day all their Dollar reserves on the market"?

-the American answered cooly "let them do it, we got the nukes!"

[brit1984]

I think some of you guys living in fear of international collapse need to grow a pair of testicles.

Yes, some national economies will need to readjust, to recalibrate, but that's been going on ever since the Romans and Greeks minted coins. , The gold notion is predicated on there being a systemic worldwide financial collapse. That;'s about as likely as me waking up naked with a katoey. Aint gonna happen. In my case, I have a sharp eyed broomstick flyer keeping an eye on me. In the case of the world economy, there are too many central banks working together. Despite all the negativity we can read about in the media, when push comes to shove, the central banks of China, Russia, the EU, and the USA all come together because they know that if one goes down, they will all suffer.

Do you remember what happened at the peak of the financial crisis, when there was a real fear that the USD would collapse? The Australia Canada, Sweden, the UK and the EU central banks went to work. Even the Chinese were obliged to prop up the USD. The world is too integrated and too dependent on each other to allow such a thing to happen.

let me add a little episode from the 1990s when

-a German asked a bragging American businessman "what would happen to the Dollar if Japan and Germany would throw on one trading day all their Dollar reserves on the market"?

-the American answered cooly "let them do it, we got the nukes!"

As many an action movie shows, in times of complete breakdown of society as we know it, guns and bullets are more effective for getting hold of the goods you need, than a few gold coins would be...