Ever since I started writing about the importance of owning physical gold and silver as insurance against the inevitable failure of the US dollar, I’ve been receiving an increasing volume of questions in my inbox from folks curious to know more about precious metals.
With that in mind, here’s one that I received last week from Joshua:
How much gold and silver should a person own? I’m 38, with a wife and three kids. My only debt is a mortgage and a small bank loan. Going by your prep list for a possible financial collapse, I’m well prepared. My plan is to start buying precious metals mostly as an insurance against dollar devaluation. So how heavily should a middle-class guy be buying precious metals, assuming I have an extra $1000 per month?
There is no single right answer to how much gold and silver we should own, if only because there are so many variables that are dependent on personal circumstances.
Most of the so-called “experts” suggest holding no more than 10% of your net worth — excluding home equity — in precious metals. The biggest problem with that rule of thumb is that it’s virtually meaningless for folks who have a small or negative net worth. I also think it’s a bit too conservative considering the ever-growing risk of a currency failure.
How to Determine the Implied Price of Gold
The first step in determining the “right” amount of wealth insurance needed to survive a currency failure is to identify a realistic dollar-price of gold if it were based solely upon the actual currency supply and the amount of gold held by the US Treasury and world central banks. For that, let’s go to macroeconomist Jim Rickards, who deftly explains the calculation this way:
The combined M1 money supply in the world is about $24 trillion. That includes the United States, China, the Eurozone and Japan. Those four entities combine for over 70% of global GDP.
Now, the official gold in the world is about 33,000 tons (107 million troy ounces). That’s not counting private gold, because private gold is not part of the money supply.
Historically, central banks have run successful gold standards with only 20% gold backing; in most of the 20th century, the US had 40% gold backing.
I use the higher number, 40%, because I think a higher number might be needed to restore confidence in event of a collapse. The point is, 40% is a debatable, but reasonable figure.
Now, if you back 40% of the $24 trillion of (currency) supply with the amount of official gold, it implies a gold price around $9000 an ounce. But I predict $10,000.
So how do I arrive at $10,000?
That’s because I expect central banks to print a lot more money by the time this issue comes to a head. So, by the time the printing presses stop running around the world, that $9000 number will likely be in the range of $10,000.
The point is, $10,000 an ounce is not pie in the sky. It’s not a number I pulled out of a hat to get headlines. It’s the actual mathematical implied non deflationary price of gold. If you reintroduced a gold standard at a lower price, it would be deflationary. They’d have to reduce the money supply in order to bring it into alignment with the price of gold.
Now here’s the punchline: The global M1 money supply has doubled to $48 trillion since Jim explained this in 2017. So the implied gold price is now closer to $20,000.
Others believe that confidence will only be restored if the dollar-price of gold is based upon 100% backing — at least for a short period of time — which would result in an equivalent minimum purchasing power of roughly $22,500 in today’s dollars.
Are those numbers a pipe dream? Perhaps, but I think they are close.
That being said, I am confident that both silver and gold are extremely undervalued at today’s prices — especially when you consider the number of dollars currently in circulation and central banks’ sustained and coordinated currency-printing programs known as “quantitative easing.”
So, for my planning purposes, I take Rickards’ conservative approach and assume a post-reset purchasing power equivalent of $20,000 per ounce of gold.
I also conservatively assume that the gold-silver ratio will drop from roughly 80:1 today to 30:1 after the reset. I say “conservatively” because, since 1687 the average ratio has been slightly more than 27:1. If I’m right, and gold climbs to $20,000 per ounce, then the post-reset purchasing power of silver will be equivalent to $667 per ounce.
How Much Gold Should I Own?
Based upon those assumptions we can determine how much physical gold and silver we need to get to the other side of a currency reset.
For example, if you want enough insurance to provide the equivalent purchasing power of, say, $100,000 after an economic collapse, then you’ll need to accumulate 5 ounces of gold (5 x $20,000). On the other hand, three ounces of gold and approximately 60 ounces of silver (3 x $20,000 + 60 x $667) should get you $100,000 worth of insurance too.
See how that works?
And if the actual post-reset value of gold ends up being on the order of $25,000 or more instead of $10,000 … well, then you’ll be even better off financially.
Closing Thoughts
A few important closing points:
- Make sure that you have adequate food and other emergency stores in place before you begin accumulating gold and silver
- I believe it’s important to diversify your precious metal holdings; silver has more upside than gold, although it takes more ounces to store an equivalent amount of wealth
- Although the US dollar is going to fail sooner rather than later, nobody can say exactly when — so unless you think the “big reset” is imminent, don’t go overboard and start throwing every last extra dollar you get into precious metals. Enjoy life! Don’t stop saving for the annual family vacation and other things that make life worth living.
Finally, a word of caution: Always remember that precious metals are insurance. If you’re thinking about buying gold and silver as an investment or way to make a quick buck, then you’re buying them for the wrong reason.
Photo Credit: kwn
Gold prices are going down – might be a good time to hold off buying, what do you think?
I don’t know about you, but I don’t have a crystal ball, Robert.
Would you risk your home and wait to buy homeowner’s insurance in the hopes that the price may fall in the future? I wouldn’t — but that’s just me.
I hope you didn’t wait HAHAHA!
Yo! Where do you pick up your own silver/gold for yourself? Do you get straight bullion or do you get it by older coins w/ the precious metal in them?
Reason I ask it twofold:
1) I’m a coin collector and always love seeing what type of coins people have. Similar to when they share their net worth!
2) The thing that always concerns me with these worst-case “end of the world” situations, is that if you have a large ass coin or block of gold, worth say, $5,000 and what you’re wanting to trade for it (say, a cple gallons of water and bread for $50.00 (it’ll be expensive in this crisis, yes?)) how exactly would you go about breaking this coin/block up? Are you going to shave off a few slivers that’s worth $50.00 and then make the trade?
So it would seem smart for those piling up these metals to maybe have some bigger chunks just for ease of storage, but more importantly a bunch of little coins/mini-bars to easily be traded in times of need. And, as one of my gold hoarding friends likes to say – a gun too, “because it’s gonna be the wild west out there!”
There are two basic options, J: Some people buy online, and others buy their gold and silver from their local coin shops.
I don’t think there is going to be an end-of-the-world scenario. If the powers-that-be are smart, there is going to come a point where they realize the current debt-based Ponzi money system can no longer be sustained. The G20 will then hold a weekend emergency meeting starting on Friday afternoon and they’ll announce a new monetary system on Sunday evening (that they will implement over a short time-period). That would offer the best chance of avoiding disruptions to supply chains.
If the powers that be are not so smart, they’ll let the system collapse of its own accord. In that case, supply chains will break. If the powers that be act fast enough, they should be able to minimize the damage. If not, well … That is why everyone should have a long-term store of food, water and other supplies before stocking up on gold and silver! Ideally, your gold and silver should be used post-reset to buy up all the great deals and other investments that will be out there after a new system is in place — not for barter.
Remember, US silver quarters (pre-1965) should always be able to buy a gallon of gasoline and a silver dime (pre-1965) should always be able to buy you a loaf of bread — no matter what the price is in US federal reserve notes.
I agree, having multiple sized coins and bars of silver or gold would be convenient *if* no new system was established and society began breaking down so completely that PMs were the only thing being accepted for trade. In that case it would be easier to pay for, say, a used car with a single 100 oz bar of silver than 3000 silver quarters! I don’t think it will get to that point.
Most folks who own precious metals also own firearms. The two go together like peanut butter and chocolate.
Okay, well I might have to come over and borrow your firearms then if/when needed – cool? I have my cat protecting my coins right now.
No worries. However, you’ll have to BYOB (bring your own bullets). Have you seen the price of ammunition lately?
Gold is not for buying bread and gas. Thats what silver is for. Gold is for maintaining your wealth and purchasing power through a financial reset. We live in crazy times. Theres already a massive dissconnect between real life and fake monetary world. Now with digital assets that divide is pretty much complete. The real world is dirt cheap right now.
Huh. Hadn’t ever considered owning physical metals as insurance. I’m sure if the pooh hits the fan with our currency, some things (maybe gold, maybe just physical goods) will be worth a whole lot more than they are today.
If the poo hits the fan, many things of tangible value that we take for granted, especially food items, cigarettes, alcohol, batteries, lighters, etc. will be worth a whole lot more than they are today. Although I could be wrong, I think the risk of a “Mad Max” scenario is low.
While I believe there is a chance for a brief breakdown in supply chains, I think they will be temporary.
The real pain will come after the new economic system is in place, which will result in a lower standard of living for most folks in America — and that is going to lead to its own set of troubles.
My friend who is a police officer was really worried about our economy and asked me about gold. He has the most valuable asset, guns and bullets.
As do probably 90% of all people who own gold and silver.
While important, I’d place food, water, and a few other items higher up on the list than firearms and ammo.
Len, I hope you are right about no Mad Max scenario, and only a temporary interruption in services. But I really worry about what even a temporary interruption will do to our society. Many people have no morals any more.
Look at what happenned with so many of the more recent local calamities. Rioting and looting immediately. Look at every Target and Walmart on Black Friday morning. People rioting over crappy Chinese goods that they don’t even need. Look at what happenned in the Walmarts when the EBT card system went down for a few hours back in October in Louisiana. People go crazy immediately and turn to animals.
I think the cities are only 3 meals from total anarchy. So what would a 1 month to 3 to 6 month interruption bring? I think the cities could very well turn Mad Max very quickly.
During an interruption of services, would the police get paid? Would they show up to work? A very small spark quick quickly ravage a nation full of hungry and desperate people.
You’re right, Josh. The cities are going to be a mess if supply chains break. The more densely populated, the worse it will be.
It’s why I recommend keeping enough supplies on hand such that you don’t have to leave your residence for six months — just in case things get really out of hand.
If supplies chains are still broken more than six months after the crisis begins, then we’ve got big problems. In my opinion, though, that scenario is truly a “long-tail” risk that is very unlikely.
Because it is in society’s best interest to solve the problem as quickly as possible, the most logical outcome is that a monetary solution will be implemented ASAP to make it so. Let’s just hope it is the right solution.
Is it possible that our government would allow the crisis to continue Long enough as to lose a percentage of the weakest among us?
I sure hope they wouldn’t intentionally do such a thing, James.
Len is absolutely correct. A simple disrupt of trucking would cause complete depletion of all available supply. 48 hours later densly populated areas would errupt into total combat zones, with troops and martial law. Police and Fire response would be overwhelmed and ineffective due to 911 gridlock. Prepare Now! Time is not on your side this time around.
I have 29 years of Govt. Service and have been trained for this day..
Len,
As a fan of your site -always look forward to a new article every Saturday!- these articles about the Economic Collapse 101 especially got my interest. I am a European living and working in the United States. In your opinion do you think the government would close the borders in case of an economic collapse and the European countries as well or would the effects spread worldwide and the same conditions here would be found elsewhere also? In short, better stay put and ride it out here?
Thank you, Jan. I have no idea — I can only speculate.
If the dollar fails first, the entire world economy will quickly follow because the majority of all world commerce is transacted in dollars. If not fixed, the world economy would eventually revert to a more-localized economy based upon barter — although local scrip may spring up too.
I believe that unless you live in the middle of a large densely populated city, “bugging out” to find a safer place after critical supply chains have broken, is riskier than preparing ahead of time, “sheltering in place,” and riding out the storm. But that’s just me.
A lot of the silver bugs say that most of the mined silver has been used and destroyed. Gold has been saved. They say oz for oz the remaining silver is actually more rare than gold. When the world realizes this, they say, silver will be worth more than gold.
Any thoughts on those “facts”?
Short answer: no.
Unlike gold, a good proportion of silver is used in manufacturing processes for electronics, photography, medicine, solar power, batteries and other goods. A lot of that stuff ends up sitting in landfills (most of it is not actually destroyed). Silver is also “easier” to acquire because a lot of it is produced as a byproduct of copper, tungsten and even gold mining.
I believe geologists are currently estimating that there is roughly 8 times more silver in the earth’s crust than gold. So I do believe the gold-silver ratio will drop substantially from where it is today — as I mentioned in my article, for planning purposes I am assuming 30:1. However, I believe it will actually fall to somewhere closer to 20:1. If I’m right, that means silver is currently even more undervalued than gold (by two to three times) — regardless of whether the ratio drops to 30 or 20.
Bottom line: I don’t believe silver will be more valuable than gold, but I believe it has a much bigger financial upside.
To answer such a question, one has to open the history books for guidance of what to expect. King Solomon once said, “There is nothing new under the sun.”
Since we use the same sun 2900 years later, I take his advice. Now what happened in US history in the 1929 crash? Did the economic chaos start in 1929?
Well, the market crash actually started in 1922. Now you all are scratching your heads wondering what on earth I am talking about. First, the agricultural markets crashed in Chicago. Then the hyper inflation of food prices (Been to the grocery store lately?) forced the stock market to crash 7 years later.
When we look at the drought in California, we get an idea of the rise in food prices coming our way this year. Take a trip to your local Wegman’s or Trader Joe’s and see for yourself how much more we pay for food today.
In summary, the depression started in 1922 and finally ended in 1950 when the Korean War happened. Our next depression will possibly last 28 years again.
So, make sure you stock up on silver and gold as “insurance” against something like this happening again. A rule of thumb is to invest 5-10 percent of your portfolio in precious metals. Think of it as a life insurance policy. You do not want to die; it is insurance against the catastrophe on your family. The same goes for investing in precious metals.
To Your Health…
To Your Wealth…
To Your Wisdom
I’m wondering, who has a collection of these metals? Not many people I imagine. Grandma’s and such may have stashes of jewelry but they are often valuable beyond transferable money (memories and such).
I only wish I had a massive lump of gold for emergencies, like in the movies (Die Hard 3 with the raid of fort knox for example).
Alex, the data I’ve seen suggest that only 1 in 100 people buy physical gold and silver coins and bullion.
Len,
great site and excellent articles. I have recently been doing much research in getting my household finances in order and stumbled upon your site…which of course led me to your more detailed articles of the “Economic Collapse”.
Regarding investing in silver as insurance for my current wealth and after the possible Economic Collapse, would it be wise to invest in the more popular government issued silver (1 oz coins) like Silver Eagles, Canadian Maple Leafs or Chinese Pandas? Or other silver rounds that are not government issued? It seems that you are able to purchase the non-government issued rounds for a lower price than the government issued coins due to popularity and higher quality, but both have the same silver value. Do you think this will make a difference after the reset? Or do you think silver will just be silver no matter what government or company produced it?
Thank you!
Steve
For those just starting out, I recommend “junk” silver, which isn’t junk at all — it is US silver dimes, quarters and half-dollars that were minted in 1964 or earlier. The beauty of junk silver is that is can be easily bartered for small purchases in the event of a currency collapse; for example, a silver dime will always buy a loaf of bread and a silver quarter will always fetch a gallon of gasoline. The risk of counterfeit junk silver is low too.
Not sure how it happened but I lost your blog for a couple of years, I am enjoying catching up. Thanks for the fine work! Glad to be back.
Well, welcome back, Jeff!
I buy silver rounds because the Eagles, maples rags, and Panda’s are the 3 most counterfeited silver coins in the world. I would also invest in pre ’64 90% coins also
They are NOT! A simple test to authenticate a silver coin, ANY silver coin, is to place the leading edge of the coin against a ICE CUBE. THE coin should slice right thru and transfer the coldness to the coin. If it does its authentic silver
The sophisticated may understand the value of pre-1964 “junk silver,” or which mint coins might be most often counterfeited. The unsophisticated probably do not think in terms of “melt value.”
My unscientific guess is that if mid-reset you are trying to barter an ounce of silver for a big tank of gasoline at the filling station, the proprietor is more likely to think that an Eagle or Canadian Mint Maple Leaf is real, and a “Remember the Alamo” round might be the counterfeit.
A Maple Leaf at this instant costs almost 5% more than a round, but it is “official money” and should be accepted with less hesitation by the average person.
On the other hand, you can accumulate more rounds than mint coins for the same investment. I would just be sure to avoid collectors’ “art coins” with crazy premiums, possibly 100% or more.
Concerning the big rise in the future value of gold, shouldn’t you subtract the capital gains tax to obtain the actual value to the consumer who would be cashing in the gold for whatever the new currency is (IMF SDR’s maybe?) to survive?
Randy, that is a fair question. Technically, yes. Although I suspect private citizens who trade their gold amongst each other in exchange for services, other tangible assets, and even the new currency wouldn’t be worried about that since it would be virtually impossible for the government to track.
I’m not saying I would do that, of course. I’m just pointing that out.
Regarding a question posted by Steve Billing. US eagles,.both gold and silver carry a higher premium than rounds like sunshine, apmex or Scottsdale. They are easily validated and less counterfeited. Also according to the IRS, they are non reported at time they are bought or sold. Unlike other types and larger weight precious metals, like Kilo bars, 100 ounce bars foreign gold coins, etc. To get specific info, I recommend. Mike Maloney’s, Investing in gold and silver. As a side note, freeze dried foods are in back order status at many of the good companies and prices $$ are going higher.each week that passes…
I agree, Pat — it’s hard to beat Mike Maloney’s Investing In Gold and Silver.
As for reporting requirements, a few comments: 10 and 100 oz. silver bars are non-reportable as long as they are bought or sold in increments that do not exceed 1000 oz. Also, in most cases, the only time gold and silver bullion is reportable is if you buy more than $10,000.00 in cash (as in the green Federal Reserve Note funny money we all have in our wallets, or money orders) in a single transaction.
Gold has outperformed stocks since 1975. It is a viable investment – not just insurance.
Yes, George, you can certainly speculate with gold (physical or paper) and purchase it in the hopes of higher returns. People do it all the time, just as they do with pork bellies, corn and cotton. But gold has a higher purpose.
If you take a look at Exter’s pyramid, JP Morgan’s famous quote is obvious (paraphrasing): gold is money and everything else is credit.
I’ve been enjoying your blog, Len! Both PF and prepping are fascinating topics to me.
I’m wondering what you think about stocks and bonds in an economic collapse. I’m building an early retirement fund in an SIPC-insured brokerage account, in which I am buying shares of ETFs. If the economy were to collapse and then recover as you describe, what do you think would happen to them? So much of the value of companies is based not on dollars, but on other assets, including the supply chains that you mentioned. After the recovery, do you think brokerage accounts like this could retain much (even if not all) of their value?
Thank you, Carrie. History is full of examples that show us what happens to stock markets when hyperinflation infects currencies. The bottom line is they skyrocket! But here’s the catch: stocks’ skyrocketing prices will be reflected in nominal terms — not real terms. In real terms, they will not rise fast enough to overcome the loss in purchasing power of the failing currency. So, a share of Apple stock may rise to $1 million per share when the dollar begins its inevitable collapse, but at the same time a cup of coffee will increase from $5 to, say, $100,000. Still, holding stocks will be better than holding an imploding currency because history also tells us that all fiat currencies — including the “almighty” dollar — eventually return to their intrinsic value: zero. The stocks of companies that are able to weather the storm will still be worth something — although they won’t be able to keep up with the world’s ultimate stores of value: gold and silver. Hope that helps.
I cant afford Gold. I am trying to purchase some Silver when I can. President Trump has given the 6 largest banks 3 years + or – until they are closed financially. I suspect that 2020 re-election of President Trump will trigger his and those aligned with him the Reset of our Economy. The end of Fed monetary Scam policy. Do you have any idea what will replace the dollar or will another form of dollar backed by Gold emerge? Will a form of Bitcoin such as a Gold US Bitcoin become legal tender? Ive read that once the Fed Scam and banking Scam ends that Gold and Silver will explode to over $10,000.00 +…
Bitcoin is a scam; I strongly suspect it will not protect you in the event of a currency failure because bitcoin is not money.
Think about it: If the purchasing power of a dollar goes to zero, then one bitcoin should be worth infinity dollars, which is essentially undefined.
Gold and silver do not have that problem because they are real tangible wealth — atomic elements on the periodic table. As such they can be valued in terms of mass. For example, we know that, historically, 0.1 grams of gold will always purchase a loaf of bread.
During hyper inflation money would pour into bitcoin, but it doesn’t have to be valued in terms of fiat. It will continue to be valued against other cryptos, but goods can be priced in terms of BTC as well.
There’s already decentralized finance systems in place. Maybe at a certain point, no one will sell for fiat.
Maybe ultimately, it’s value will be priced relative to gold/silver?
Think about what you are proposing: Cryptos valuing themselves in terms of other cryptos is pointless. You’re trying to anchor one cryptocurrency’s value to other cryptos that have no anchor. That is an exercise in monetary futility. It’s like two ships trying to maintain a fixed ocean coordinate by attaching their anchors to each other, rather than the ocean floor.
You are correct, in the end cryptocurrencies can — and most likely will — be measured in terms of gold and/or silver. Or, to put it another way: The true value of cryptocurrencies will ultimately be determined by gold and silver holders!
This, of course, begs the following question: Based on today’s manipulated prices, will gold holders really be willing to trade 25 ounces of real physical gold for one ethereal bitcoin? I highly doubt it — frankly I don’t think most would trade one gram of physical gold for an ethereal bitcoin.
Is it best to buy physical gold/silver or silver certificates? How easy is it to sell either if needed?
I can’t stress this enough, Mary: Always buy physical gold or silver. Always.
The main benefit of precious metals is that they protect you from counterparty risk (i.e., extremely high inflation, or outright currency failure leading to hyperinflation). If you buy paper facsimiles of gold or silver (e.g. certificates “backed” by the metals, ETFs, etc.) you are making yourself vulnerable to the very counterparty risks the gold and silver is supposed to be insuring you from in the first place!
Len,
I find your information very interesting and have enjoyed reading it this morning. It all set me to wondering if you had ever researched what the people did during the collapse of the soviet union back in the late eighties and early nineties. Do you know if metals were a part of their survival strategy or was that just not a practical possibility in that type of closed society?
Johnny, that is a good question. I tried to find info on the Internet about the Soviet citizens and whether they held gold as a store of wealth, but found very little evidence that indicated they did. I don’t believe the totalitarian regime in Moscow would have ever permitted its citizens to hold honest money, since its economy was 100% dependent on central planning and its corrupt fiat rouble — yes, the rouble was even more of a sham than the US dollar is today.
Len,
Is it a possibility that the United States can forgive it’s own debt?
Also, I’m trying to wrap my head around who physical gold or silver will help you during times of a depression. Stores and utility companies only deal in cash, so do you cash out your metals and trade for fiat to pay for items you need day-to-day.
Don, the US can do whatever it wants to do. The question is: What would the impacts be of such a move? There are just too many political issues — not to mention there is far too much debt out there NOT owned by the US government. It’s much more politically expedient to inflate the debt away.
As for use of gold and silver during a depression … Remember, because precious metals are money, they would become even more valuable in a true monetary depression (which is a time when the amount of available money in circulation is in short supply). Unless they outlawed silver and gold, you would convert your precious metals for fiat currency, just as you can today. You may receive fewer dollars because the price per ounce would be less, but your equivalent purchasing power would ironically be much MORE.
And if they DID outlaw precious metals, you could take your chances you’d be fairly compensated by the government when turning it in (note: they didn’t fairly compensate those who trusted the government to do so back in 1934), or you choose to break the law and hold on to it; then you could spend it as needed on the black market, which is always available. You could also do a little of both — that way you’d ensure you’d have enough currency to pay the utility bills.
More evidence that “people in the know” are preparing for a financial crisis.
They are moving into precious metals and so-called “hard money”:
https://www.zerohedge.com/markets/hundreds-billions-gold-and-cash-are-quietly-disappearing
Len,
I have been accumulating bullion since 2008 and I currently hold 20 oz of gold and 3,000 oz of silver. Based on Jim Rickards prediction of $10,000 gold and $333 silver, I could potentially gross $1,199,000.
That being said, I am wondering what the government and banks will do regarding the balance/interest rate of peoples existing loans in a hyper inflationary situation.
Banks do not currently adjust peoples existing loan balances/interest rates for inflation, but do you think they will during hyper inflation? If not, a person holding bullion could very easily pay off large loans (mortgage, student debt, etc) for cents on the dollar.
That is a great question; I wish I knew for sure! There are those who believe that if hyperinflation destroys the dollar, then the US Congress may do something akin to what Germany did to mortgage holders after the Weimar hyperinflation from 1922-1923. In the book, When Money Dies by Adam Fergusson, he notes that Germany passed a law on Feb 14, 1924 called the “Third Taxation Ordinance” that revalued existing mortgages at 15% of their original gold price based upon the price of gold (in German marks) on the exact day and year the mortgage was originated.
As a simple example, if a similar law was passed in the US, it might work like this (assuming I am interpreting the German law correctly) …
Let’s say you purchased your home with a $100,000 mortgage on a day in 2010 when the price of gold was $1000 per ounce. In that case, your new mortgage would be defined as being worth 1.5 ounces of gold. The math would look like this:
So, to sum up, your new revalued mortgage would then be based on 1.5 times the price of gold in the new currency. I would hope if, in our example, one had paid down the mortgage by half over time, then the new mortgage would be revalued at 50% of 1.5 ounces of gold, or only 0.75 ounces of gold. But regardless, the hyperinflation turns out to be a pretty good deal for mortgage holders; all of the other problems hyperinflation incurs notwithstanding.
But who really knows what new laws the bankers will lobby for in such a situation? Frankly, I would argue that the bankers took the risk of lending in dollars, and therefore they should be forced to eat any losses due to hyperinflation — especially when you consider their mortgage was created with currency created out of thin air; not actual money in their vault from depositors.
By the way, Fergusson also notes that Germany passed a second law a short time later that upped the revaluation from 15% to 25% and even included the revaluation of all retired mortgages within the previous five years! So you can see the bankers did a good job convincing the politicians to help them try and recover at least some of their losses.
Hopefully, mortgage holders will continue to make out from any hyperinflation scenario — and I believe we will. (Although, of course, nobody can ever be certain.)
I think Gold and Silver will be the next world reserve currency temporarily until the Cashless and Electronic financial system is fully established. That is what I see happening.
3000 – 4000 people in Sweden have a RFID chip planted in their hands. These people are Buying and Selling with this RFID chip. I think that is going to be the next Global financial system.
In my opinion Sweden is the testing grounds.
I sure hope you’re wrong, Norman. We are warned in the bible about having the mark of the beast being placed on/in your right hand or forehead.
Absolutely, Mr. Penzo. I have been following your data/information through your site for a while now. I have found most of your ideas, concepts and insights to be on-the-money (no pun intended). I have utilized resources to accumulate some hedge against a probable financial collapse as described by many (silver assets) and have also initiated a recovery strategy as you ascribe to. Your Biblical reference solidifies my familys short and long range recovery plan. Keep up the good work!
A nice side benefit of gold and silver is that you can pass on/gift this asset to heirs, children, or others with no taxes or other gov. intervention. And I suspect that most folks who receive them will tend to keep them vs. turning them in as compared to a cash transaction that can immediately be spent.
Absolutely, Frank. Precious metals are the ultimate form of privacy. For those who choose to do so, they allow private transactions of almost anything
I have a strange question- first time I am reading your site. My husbands son is a “doomsday” person and is trying to convince his father to spend alot of money at 80 years old to buy silver. We are trying to retire this year and we have a bout 1mil net worth. Not alot in cash, as my husbands medical expenses exceeded $30K last year which had to come from personal accounts. I for one think that if you cannot live on your social security and a little of your retirement accounts (I cannot take RMD yet)… then spending $12,000 in silver to me is not a good investment at this time. It’s insurance only not “money” you can spend if you need it. I understand the “hedging”, but if the economy fails and you go grab a few gold bars and silver coins to barter with.. the have nots will unfortunately take notice and so would the govt. So as I told him, in a society that is broken down…. civil unrest.. what do you think is going to happen to someone at 80 years old who uses those means to purchase in public? Get followed home? Beat Up? Robbed? – govt step in and try to take anything you have? They did it in Russia, they can do it here. Just curious as to your thoughts on this? It does scare me, but it also scares me that this kid of his has literally taken so much of his dad’s funds and never paid it back— well over $150K, files bankruptcy, etc. etc. and he is going to advise us financially? Please do not post my name!
If a currency dies, people who have their wealth in assets denominated in the dead currency (e.g., bonds and cash, especially, but also stocks to a lesser extent) can lose their life savings overnight. Precious metals are insurance whose primary purpose is to transfer a person’s wealth from a dead currency to a new one; its other insurance role is to maintain purchasing power during times of high inflation and the hyperinflationary period that comes immediately before the death of any fiat currency. These types of transitions from a dying currency to a new one have happened countless times in human history and the world has carried on with only minor societal inconveniences over relatively short periods of times (i.e., mainly shortages and broken supply chains that resolve themselves with the introduction of the new currency). Precious metals would only be used for everyday transactions in the most dire of circumstances, when society has completely broken down. People who believe in being prepared for that unlikely case buy pre-1965 US silver dimes, quarters and half dollars for bartering — not 100 oz or 10 oz silver bars — because they are easy to barter with (e.g., a silver dime will always buy a loaf of bread or a dozen eggs, and a silver quarter will always buy a pound of chicken or a gallon of gas). They also have an extremely low risk of being counterfeit (because, well … it’s hard to make convincing counterfeit coins minted in 1964 or earlier).
Frankly, if you do decide to buy any silver, I would not say a word to the kid; it is clear to me that he is only out for himself.
A thought to consider. I understand about 60 plus percent of mined silver is used for industrial purposes. So, in theory, this need could stir political wieght against moving to a silver standard as the dollar lost credibility?
Yet multi layered graphene is a potential silver replacement. ( Cost?) So, if a replacement was found, then it would possibly make silver more viable as a monetary standard??
If silver was made to be a monetary standard, how does government come to own adequet reserves to even do a 40 percent backing?
Thanks in advance…
Nice article 😀
Thank you for the information. I have two questions
1) Storage? I see Maloney offers storage at low fee ? In a bank safe deposit ? Or home in fireproof storage?
2) I have no idea about gold silver authentication. Are there specific trustworthy vendors that you can recommend ?
Hi Laurel: 1) It’s up to you; obviously storage at home avoids the storage fees, but some people are uncomfortable with that. 2) APMEX is who I deal with; they are probably the largest dealer in the US; their reputation is solid, their customer service is top notch, and I trust them implicitly.
P.S. I guess I should get out of bonds…
When people lose faith in the currency, bonds will become worthless.
It caught my attention when you explained why you believe that gold and silver are both undervalued in today’s market. My husband and I both agree we want to start making more investments this year to diversity our finances and feel more confident about our future. Maybe I’ll look for a bag of gold nugget paydirt since that sounds like a fun way to start building our collection of precious metals!
Do you think the Chinese yuan could be the next currency to the world market? And is it a good investment?
Only if they announce at some point that it is gold-backed. I think a more likely scenario is that gold — or a new global gold-convertible currency for world trade — will become the next reserve currency. I think going forward the euro is going to go the way of the dodo, and all nations will use their own currencies for domestic use only (including a sharply-devalued US dollar).
Very cool article. I live in Canada and have been investing in physical bullion for about a year. I have also been stocking up on other hard goods including firearms and ammunition (Glad I did seeing as how the prices have skyrocketed and ammo is becoming scarce). I also have a solid friend group who actively train with their firearms. I have a lot of concern for the future, and for our “freedoms.” Note that in 2020 most semi-automatic rifles became prohibited in Canada, and I think similar policies will come into effect in the US under Biden.
My worry, with precious metals is that their prices seem to be so manipulated, and if it’s possible the government would manipulate the prices much lower than their intrinsic value, then move to a cashless society. If they outlawed gold, as they did in the 1930’s, it would then be impossible to convert your physical bullion into electronic currency.
I understand that a black market would still exist and goods and services would still be available for trading there, but how would anyone truly know the “value” of gold and silver? In other words, if gold and silver spot prices weren’t publicly posted, how could we use these metals for transactions?
Do you think people would eventually come to some sort of valuation on their own? I guess history is on our side, in the fact that gold has been true money for centuries, however, we have never lived in a digital age before…
Are you sure your numbers are correct as far as how much pm to buy for future purchasing power? I think you would need $100,000 in pm in todays value to have the same purchasing power in the post reset. That might end up being $1,000,000 post reset but it still would only buy roughly what $100,000 would buy today.
That would be true if you believe the dollar is fairly valued compared to gold at this moment in time. But when you compare the difference in the number of dollars in circulation to the amount of gold held by the US Treasury today vs. 1971 when the dollar lost its anchor to the yellow metal, it becomes readily apparent that in order to balance the monetary system books TODAY, the dollar price of gold must increase by at least ten-fold. That means the dollar TODAY is over-valued against gold by a like amount — and so anyone purchasing gold TODAY is buying it at a sharp discount to its true value.
By the way, as Rickards notes, any reset would have to take this in to account to restore confidence in the currency and reboot the system.
sure would like to continue this conversation now……. 5/16/21
I’m still here, Randy. What would you like to share?
Hi Len,
What free advice can you give me a 61 year old single female living in a mortgage free home and I have two IRA accounts and $150,000.00 in another retirement account. I live in the Tampa Bay area.
Given the possible crash of the dollar during the Biden administration, how much gold and silver should I purchase to survive and in what increments? And if the dollar crashes, how will this affect the IRA and retirement accounts? Will I lose it all?
Thank you
Only you can decide how much gold and/or silver you need, Misty. In short: decide on how much purchasing power you want to have if the dollar implodes, and then buy the appropriate amount as described in my post.
If the dollar crashes, the purchasing power of your IRA and retirement accounts will be reduced; how much depends on whether there were any precious metals or precious metal stocks in their portfolios.
Re: obtaining other assets for personal safety and security.
Len mentioned food stores. We have always had extra stores on hand due to our lifestyle and mindset, (independently rural). But people need to take into account food rotation and replacement. All food, even canned stores, has a shelf life. And if you don’t particularly like canned food, remember you will have to still be eating it as you live day to day right now. Frozen food, even if vacuum packed prior to freezing, will last a year, max. Non vacuum packed food lasts even less time. I have had elk frozen for a few years, but it isn’t very good. We have two freezers full of home grown veg etc, but it still has to be used up over winter.
We always have flour on hand as we (I) bake our bread, always have a large 20 lbs bag of rice on the shelf, pasta in bulk….but you have to still eat it as you save for the future. Therefore, we eat a lot of Italian food, curries, stir fries, and other tomato based side dishes. My old neighbour always prepped from Y2K days. He even had stores packed in nitrogen etc, but I have no idea what happened to all ‘the stuff’ when he died of a sudden illness. Probably got thrown away. We do have home jar canned salmon that seems good to eat, even after 6-7 years in storage. Gasoline even has a shelf life, especially the ethanol laced crap. Heat and cooling? Electricity?
Don’t forget about skills. and health. Many rural folks can build, plumb, weld, and fix stuff. I’m 68 and still get asked to help people build houses, additions, do renos, whatever. I cannot stress enough the value of learning personal skills. First aid, building, fixing, etc, are easily obtained at local community colleges over the winter. Beats tv.
I don’t think there will be a sudden collapse. And I have always felt the average North American and Western lifestyle is beyond unsustainable, anyway. If the rate of opioid abuse, alcoholism, obesity, depression requiring meds, and personal indebtedness is any indication of how well this is working for individuals right now……. then perhaps many folks would be better off working harder for a simpler life in the long run. A life like my parents lived. This idea is opposed to heroically saving to keep it all the same. Just an idea. Sure, prep and planning is just common sense and probably everyone here is doing it one way or another, but I also don’t think the Govt, all our western governments, will idly stand by and watch a collapse unfold. There will most likely be a new imposed financial system that folds the old assets into something new, whatever it takes, even imposed PM buybacks, wage and price controls, etc. Instead of Mad Max, it could actually morph into neighbours helping neighbours.
regards
And I am now away all day so I won’t be around to address any replies or criticism to my Pollyanna comment. Have a good one.
Totally agree about rotating your stores; it’s very important and it takes discipline. Sometimes though it isn’t possible to rotate everything before a can’s “best by” date. That being said, canned food will keep for decades as long as the can doesn’t get damaged. The nutritional value will take a bit of a hit, and the color will be off, but it is still better than nothing. For what it’s worth, as an experiment I’ve opened and eaten a can of ravioli that was ten-years beyond its “best by” date; the sauce was more brown than red in color, but the ravioli was still delicious. In fact, if I had eaten it blindfolded, I would have never known the ravioli was more than a decade old.