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Economic collapse hypothetical


Roamer

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Okay excuse my ignorance here, i am new to this hobby and investing in general. 

So i understand investing in metals for the sake of betting the spot price will rise and we can all sell and float off into the sunset on our new yachts. 

But i am having trouble to understand how it benifits us if there came a point where all paper money becomes nothing better than toilet paper. So if we cant sell our metals for paper money, what would it be used for? Basiclly a bartering item and trade system? Like ill trade you X oz of silver for X gallons of gas or food type of deal? Or is it even further in the furture of this hypothetical where we hold our silver untill a new world standard for currancy emerges then we could trade the silver in then for the new money? 

I hope im explaining myself clearly, if not let me know i will try to revisit my thoughts! :) thankyou

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Short Answer: there are people who'll tell you that the sky is about to fall... but they or those like them have been saying that for a long time.

Longer Answer: Gold / other PMs are commonly agreed to be a good safe haven asset but probably aren't the best bet for making returns and should probably form part of a diverse portfolio of investments. (Coin collecting is a subtly different aspect of it because sometimes it's just nice having a nice physical object.)

IMHO a certain amount of the crowd that expect some kind of utterly calamitous collapse of the financial system stem from some people deliberately stoking ear/expectation of massive gains in order to sell something (typically bullion). People like Silver Doctors will happily tell you from dawn to dusk that the dollar is about to collapse while happily selling you bullion.

Long story short, be careful about whose advice you take (including mine) and be aware that there are paranoid conspiracy theorists, snake oil salesmen, and also genuinely lovely and helpful people in the community.

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When was the last time¬†when all paper money become nothing then toilet paper?¬†ūüßź¬†(as in all together)

If you start off with wrong bearing, you will find your journey way off to the intended path. 

Our lives are not lived in an extreme situation. If such event do happen, it tends to be localise in a region, and that region has to find an alternative payment system for basic services until the de facto currency regains confidence. Outside that region, typically is not affected at all. External trade is possible with an accepted value payment such as PM. Those who have and those who have not each have a different quality of life post recovery.

War between 2 countries may suffer similar currency devaluation together due to various political or military reasons.

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5 minutes ago, Au79 said:

When was the last time¬†when all paper money become nothing then toilet paper?¬†ūüßź

Venezuala last year... Just about all paper currencies have gone back to zero over history. The problem is that people have a built in forgeter...

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3 minutes ago, STONE said:

Venezuala last year... Just about all paper currencies have gone back to zero over history. The problem is that people have a built in forgeter...

By the same logic all gold standard currencies have eventually failed.

PMs asa monetary system is fundamentally limited because it has no mechanism for economic growth short of obtaining more gold.

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41 minutes ago, Roamer said:

Okay excuse my ignorance here, i am new to this hobby and investing in general. 

So i understand investing in metals for the sake of betting the spot price will rise and we can all sell and float off into the sunset on our new yachts. 

But i am having trouble to understand how it benifits us if there came a point where all paper money becomes nothing better than toilet paper. So if we cant sell our metals for paper money, what would it be used for? Basiclly a bartering item and trade system? Like ill trade you X oz of silver for X gallons of gas or food type of deal? Or is it even further in the furture of this hypothetical where we hold our silver untill a new world standard for currancy emerges then we could trade the silver in then for the new money? 

I hope im explaining myself clearly, if not let me know i will try to revisit my thoughts! :) thankyou

Silver and gold ARE money, always has been and always will be. Its value is within itself because of its scarcity and difficulty to produce without having to put in money to make it. Thats why up until a few years ago coinage was actually made of silver. Lets see, you could take that coinage and barter for needed goods so how is what has been used as money any different from the scenario you presented?

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Over long periods of time currency devalues. If you want to save some of the currencies value that you earn for long periods of time then you need a medium that doesn't devalue, that is where gold comes in. It tends to appreciate against other goods (a factor linked to rarity and how costly in energy it is to mine/yield per ton of earth, despite technology advances) while your currency will only ever inflate away, the central banks target inflation at 2% a year or they used to at least. Good money appreciates.

A recent example of currency vs gold; after the Brexit referendum in 2016 sterling lost around 20% of its value. If you held gold prior to 2016 then it was a two way win as gold did quite well that year. House prices fell in gold. Stocks fell in gold. In currency everything went up. 

Venezuela is a good example of recent economic collapse. Zimbabwae is a good example as well, 2009. They both reverted back to using other currencies including the dollar, and gold and silver for barter trade as you mention. In Zimbabwe there were stories of people panning for gold in the rivers to buy food. If you want a western example of economic collapse the Wiemar republic is an interesting case.

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18 minutes ago, PansPurse said:

By the same logic all gold standard currencies have eventually failed.

PMs asa monetary system is fundamentally limited because it has no mechanism for economic growth short of obtaining more gold.

But that limitation is the built in mechanism that is supposed to prevent govts. from printing currencys beyond their actual worth. Its not the economic growth that prevents actual growth of an economy its the over spending by the govts. that eventually devalues itself. That along with greed. When a govt. wants to spend more than it has, it has to borrow, at that point which the fastest way to get what it wants is to devalue its currency and to print more than what is stored in a gold backed currency. Which is why eventually paper goes back to its intrinsic value of zero. So instead of saying "we dont have the money right now and we need to dig up more gold" They say " we can have it now if we just devalue our currency"... So eventually, like where we are now, paper moneys only value is in the "perception or confidence" that it will still buy needed goods...

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23 minutes ago, STONE said:

Venezuala last year... Just about all paper currencies have gone back to zeroÔĽŅ over history. The problem is that people have a built in forgeter...

The generation that lived or experience through a failed currency confidence remember the lesson. The generations thereafter due to the uninvolvement of that scenario would not have any experience that would be imprinted into their minds. It is not that they have forgotten. And most generations living in that currency confidence would unlikely be having their faith be tested until the matrix system breaks down.

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6 minutes ago, STONE said:

But that limitation is the built in mechanism that is supposed to prevent govts. from printing currencys beyond their actual worth. Its not the economic growth that prevents actual growth of an economy its the over spending by the govts. that eventually devalues itself. That along with greed. When a govt. wants to spend more than it has, it has to borrow, at that point which the fastest way to get what it wants is to devalue its currency and to print more than what is stored in a gold backed currency. Which is why eventually paper goes back to its intrinsic value of zero. So instead of saying "we dont have the money right now and we need to dig up more gold" They say " we can have it now if we just devalue our currency"... So eventually, like where we are now, paper moneys only value is in the "perception or confidence" that it will still buy needed goods...

That's frankly bunkum. Inflation is an inevitable by-product of any financial system that permits the extension of credit. Without the ability to extend credit you stymie economic growth. Saying that all inflation is a result of governments printing money simply isn't a reflection of how the financial systems work.

Also please don't conflate economic growth with inflation, this is not a zero sum game.

Also Venezuela is an unhelpful example. Conflating any inflation with hyperinflation doesn't really serve any purpose than to push an absolutist view that anything other than physical assets are unimportant.

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2 minutes ago, PansPurse said:

That's frankly bunkum. Inflation is an inevitable by-product of any financial system that permits the extension of credit. Without the ability to extend credit you stymie economic growth. Saying that all inflation is a result of governments printing money simply isn't a reflection of how the financial systems work.

Also please don't conflate economic growth with inflation, this is not a zero sum game.

Also Venezuela is an unhelpful example. Conflating any inflation with hyperinflation doesn't really serve any purpose than to push an absolutist view that anything other than physical assets are unimportant.

Well, you are entitled to your opinion whether its within the bounds of reality, or not...

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How credit is "supposed to be used" to help keep an economy healthy and how it is actually used today are two different things. You are confusing the two. Loaning money to the vast majority that CANNOT ever repay IS the problem. Would you give everthing you own to a homeless man who doesnt have a job and cannot concievbly even show a way that he can ever repay you? Doubtful. But that is exactly why economies fail because they create "credit" out of thin air and pass the debt on to someone elses shoulders... Usually the taxpayers. Tell me we arent taxed to death... Ever heard of govt. bailouts???

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Just remember that with or without a collapse, currency still devalues over time and the target is 2% devaluation per year. As mentioned inflation is primarily due to the expansion of credit, there is nothing to say that such lending is going to lead to economic growth, often times it is miss allocated, a good example is in the lead up to the last major financial crisis in lending on housing worldwide (defaults, repossession, bankruptcies of businesses and individuals, job losses everywhere), another example was in the lending in oil and shale at previous high prices more recently (followed by defaults and bankruptcies, mass layoffs, ect).

It doesn't matter if you use gold or fiat as the base. Gold has physical limitation in lending but fractional reserve lending still exists. Equally in a fiat system regulations can act in the same ways as the physical limitations of gold - the issue is that over time politicians and populations forget the lessons of easy money and either decrease the reserve requirements in a gold standard or remove regulations in a fiat one. The best system is the one we have, currency and gold side by side performing different roles, one for exchange, one as money. The confusion of the populace as to those roles is not the fault of gold or currency. 

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When greece went to hell from its debt, people didn't get money from the government, the people on pensions and state wages were stuck...what I found was a big increase in gold and si,very items being sold on ebay from greece, this is where those with items could sell and convert, now if you're leaving a country it's down to what you can travel with, if you're staying then it's the amount of items you can sell to keep yourself fed...this is where the Jews have hade millenia of experience of it, they will save gold and silver and diamonds and art, anything transportable just in case and those same thjngs can be sold to,people outside their country to foreign currency that isn't inflated...one reason those running from the Nazis took part of their wealth with them and those who stayed didn't feel the full effect of hyperinflation by selling as and when needed, not bartering for food with gold or silver but selling for more preferencial  ureencies that they could exchange for goods and convert for local currencies when off to go shopping and not be tied to a bank account shrinking in value if even allowed to take money from  at all.

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Imagine being in Argentina when they were only allowed to take out $150 a day, now you have $20,000 on gold with no limits on it...you sell for dollar, convert dollars to pesos and that $150 limit doesn't mean anything...there will always be people who are willing to convert dollars for pm's if the exchange is good enough, using the same with the dollar, you could simply convert gold or silver into the ranking currency of the day be it yen, yuan, euro etc and convert that to dollars if the government has outlawed foreign currency for purchases...which some do in order to try and hold their currency from becoming worthless.

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On 25/07/2019 at 08:23, STONE said:

Venezuala last year... Just about all paper currencies have gone back to zero over history. The problem is that people have a built in forgeter...

He asked about all currencies at the same time. A single country doesn't count.

Most paper currencies do not go "back to zero". Paper and electronic currencies are used everywhere and in modern Western countries they appear to work well. I'd rather have a fully private banking system where banks and other entities (e.g. blockchains) issue their own currencies in a free market, but it doesn't do us any good to keep circulating false claims about government paper currencies. Central bankers in modern countries appear to be able to do a passable job of controlling inflation, though I think maybe long-term deflation is preferable. It's not clear what the market would reward most in a free (private) banking system.

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Yes it does count. And who are you?  His mother?? Besides, he added that all together statement AFTER I POSTED. Try to keep up huh...

" Edited yesterday at 10:42 by Au79"   Focus a little more on the details...

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Couple of brief opinions of mine on this hot topic.

ALL fiat curriencies go to zero, paper or digital, it doesnt matter, the future is a big fat zero.  The USD has lost something like 98% of its value in the last century, and that seems to be one of the better ones.  Venezuelas currency very recently collapsed, and Iran is in the early stages of its collapse, amongst others, sonits not just a single currency, its a snowball.

Brexit Britian may well be next for a currency collapse. The biggest global hedge funds are all opening shorts against pretty much the entire UK's economy.  They create self-fulfilling prophecies for profit.

Gold backed currencies dont collapse, as someone suggested, but they do limit the govts flexibility to exert control (manipulate)  When exactly did the govt get the idea its role was to manipulate the (allegedly) free markets anyway???

Precious metals are a great hedge against collapse, or against inflation.  They are a tried and tested store of value.  To quote Lynette Zang, "shields are made from metal, not paper or promises"  

I see references to Greece, and it amazes me that nobody seems to recognise the lesson feom that (one of them anyway)  At the click of a mouse, the banks can stop, or restrict our access to our bank accounts.  Technically if you give your fiat money to them, its not yours its theirs anyway.  They can also stop international transfers of fiat so you are trapped in their system.  Just try that with something like Bitcoin, or Litecoin, or Monero (to name my 3 favourite cryptos) ts just utterly impossible.  Same for portable wealth like precious metals.

Dynastic, multi-generational wealth.  Why are some organisations, like the Catholic church, or like the Royal family, wealthy?  Because at some level they understand money and wealth.  They dont keep their wealth in FIAT products!  Its in assets like land which, if you hadnt noticed, they arent making any more.  Its in precious metals (im thinking of golden carriages and gold pianos, the crown jewels etc)

I'll leave you with this final bombshell.¬† Paper money, well, its just not pretty and shiny like my 'precious' metal coins.¬† Who wants to look at a twenty pound note when i could be holding an oz of silver, or even a bunch of plasticky paper notes when i could have a gold sovereign in my palm¬†ūü•į

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On 25/07/2019 at 08:14, PansPurse said:

Short Answer: there are people who'll tell you that the sky is about to fall... but they or those like them have been saying that for a long time.

Longer Answer: Gold / other PMs are commonly agreed to be a good safe haven asset but probably aren't the best bet for making returns and should probably form part of a diverse portfolio of investments. (Coin collecting is a subtly different aspect of it because sometimes it's just nice having a nice physical object.)

IMHO a certain amount of the crowd that expect some kind of utterly calamitous collapse of the financial system stem from some people deliberately stoking ear/expectation of massive gains in order to sell something (typically bullion). People like Silver Doctors will happily tell you from dawn to dusk that the dollar is about to collapse while happily selling you bullion.

Long story short, be careful about whose advice you take (including mine) and be aware that there are paranoid conspiracy theorists, snake oil salesmen, and also genuinely lovely and helpful people in the community.

Agreed.

But for the record, not all conspiracy types are paranoid. 

After all, it's not paranoia if they really are out to get you.

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Wow! Thanks all who threw in on this topic! :) glad ive sparked some reading conversation here haha. 

Let me get back to my original question a bit tho, i think what im asking is okay lets say our USD turns into absolute zero. Now with our hoards of metals, what do we do with it if we cant trade it for USD? Again, would you barter your metals for needs, food, gas etc, or do we keep holding untill a new currancy comes into play and then cash out on top? This hypothetical is a SHTF scenario, i dont see it happening in our lifetime, im just worried about the future of the states if the far left keeps pushing for socalism, ( and all the other extreme political correctness going on ) thats whats really got me interested in holding onto my metals.  

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I don't believe in the dooms day financial collapse. What the past has shown in the UK , is that governments have devalued the pound, 1949, 1967, 1992 were all formal devaluations however there are other informal devaluations . I am thinking when the UK voted for Brexit and the pound dropped by 20%, there could be further informal devaluations , if we leave Europe without a deal, this may effect the value of the pound. I think that a holding of silver and gold ¬†can help alleviate some of these devaluations. Just my simple thoughts, which could be completely wrong.ūüėÄ

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