Money, Schmoney
May 18, 2006
1:06 p.m., MT

I'll admit I was caught in this kind of circular thinking about buying gold and silver for a while, because we're so strongly encouraged to think only in terms of buying stuff with dollars. What I mean is, while I grok converting fiat money—especially ones that are actively going down the toilet, as is the USSA dollar—into things that retain value, like gold and silver, what happens when you want to buy something? If you change back into dollars to make your purchase, aren't you right back where you started? And isn't that a bad thing?

Well, Duh!—of course you'd end up back where you started, and of course that's a bad thing. But notice that teeny little word—that slim preposition that makes all the difference to the question—IF.

Of course, The Mogambo Guru puts it much more amusingly than I just did. And he says more, lots more, that should be of interest to folks who want to avoid as much damage from the economic fallout as possible.

Exchanging goods or services has a very old history—as it must, since it predates the development of money. It's called barter or swapping, and it's apparently gaining in popularity. There's no reason why part of the exchange can't include gold or some other valuable commodity. Yes, it might be inconvenient doing small-scale exchanges in gold and silver, but I prefer to think of it in terms of having something that's got real value. Alcohol, tobacco, coffee, and guns and ammunition are just a few of the items that will continue to hold value after the dollar tanks. If I'm lucky, chocolate will too, to some degree.

If you've got assets that are tied up in FRNs, it might be worth your while to change some of them out for PMs. Here's some of what Doug Casey has to say about current markets and trends:

Generally there are three stages to a bull market. The first is stealth, when prices go up but nobody cares or even notices. With commodities, that happened from about 2000 to 2003. Next is the Wall of Worry stage. People see that prices are rising, but expect them to fall back to the bear market levels they'd gotten used to. People come up with all kinds of reasons why they're overpriced. They are confused by the new reality, and many old hands and commodity producers take the opportunity to sell, since they haven't seen good prices for years. This is the stage of the market we're now in. Finally, there is the mania stage, when broad masses of the public get involved. It's where the big profits—but also the big risks—are. Personally, I'm more comfortable buying when everyone says you're an idiot for doing so, or at least when they're skeptical. When we're all hearing about what a great investment gold is, I'll be looking for other opportunities. But my guess is that we won't really be there for another year. And when it arrives, the mania should last for some time, as it did most recently with the Internet stocks.

I'm certainly no expert on this investment stuff, but I see enough news and such to know where the major trends are going.

I've a small jar of gold dust that I was planning to use to decorate a line of high-end truffles. It was purchased back in the $500/oz. Au days ... I may be crazy [Okay, I've dispelled any doubts about that long ago], but the way things are going now, I'm leaning more toward holding on to it. Who knows what it might buy me, especially in some emerging Second-World market, a few years out?

Sunni

Comments: 1 person has added a thought or two ...

On Saturday, May 20th, at approximately 11:17 a.m. Mountain time, Dr. Lenny said:

i'd invest in commodoties today - including enough silver to make change for a gold coin in silver. If the only thing people have comoes in $700 to the ounce units, making change will require lots of coffee and chocolate (and silver, but...)i wonder what the space requirements are to hold one gold coin worth of chocolate - how would we rate the chocolate quality?
I like endangered chocolate - both good taste and social value, i wouldn't trade one for five hershey bars. But i like the though of chocolate as currency.

Home
Previous entry: "Brits to be Commanded to Yield PGP Keys?"
Next entry: "Alcohol and Terrorism?!?"