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Sep 08

Why GOLD is a bad idea for most Preppers.

I recently read an article entitled The Five Stages of Economic Collapse which was published by the Energy Bulletin in 2008. The author, Dmitry Orlov, was born in Russia and witnessed first hand the collapse of the Soviet Union. According to Dmitry The Five Stages of Collapse which occurred in the former Soviet Union are now slowly manifesting themselves in the United States. They are identified as follows:

1- Financial Collapse

2- Commercial Collapse

3- Political Collapse

4- Social Collapse

5- Cultural Collapse

I will submit to you this rationale. If you are a new or even moderate prepper the benefits of purchasing gold right now or anytime in the near future are few and far between. I would even go so far to state that gold in general, in a post SHTF environment would be pretty much worthless to the vast majority of the population for a long period of time. I will elaborate upon my theory with respect to the stages of collapse shortly, in the meantime take a look at this graphic I came up with.

Prepper Resources Gold Value Graphic New

If you bought a one ounce gold bar (bullion) today it would cost you around $1800. I use the term “around” because in order to get the best possible price per bar you need to order more than 1 at a time, usually 5 to 10 at minimum. So for $1800 you get a little shiny bar which easily fits in the palm of your hand. It has value because people believe or have faith in this value. You cannot physically eat or drink the gold but you can place it in your safe and hope that the value continues to increase over time.  Here is a picture of what your $1800 can buy you.

Prepper Resources-Gold-suisse-1-ounceNow let’s examine what else you could buy for $1800, something related to prepping. How about enough food to sustain one person for up to a year? Food with a shelf life of 20-30 years which contains a total of 738,534 calories, easily enough to feed one person over 2,000 calories per day. In case you were wondering here’s a picture of what that looks like.

Prepper Resources The Ready Store Food Storage

I do not have any gold stored up for a major economic collapse quite simply because there are many other things much higher on my priority list than shiny little bars which have a perceived value. I truly believe that at no point in time during any of the aforementioned stages of collapse will gold be beneficial to myself or my family. Gold is more of a “nice to have” item in my opinion, for people who have achieved such a level of preparedness that they start buying gold simply for the diversity it adds to their prep portfolio. For those people it’s more like icing on the cake.

If you already live on a property which is capable of supporting life while off of the power grid, have plenty of food storage on site and a way to cultivate more food, have water on site and a way to filter it, have a way to defend your homestead, have no debt and a way to generate income than gold might be for you. If however you are like most of us who are either just beginning to prep or are “middle of the road” preppers I would avoid gold altogether. My reasoning for this is two fold.

1- The cost of gold is ridiculous right now compared to the immediate benefit it would be able to provide if called upon in an emergency. You could easily spend $20,000 on gold and fit your investment inside that Crown Royal bag you have in the back of your safe. What immediate value would it provide if the market collapses next month?  Good luck paying for groceries or trying to fill up your car utilizing your bullion.

2- Gold (or any other precious metal for that matter) simply won’t become relevant until far into a reset period after society has stabilized itself post collapse. If you worry too much about gold and don’t have much of anything else in the form of life support preps your chances of even making it to the stabilization period are slim. If we as a country are in the Social Collapse phase and you show up at my doorstep begging for food with $20k in gold bullion to exchange I’d probably give you a can of re-fried beans and send you on your merry way, but I digress.

Now that you are fully sold on the notion that I am a raving lunatic what I would like to do is examine each of The Five Phases of Collapse and explain just how gold will have very little to no value during any point while the collapse plays out. Hopefully you will begin to understand that for most of us buying gold now or anytime in the near future just doesn’t make sense especially given the fragile state of our nation and the impending financial disaster that is looming on the horizon.  I will pull from Dmitry’s article to give a brief explanation of each stage while adding my own thoughts after.

Financial Collapse

Financial collapse seems to be particularly painful if you happen to have a lot of money. On the other hand, I run across people all the time, who feel that “Nothing’s happened yet.” These are mostly younger, relatively successful people, who have little or no savings, and still have good paying jobs, or unemployment insurance that hasn’t run out yet. Their daily lives aren’t much affected by the turmoil on the financial markets, and they don’t believe that anything different is happening beyond the usual economic ups and downs.

Gold won’t do you much good here because if you do own some you will most likely continue to sit on it. After all you bought it as a hedge against inflation and for financial security, no need to panic and sell it off anytime soon. Things will get better soon enough, right?

Commercial Collapse

Commercial collapse is much more obvious, and observing it doesn’t entail opening envelopes and examining columns of figures. It is painful to most people, and life-threatening to some. When store shelves are stripped bare of necessities and remain that way for weeks at a time, panic sets in. In most places, this requires some sort of emergency response, to make sure that people are not deprived of food, shelter, medicine, and that some measure of security and public order is maintained. People who know what’s coming can prepare to sit out the worst of it.

Gold has even less value during this phase no matter what the talking heads say because you surely won’t be taking your gold pieces down to the store to buy food or water. The store shelves will be empty and resupplies few and far between.  Those who are fortunate enough to have access to the essentials will be hoarding and not interested in selling anything to you. There is a slight ray of hope, if during this phase you are still able to cash in your gold for fake (paper) money you could increase your purchasing power.  This assuming you could even find products to buy. Remember most people who are not familiar with gold would be very wary of someone presenting them with a shiny coin and stating that it is worth $1800, they would rather do business with someone who carried a roll of one hundred dollar bills.

Political Collapse

Political collapse is more painful yet, because it is directly life-threatening to many people. The breakdown of public order would be particularly dangerous in the US, because of the large number of social problems that have been swept under the carpet over the years. Americans, more than most other people, need to be defended from each other at all times. I think that I would prefer martial law over complete and utter mayhem and lawlessness, though I admit that both are very poor choices.

During this phase you are facing a lack of basic life sustaining resources, crime is rampant and martial law has been enacted, and those shiny coins in your safe are going to help you do exactly what? At this point as the economic pain and civil unrest will have only gained momentum since the Commercial Collapse. If during this phase you are moderately prepared I suspect you will be far better off than most other people around you. Communities will definitely start to form with the goal of mutual protection and ultimately basic survival. A common theme with respect to gold will continue in that it will be completely irrelevant.

Social and Cultural Collapse

Social and cultural collapse seem to have already occurred in many parts of the country to a large extent. What social activity remains seems to be anchored to transitory activities like work, shopping, and sports. Religion is perhaps the largest exception, and many communities are organized around churches. But in places where society and culture remain intact, I believe that social and cultural collapse is avoidable, and that this is where we must really dig in our heels. Also, I think it is very important that we learn to see our surroundings for what they have become. In many places, it feels as if there just isn’t that much left that’s worth trying to save. If all the culture we see is commercial culture, and all the society we see is consumer society, then the best we can do is walk away from it, and look for other people who are ready to do the same.

When societies and cultures fully (or even partially) collapse we are full steam into SHTF. At this point there will be many desperate people looking to fulfill the basic needs of survival. I’m sure bartering will exist in many forms but mostly utilizing tangible life sustaining items or services. An example would be trading some food in exchange for medical treatment, or access to a fresh water well in exchange for some ammunition. Gold owned by the few elites (should we call them Warlords at this point?) might be exchanged as a form of currency, but for the average person gold still remains irrelevant.

Right about now you could be thinking that I’m starting to make sense, that gold might not be a great idea after all and that your efforts and money would be best spent elsewhere. That or you can’t wait to finish this article up so you can send me hate mail.  Regardless I respect your opinion and hope that you make the decisions which best suit your prepping lifestyle. I’ll leave you with a few quotes from other writers who seem to stand on my side of the fence when it comes to gold.

Why You Shouldn’t Buy Gold as a “Hedge” Against Devastation

The economy went back to the bartering system in 1923 and 1924. People traded services with each other and traded services for goods. Instead of working for money, people worked for food and other goods.

Gold wasn’t used as a means of exchange because gold is not something people need on a day to day basis. Food is. Potable water is. Clothing is. Shelter is. Repair skills are. Gold is not.

If you want to “hedge” against some sort of imagined financial apocalypse based on a very negative view of the future, don’t use gold as that hedge. Instead, spend your time building skills. Store up some dry food in your basement. Set up a generator. Become as self-sufficient as you can. These things will help you whether “financial apocalypse” happens or not.

10 Reasons Why Investing in Gold is a Bad Idea

Gold might not be the best investment to hedge against inflation. Being that we live in the 21st century, there is a good chance we might put more value in other commodities. With gold, the only thing you can do is lock it away in a vault and hope someone doesn’t steal it from you once you’ve got it. Alternatively, commodities like gas, rice, even cattle, would probably have more usefulness (on the consumer level) since you can use them as food, fuel, or other things society would deem more valuable. Gold may be edible in small amounts, but I would rather have a steak any day.

Gold isn’t everything it’s cracked up to be, trust me on this one.  Cheers and happy prepping as always.

 

 

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4 comments

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  1. Ranger W

    Gold wont buy anything once its actually needed. Right now is when people should be selling or trading their gold for goods. All people can recite the “buy low sell high” but no one ever does it. Gold could actually end up being the trigger for the economic collapse in the US. China is buying gold unlike any other country, one could easily make the argument they are trying to accumulate enough to put their currency on a gold standard. People here dont realize the weakness of our OPEC-fiat currency. If China declared tomorrow they were going on the gold standard the US dollar would immediately freefall because international money would flock to the new “real” currency. The only reason the US economy is still afloat is other ships are sinking faster. We are getting a false positive because investors are fleeing europe and moving their money here. Sure your stock prices might be going up but the underlying value of the companies isnt increasing, only the demand due to foreign investors coming into our markets.

  2. Ranger W

    Oh yeah, dont forget Executive Order 6102 in 1933 when the US government seized individual’s gold… yes that happened in the US. You had to surrender all gold to the government for a set price (below market value). Communism isnt a new theme in the US unfortunately.

  3. ruleofthunder

    You articulate the points better than I could have. This is my sentiment exactly – if it has no immediate survival value, it has low or no priority in one’s planning. Silver, at least, can be used to keep drinking water good. You don’t need all that much, however.

    1. PJ

      Thanks for the comment, glad you tend to agree :)

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