(Survival Manual/2. Social issues/Prepare with cash and equivalents)
Prepare with Cash and Equivalents
Our financial system needs growth to sustain it, so that loans can be paid back with interest. Once peak oil hits, growth will be gone. Economic growth may even be replaced with economic decline. It is not clear our financial system can handle this.
“When it becomes serious, you have to lie”, Jean-Claude Juncker, Chairman of the Euro zone finance ministers and the currency union’s key spokesmen, May 2011.
Projection from early 2005
Today’s fiat money system is in joint peril with other paper assets during the upcoming worldwide depression. Unlike the last depression, our Federal Reserve paper money is backed by nothing but
air, hot government air, redeemable in like units. And nearly as cheap as air to give to the body economic, Rubin and Greenspan (Plunge Protection Team) will work like crazy to inflate the bursting economic bubble with huge quantities of this air.
• I would expect the discount rate to drop to near 0% enticing us to borrow more, refinance again and to help them float the market and the world on the sinking U.S.S. Titanic. [Local bank interest rates 0.1% in 2009-2010, 0.05% during 2011.]
• But eventually this ploy will become unworkable as we find ourselves mortgaged to the hilt and questioning our ability to repay. (July 2011]
• Mass bankruptcy will follow and the good faith and credit of the U.S.A. will look to be in real trouble to the rest of the world. [First international bankruptcy 2010-2011]
• There will be a flight to quality, dollars around the world will be sold at any price as they go through a confidence crisis. This is the reason that the next depression will eventually end up being inflationary
and not deflationary. [Gold started its long-term rapid rise in the summer of 2008. Silver ‘took off’ in April 2010]
• Money then is a commodity (pretty printed paper, cheap metal slugs, barter items, and/or precious metal coins) that you can use in trade for other commodities you would like. You choose each day what you will trade your labor or stuff for, to use as money. You are wealthy only if you own and control the means to sustain life for yourself and possess items that can be traded with others.
• Paper assets are about to be destroyed in the upcoming years during a stock market crash. These overvalued pieces of colorful paper, with the engraved images of our national forefathers, will not feed or take care of you because nobody will be willing to trade anything worthwhile for them. These include Stocks, Bonds and any other debt based paper asset like Federal Reserve Notes and your bank account valued in Federal Reserve Notes.
Additionally copper-clad coins will eventually be viewed for what they are – Slugs – imitations of the real thing. What then will be used as money?
Four Characteristics of Money
1) It must be divisible.
2) It must have high value in relation to its volume and weight.
3) There must be widespread recognizability.
4) It must have transportability.
Gold and silver coins satisfy all these requirements.
A. How much and what kind of money should I own?
To prepare for the coming depression please consider the following:
1) Newer Coins
You will want to have on hand a significant amount of pennies, nickels and copper-clad dimes and quarters. This is for when limits on bank withdraws begin and cash is scarce. You do not want to use your gold and silver coins then, they are to be used when things start leveling out and the economy restarts. Most people will not initially know the value of gold and silver. Therefore, use the copper-clads until the populace gets educated. If you are on a budget, start by collecting a few hundred dollars face value. A wealthy individual could have thousands of dollars face value of copper-clad coins
2) Paper Money
You will want to start by having enough paper cash money on hand to cover at least one month’s
personal expenses: mortgage payments, car and truck, taxes, utilities, household supplies, etc. If you are well enough off I would recommend that you have much more. According to the experts you must have cash on hand, not in the bank, to satisfy your obligations or you may be forced to forfeit your assets. Also, as the stock market crashes and banks suspend withdraws, you will be able for a short time to buy pennies on the dollar. Additionally, banking services will be non-existent and checks, credit cards, etc. will be useless. An assortment of $1, $5, $10 and $20 bills is recommended (it may be difficult to get change for larger bills). The amount you feel comfortable storing is up to you. Keep the cash where you can easily get your hands on it.
You may not have access to your safe deposit box because of an extended bank holiday.
3) The Transition Period Between Fiat Money To Real Money
Eventually, the liquidity crises, during and after the bank limits will pass, and paper dollars will be devalued (they become worthless), the federal government will begin taking over the failed banks, they will make good on the FDIC and FSLIC government bank guaranty and other government commitments by printing new larger denomination paper money.
$500, $1,000, $5,000 and then $10,000 bills will be reissued by the federal reserve in huge quantities, and/or they will circulate a new type of currency. Copper-clad coins, and small bills will become worthless, unless you have wheel-barrels full of them. Run-away Inflation. This will be a hyper-inflationary period for people holding paper assets, paper money and copper-clad coins. When you get wind of the coming currency devaluation dump your paper and copper-clad money for anything of real value. This is the time to already have your silver, gold and any other items you will want and to barter with.
Look for a new National Value Added Tax (V.A.T.) on all purchases and services. Government-controlled rationing will be setup and the Black Market will be in operation.
4) Silver Coin
Now the importance of having gold and silver coin is evident after seeing the stock market crash scenario and the destruction of paper assets. The only money that is real is that which has intrinsic value. Currency like gold and silver money will be the only real store of money value. The wealthy individuals to emerge from the coming stock market crash and depression that follows, will be the ones who have preserved their wealth during the destruction of paper assets. Face it, after having a roof over your head, food to eat and clothes to wear, you will be wealthy only if you have things of real value to others and if you can turn that into opportunity for yourself. Barter any commodity that you can but the two commodities historically that always become real money and a reserve of value are gold and silver.
You will want now to buy as much silver as you can, before the VAT becomes law, and while the rest of the world is chasing after paper assets. Today, silver is a good value compared to how it will appreciate. Although you will want to acquire gold, silver is better suited for small exchanges and will be used more for the day-to-day purchases. Get plenty of junk silver, pre-1964 dimes, quarters and half dollars by the bag ($1000. face value), 1/2 bag or smaller amounts. You are basically getting old U.S. silver coins that have been picked through to remove the rare pieces. The price is currently about 5 times the face value. Old silver dollars are much more expensive costing about 30.88per dollar (based on 39.90 spot price of silver, 29 July 2011). Your best value for silver dollars is to get newly-minted US American Eagle silver dollars, the US mint has been minting the new silver coin since 1986 and they are about $44.60 each (29 July 2011) and contain 1 troy ounce of 99.9% silver, this is about a 0.3 ounce more silver than carried by the old silver dollars (0 .714 troy oz.).
All these coins contain a specific amount of silver and are recognized by the whole world as to their size and weight. U.S. coins are better than other coins or bullion because of their recognizability, so don’t hold anything, but U.S. gold and silver coins.
5) Gold Coin
The best value in U.S. gold coins are the ones minted by the U.S. Government. US American Gold Eagle coins are currently minted, ranging from about $180, May 2011, for the 1/10 oz. coins to about $1,627, July 2011, for the 1 oz. coins. There are also 1/4 oz. and 1/2 oz. coins, but I prefer either the 1/10 oz. or the 1 oz. coins.
• 1/10 oz. gold coins should be used to barter on small items; items that are larger than what you can buy with your 1 ounce silver coins. The 1/10 oz. coin is ‘valued/stamped’ at $5.00 and would be an easy way to buy something worth a fraction of the 1 oz. of gold.
• The 1/4 oz. gold coins are improperly valued at $428, May 2011 because of their weight; the 1/2 coin is not a good value because of its increased commission.
• The 1 oz. coin is the best way to store large quantities of gold and is the most cost-effective method.
Each coin contains 1 oz of 91.6 pure gold in troy ounces plus a small amount of hardening metal to strengthen the coin, each coin weighs slightly more than its stated value.
After socking away new copper-clad coins, paper money and silver coin, you will want to buy as much gold coin as possible. You will preserve your wealth through the coming paper asset destruction and will emerge as a rich individual.
(Note: Do your own research and come to decisions that fit your personal circumstance. I’m not a qualified financial advisor. Mr. Larry)
If you are financially capable of storing (your long-term ‘savings account’) gold and silver, you should have different types of gold and silver holdings. I would suggest starting your bullion holdings with cash and junk silver, then progressing to American Eagle silver and gold bullion coins.
Besides being the historical standard for money, silver and gold are also barter commodities.
You will want to have the right denominations/weights of silver and gold coin to transact business. Which silver or gold coin you will use, depends on the cost, situation and who you are working with. People familiar with the old ‘junk silver’ coins would rather trade with them than with bullion coins. Some people will see your US gold or silver Eagles and feel secure that they can count on that coin to be what it says it is and will be more willing to make a trade with you.
During shortages and government controlled rationing, a store keeper may have a limited supply of a desperately needed item like medicine that he can only sell at the government set price. Who will get
this item? The person next to you with a 50 dollar bill of questionable value, or you with 50 dollars in silver or gold coin – the store keeper or trader will recognize that your coin has a much higher intrinsic value. Of course you will get the medicine; however, if you only had an unrecognized bullion coin or a ‘junk silver’ coin from another country you may not.
Buy as much junk silver and American eagles as you have the means for. The bullion coins will preserve your wealth through to the other side of the collapse of paper assets and you will have the means to get going financially.
Old junk silver coins are meant for dealing with local stores for small transactions during and after the upcoming paper asset collapse. Deciding what and how much to store all depends on your situation, will you have the desired money medium for the opportunity/life style you are pursuing?
You only want enough cash on hand to sustain yourself in the event of bank withdraw limitations, and until worldwide dollar confidence crashes and the world dumps dollars on the market in a race
to get any value they can from it. Other than a pile of small bills to see you through a crisis, cash is a bad thing to hold because of possible hyper-inflation and the fact that it is backed by practically nothing.
Obviously the bulk of your investment money placed in a good fund tied to the performance of the stock market is the best place to be right now; long if you see the market rising and a ‘short’ ETF (DXD and others) if you see a decline coming.
B. Forces which cause gold and silver to rise in value.
• Bank Failures
• Rising inflation or the expectation of rising inflation
• Devaluation of the dollar
• Other currency-related crises
• Increased Industrial and Investment demand for gold
• Price increase in other commodities
• Stock and bond market collapse
• A New World War
• International tensions
Gold serves as an increased hedge, though volatile in the short-term, against the erosion of the purchasing power of paper money. This is why you want to hold your portable gold coins for 3 – 7
years on the average. However, if a deal or situation presents itself that is extremely advantageous such as gold appreciating in value to quadruple or more what you paid for it–consider selling– you can always buy property with the proceeds.
Just before the peak of another depression, gold, is estimated to possibly rise to $3000 – $6000 an ounce. And if the President bans gold altogether; then places the U.S. back on the Gold Standard—as it is felt in many of the bearish financial newsletters, gold could a lot higher!
Spot silver prices are closely connected to the same factors as those driving gold; however, because of the low supply of available silver, it may become nearly as valuable as Gold.
You have five things working to drive the price of gold up:
1. Increasing Gold Lease Contracts
2. Increasing Consumer Demand- in China and India, as well as Europe.
3. Gold Investors Needing Gold- international banks
4. IMF: “By the IMF’s [International Monetary Fund] own documentation, the international banking community is trying to create a new global currency that will be backed by gold valued at between $3,000 to $5,000 per ounce.” –The Economic Outlook; Vol. 7. #1. January 1998.
5. Deflation: “To avoid outright economic collapse-Asian governments are devaluing currencies. Currency devaluation is a hidden form of hyper-inflation–the last desperate act before outright economic collapse. How do you protect yourself from currency devaluation? Gold & silver.”
–The Economic Outlook; Vol. 7. #1. January 1998.
The following table provides my personal thoughts on the way to split up assets in order to cover most contingencies. I recommend you set aside the cash mentioned in the top half of the table first, and when this is done, do what you can to develop the funds to buy some combination of the bullion listed below.
|Number to have on hand(minimum)||Item cost
in each denomination
|Dime (10¢) coin||10 rolls||$5||$50|
|Nickel (5¢) coin||10 rolls||$2||$20|
|Penny (1¢) coin||10 rolls||$.50||$5|
|Currency & coin||$5,150|
|Pre 1965 ‘junk -90% silver coins||$200 face
|Silver Eagle 1 oz||500 ea||$19.87||$9,935|
|Bullion bar, 100 oz||–||–||none|
|Gold Eagle 1/10 oz||20 ea||$138||$2,760|
|Gold Eagle 1 oz||8 ea||$1295||$10,360|
|Currency, Coin and Bullion ‘On Hand’||$31,049|
Table above updated on 16 Oct 2014
When faced with hyperinflation or other major calamities, you should have a pre determined list of items to purchase ‘at the last-minute’ and/or items to invest your cash in, things that will survive the
currency collapse or become more valuable in the post disaster period. When the window of opportunity is seen about to close, you must immediately transfer the bulk of your extra cash into some combination of ‘commodities’, such as; food, land, housing, other real estate, and barter items.
The totals shown in the table above are approximately the current annual gross wage of a mid level
US worker. With slightly reduced circumstances, this sum will provide 1) Four to five years of supplemental income, or 2) in a severe depression it would provide about two years worth of 50% pre-crisis income, or 3) in a catastrophe, provide one full years income.
Coupled with your food and water storage plan, as discussed in, 1) Survival Guide/ Food&Water /Develop a Survival Food List, and in 2) Survival Guide/Warehouse/Food, you should have the capacity to weather a serious dislocation.
With the adoption of other support systems, discussed and enumerated in Warehouse/… your resilience and survivability should see you through most of the abrupt physical catastrophes that may impact a region or a national or global economic collapse.
While watching the short term, keep in mind that there are very long term cycles of human conduct and behavior toward one another, in our exploitive relationship with the natural environment, our modern civilizations energy use and resultant population numbers, as well as environmental ‘black swans’. The interplay of flux and flow between these relationships, trends and surprise events show themselves in the changing levels of human prosperity.
During the late 20th Century the world was very prosperous, we all poured our wealth into entertaining material goods, desiring ‘thing’s more than the traditional stores of value, gold and silver, hence the price of silver was the cheapest it has been in almost 700 years (Google ‘650 Years of Silver Prices’ or see http://goldinfo.net/silver600.html)
On 19 April 2011, the spot price of silver reached $43.07 and began an overdue correction. As technology developed the steam engine and later, our petroleum-based civilization with electricity, mining technology brought about an easier extraction of minerals. Now, as we moving through the brief peak oil plateau period, our open-pit mines have grown huge and underground mines extend for miles.
There are no more easy surface ‘finds’ of most of our civilizations industrial mining needs. When our oil supply declines there will be a diminished amount of minerals extracted from mines and at higher real prices (above what ever inflation will be). There will be less because the huge quantity of almost free labor provided by oil driven machinery will be declining, but also because we will have already extracted the bulk of the available resources.
The coming extended rise in silver prices will reflect not only scarcity, but difficulty and cost of extraction. The same shadow will fall across
all mined minerals, lumber, paper products, aluminum, rare earths and uranium. Costs will rise rapidly during the coming few years irrespective of whether there is inflation or deflation. The things we have grown accustomed to around the turn of the 21st Century will become increasingly difficult to obtain at ‘reasonable’ prices, the cost of ‘things’ will go up in real terms.
The decade from 2011 to 2021 will be wild.