What's More Reliable Than Gold In An Economic Crisis?

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What's More Reliable Than Gold In An Economic Crisis? (0 points)

* In a crisis, the old adage about not being able to eat gold may haunt you * Because gold may not be able to act as money if there's no economy * But there is a commodity that will be especially useful no matter what

Whiskey & Gunpowder -- the Daily Missive of Laissez Faire Books

Gary Gibson, New York, New York...

While we slept gold got within $5 of $1,900 in Hong Kong trading. It dipped, but as of this writing is over $1,890 again. Silver is just a hair below $44, up over 10% from where it was just a few days ago.

Gold was hanging out in the low $1,500 range throughout June. Now it's setting new highs regularly, pushing past $1,800 with ease and now just baby steps from $1,900. That's more than 20% up in less than two months.

It's our editorial policy not to make guesses about upcoming short-term moves. We have no idea where the price of gold is going in the next few days. But we can share our short-term wishes. We are praying for a correction.

You see, we're confident gold has a lot higher to go in nominal terms. Silver even more so. And we suspect both these metals will hit those higher numbers while the dollars in which they're denominated still mean something.

In other words, gold and silver are both going to do more than protect your purchasing power. They're going to increase it. Heck, they already have! They've both moved way ahead of general price increases over the last ten years.

Bu with all the new highs lately, consolidation would seem baked into the cake. You just never know. Still, it is fun to dream of a correction...so we can pick up more gold and silver for the cash we have on hand.

And now we must make a correction ourselves...

Last week we opened up your daily shot of Whiskey with these bullet points...

"Gold is neither food nor is it wealth...But it's a great way to purchase the components of wealth...Especially after an economic collapse...And you may be able to buy food with it too in the near future..."

Maybe we spoke too soon. As Eric s writes in today's feature article:

"...gold is fungible only if there's a still-operating economy. If the worst happens and the system really does experience a catastrophic collapse, the value of gold may collapse along with it - at least, for awhile. Until civilization re-assembles itself."

This is a point we've often made ourselves. If things get reeeeeeally bad, then trade will break down. Without trade there really is no economy. There are just a bunch of post-apocalypse survivors trying to eke out a subsistence level existence among the ruins.

There would be precious little use for money in such a scenario. Part of money's function is as a store value and to help get around the coincidence of wants.

In the end of the world as we have known it, trade may only rise so far as crude barter. But there would be no division of labor, no specialization. Just a bunch of desperate people who don't trust their equally desperate neighbors enough to get much trade going.

In which case, owning the right kind of land in the right kind of place may be worth more than all the gold in the world. Eric s explores this notion below.

http://agorafinancial.com/reports/AWN/cc/AWN_creditcard_alt_vp2.php?code=EAWNM856

Whiskey & Gunpowder by Eric s August 22, 2011 Washington, D.C., U.S.A.

Land More Valuable Than Gold in a Total Meltdown

Last weekend, we bought some land.

This flies against policy (our policy) of never buying anything except that which can be paid for at the time of purchase - and even though I know full-well that we won't really own the land, just as we don't really own the land we have (or the house that sits upon it) because owners don't pay rent in perpetuity to the government, which we, like all "owners" must (in the form of annual property taxes) if we wish to continue to be allowed to remain on the land (and in "our") house.

Anyhow.

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We did this deed as a way to hedge against what I am increasingly convinced is coming - the destruction of the dollar, followed about five minutes after this becomes common knowledge by the final implosion of what's left of the American economy.

Land - physical land - is a good way (perhaps the only way, in a major economic crisis) to keep at least some of your wealth intact and more importantly - if you act in time - a way to transfer the value of fiat dollar-denominated assets into something tangible, of real value.

Gold, of course, is another way to do this but it has a major disadvantage: It is only valuable as a sort-of proxy for wealth; that is, it has value only as long as someone else who has something you want is willing to trade you what he has for the gold you have - which means that he (the owner of the item you want) must believe he will be able to then swap the gold he gets from you to some other person who has something he wants, something that's not gold. Put another way, gold is fungible only if there's a still-operating economy.

If the worst happens and the system really does experience a catastrophic collapse, the value of gold may collapse along with it - at least, for awhile. Until civilization re-assembles itself. But in the meanwhile, what will you do with your gold? It is pretty to look at but you can't eat it and outside of a few specialized industrial applications that won't matter during a period of crisis, it is useless.

Land, on the other hand, not only has tangible value (like gold) and is fungible (also like gold) because you can always convert it into gold or trade/sell it for something else you value - but perhaps much more importantly, in a time of real crisis, land can give you life.

Literally.

You can grow food on land - which could mean the difference between life and death, when the system runs off the rails and Costco and Safeway are looted to the linoleum. Which - count on it - is sure to happen the moment the masses get a whiff of the dollar's imminent collapse. And you can hunt on land, too - assuming enough acreage.

But the number one advantage to land, as I see it, is physical distance between yourself - you and your family - and the latter-day Golden Horde that is already in the process of forming itself up. (Witness the so-called "flash mobs" of "youths" in Wisconsin, Philadelphia and other places.)

Just as it is harder for a thug to assault you from 20 yards away than when he's right up in your face, you stand a better chance of making it through what may be coming if you and yours are not in the immediate vicinity (or path) of the rampaging mobs. They may not even notice you - and more significantly, you will enjoy a greater likelihood of noticing them before they notice you. In old-school cowboy lingo, this means getting the drop on them. And that can be the difference between life and death as much as having some food and other supplies stored up to get you through a few months of hard times.

In the most extreme eventuality - minions of the Clover State coming to round you and yours up for "relocation" to a FEMA camp or god-knows-what-else in the immediate aftermath of a SHTF-type scenario - you have the option of just...disappearing. Of going off the grid, into the heart of darkness. It will not be easy. It will certainly not be pleasant. But it is much more pleasant than the alternative.

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I am in my 40s now and like most people in that age bracket, I like my comforts. I enjoy having my motorcycle and car projects; even doing the chores around the place that need to be done. But if the S does H the Fan, I will do everything in my power to make it through to the other side of whatever's coming, which will hopefully be something better than what we have now. But above all else, I will not Submit and Obey. If they come for me and mine, if they are not willing to leave us be in return for us extending the same common decency toward them - well, then we have options.

Because we have some land.

If you are reading this, there is still time for you to do the same. I hope you will consider it - and I hope you can make it happen.

Meanwhile, let's hope for the best and that all we'll be doing next summer is cutting the grass...

Regards,

Eric s

http://epautos.com/2011/08/17/a-not-car-column/

Eric s is a Washington, D.C.-based automotive writer and frequent contributor to the Detroit Free Press and Detroit News. He has written for the Wall Street Journal, Investors Business Daily and Washington Times, among others. In his free time, he enjoys working on old cars and currently owns a 1964 Chevy Corvair Monza coupe and 1976 Pontiac Trans-Am equipped with a modified 455 V-8.

A Parting Shot:

Astute readers will have noticed by our datelines that we've been bouncing around a bit. For the past week we've been back in the City of New York.

We've been spending our nights and many of our days at a dear friend's place in the old neighborhood in Queens. Our friend just got her first photograph accepted into an exhibit so we came for the opening and to spend some time.

It's been years since we've been here for more than a day or two. The past ten days have given us a chance to slip back into something of a routine. It's almost as if we live here again.

And now that time and distance and a bit little travel has given us perspective we wonder how we stood the city for so long.

Don't get us wrong. The place has quite a bit going for it. This is one of the city's nicer neighborhoods that remained un-cool and un-discovered enough to stay relatively affordable.

It has a 100% walkability score on a website that measures such things. There are oodles of restaurants, hardware stores, pharmacies, general stores, barber shops, doctors, laundromats and groceries in a ten-minute walk in any direction.

The apartment buildings are historic, their industrial utility accented by prewar charm. 42nd Street in Manhattan is just fifteen minutes away on the 7 train whose elevated tracks gracefully bisect the neighborhood into northern and southern halves.

But it is a bit crowded here. And gritty. The subways that we used to marvel at now just seem confining, demoralizing and not nearly reliable enough.

It's also a stew of races and ethnicities--Irish expats, Koreans, Turks, Mexicans, Romanians, Japanese, Pakistanis, transplanted Midwesterners, Dominicans, etc--which is a bonus for some, but which strikes us as reason to worry about how well the place would do in a real crisis. The various groups seem to tolerate each other, but our impression is that this is just barely. City crowding on this scale already puts people on edge as it is.

We've spent most of our lives somewhere in the City's four boroughs (Staten Island will never count in our eyes) or its northern suburbs. We have the sort of lingering affection mixed with resentment for the region that one would feel for an unfaithful ex-spouse.

As a New Yorker we thought the rest of the country was getting it wrong. Now we think it is the New Yorkers who must be deluded. What must they be smoking to put up with life here? We suspect city officials may be adding something to the water.

"But New York is full of energy, entertainment and convenience," the city denizen might reply. "It's worth the filth, cramped quarters and expense!"

Which just proves our point. They must be putting something in the water.

Not that the cookie cutter suburbs are any remedy. If the megacity is too much of one thing, the single-use suburbs are too much of the other. There has to be some happy medium.

Personally we've come to love the small city or the large town. Populations measured in the tens of thousands. The kind of place with a main street in the center and lots of productive farmland on the outskirts. Places where you don't have to fight for a parking spot or cram into a bus or subway car.

And places with little or no federal housing projects. You know, the government reservations full of the kind of people who stand to lose an awful lot as the federal government goes broke and gets its credit card taken away.

As we've said a time or two before: there's more to future preparation than merely buying gold and silver. You ought to give some thought to where you are geographically...and to how where you live could be affected by the same factors that are making your precious metals go up in price.

We remember how as a younger man ten years ago we were stockpiling silver bullion in our studio in Manhattan's upper East Side. We like to think we are much, much wiser now, but even back then we would often ask ourselves, exactly how much will this silver help when the government wards from 20 blocks north get angry and restless after the state abandons them.

We never did find a good answer to that question. So we took steps to limit our geographic risk. We got the hell out of town.

We've been wary of big cities and their suburbs ever since. We also realize that on the whole they're not especially pleasant places in the first place. And as the welfare state craters they are essentially piles of oily rags just waiting for a spark.

It's happening all across the Western world. As Bill Bonner says:

"In England they steal clothes. On the continent, they burn cars. Thousands of Renaults and Citroens have been torched in France in recent years. Now, they're burning BMWs and Mercedes.

"It's relatively easy to turn people into zombies. And it's fairly easy to support them when an economy is healthy and expanding. But when an economy goes into a contraction, you can no longer afford to give the zombies their meat. Then what?

"Then, watch out. The zombies rise up."

The big cities of the U.S. have done an excellent job of concentrating those dependent on government largess into one place. We should all be thankful. It's that much easier to figure out where not to be.

Regards,

Gary Gibson Managing editor, Whiskey & Gunpowder garypgibson@gmail.com

P.S. Last year our good friend Doug Casey invited us down to his development in the Salta region of Argentina: La Estancia de Cafayate.

It was three-hour drive from Salta airport through some of the most amazing terrain we'd ever seen. Cafayate itself was the picture of old charm, especially in its center.

Only a few houses had been built in La Estancia when we were there last. We spent most of our time exploring the town or hanging out in the swanky guesthouse on the development, surrounded by a golf course and with a view of rugged mountains on all sides.

We were never much for golf so we spent our time riding horses or wandering around town instead. It was rough, but we managed to get used to it.

If there was ever a place to get out of harm's way and enjoy the good life, we thought, this would be it.

We are working on a special offer for Whiskey patrons who might be interested in La Estancia de Cafayate. More information will be available soon. Make sure to keep an eye on these pages.