“Money as we know it…will simply disappear.” Could this really happen? I think that it can and believe that it will in some fashion. This is a huge statement and one that certainly needs some explaining. Before getting to this, I want to relate to you a couple of questions I received this past week and pass along a quote that is very pertinent, and in my opinion almost an exact road map to what we will soon experience.
First, I was asked by a new client, “I don’t understand, if the markets and banks close, how will I sell my gold and who will have money to buy it?” This is a good question with no set in stone answer because once panic sets in there will be so many parts literally moving at the speed of light. Let’s look at a couple of historic events to get a little bit of perspective. After Archduke Ferdinand was shot in 1914, World War I commenced and our (U.S.) stock market was closed for nearly 6 months. Money in the U.S. back then was either gold coin or “dollars” which were receipts for gold coin, “money” still circulated even though the stock market was closed. Stocks circulated privately between individuals as certificates were signed over from one party to another in exchange for a real item or a service.
Another historic event was back in May of 1931 when the Austrian bank Credit Anstalt failed. This was a black swan event in a series that led to many banks around the world folding and what drove the U.S. and world economy deeper into depression. A description of the affair after the fact by Lord Revelstoke (Barings Bank) was, “It was amazing, how, in a fortnight, the credit system we had spent decades building……collapsed.” Our banking system saw many failures and was closed for a time but again, money remained and still changed hands. But remember, “money” was different back then, it was “real” whereas today it more resembles Monopoly money.
Back to the original question, “How will I sell my gold and to whom?” Gold (and silver) “ARE” money themselves. They are a store of value, they have “worth” on their own as opposed to dollars, euros, yen or any other paper currencies. The paper currencies have “value” because a government “says” it has value and enforces what they say with legal tender laws. Gold and silver need not be “sold” for currency, they may instead be exchanged for goods or services during a time of stress. Actually, the part of the question that asks “who will have the money to buy it?” can be answered in one word, “you.” YOU will have the “money” that may be retained or “spent” at your discretion, worrying about who will accept it during a crisis and after is not necessary.
Americans have become so brainwashed over the years regarding “money” and you can’t blame them. It has been a full 50 years since our coins had any silver in them (49 years for the 40% silver clad). Americans think of dollars as money when the reality is that dollars are a currency. Americans constantly think about “making” more dollars yet forget that if the inflation rate is 10% then this is the amount needed each year just to stay even. The thought process of buying low and selling high with silver and gold is simply wrong because what would you be selling for? More dollars?
As you know, it is my opinion that we have upcoming a financial panic (and probably a global war) that will close many markets and banking systems. I also believe that some sort of new currency(s) will be introduced. If I am correct and we wake up one Monday morning to a closed financial system, then how smart will it have been if you bought gold at $300 and sold it for $1,900 and were still waiting to “catch the bottom” to load up again? My answer to the question is this, if you are “buying” gold in the hopes of making a “profit” in dollars, forget about it. This thought process is so wrong minded because your “goal” is incorrect. Thinking in this manner means that you want to “use” gold as a tool to accumulate more dollars. The odds of the dollar remaining the world’s reserve currency is virtually zero and the odds that the dollar even remains a currency may be less than 50%. What is absolutely clear is that the purchasing power or “value” of the dollar will be far lower in the future.
Taking this thought process one step further, your gold in the future WILL be “worth more dollars” but there is a caveat and I’m not really sure how to put it into words but I’ll try. “Your gold will be worth more dollars but you won’t want to have the dollars.” In my opinion, there are 3 main avenues that the dollar can go. First, we can go through a series of market caused devaluations. Second, we can go the route of official devaluations or finally we might see the dollar actually go away so to speak. The dollar could be replaced by some other currency with a “BUT” attached …but, any new currency brought forth must have the “confidence” of the public. The time honored way to do this by the way is to back the new currency with gold.
I guess the best way to wrap up the above is to say that yes, more dollars are better than less dollars but there will be a point in time when NO dollars will be best. No one knows when this point in time will be but trying to guess or outsmart the markets (or those pulling the strings) is foolish. I say this because all it will take is being wrong for just the one day when markets and banks are closed with you holding a bag full of dollars instead of gold. You will have no recourse or any way to correct the mistake and it will follow you (and your heirs) for the rest of your lives.
Getting to the title itself, “money as we know it will simply disappear” can be looked at from several standpoints. First, money(s) can simply collapse in value and be replaced, I think this is certainly a possibility for several if not many today. The deeply seated meaning of the title however is since “money” today is debt based, should we see the event where debt begins to cascade into default…it will take currencies and their values with it. We live in a world today where debt is considered “wealth.” It’s crazy I know but this is the current thought process. The debt edifice if you will, or the debt ratios all over the world are higher than they have ever been before. The risk of one debtor defaulting and “spreading” (forcing) other debtors to default has never been higher. Since currencies themselves are based on debt, should (when) this happen “money” will just disappear. “Money” in banks, insurance companies, pensions, you name it will simply go up in a puff of smoke.
To finish, gold is “different.” Gold cannot “evaporate” or go up in a puff of smoke (unless held by a custodian that goes bankrupt with YOUR gold on their books), gold will remain and it will retain or even increase in value. All currencies have counter party risks, gold does not. Gold is your only way to “get out of the game” before the game ends and to arrive for the beginning of the next one. Holding gold will allow you to transfer your current wealth from here to there, holding dollars will not. Think of this from a “relative basis,” roughly only 1 American out of 100 owns or holds any gold or silver other than jewelry. Said another way, 99 out of 100 have counter party risk and their wealth is based on and depends on the solvency of someone else, only 1 of 100 do not have this risk. Money will “disappear” for several reasons and from many different sources, not allowing YOUR money or wealth to be a part of the disappearing act is the name of the game!
Bill, Good article. Very practical.
One way to illustrate how money disappears is to place a 2014 dine into some type of liquid and then place beside it a 1934 dine containing silver in another container of the same type of liquid. I don’t have the time to do this experiment and don’t even know what liquid that could be used or even if it would work. But if it is possible that the 2014 dime will disappear and the 1934 silver dime would hold in place. This would show the holding power of silver and the worthless power of non silver. Then, I think anyone would get the point of what money is.
So, do you still expect a big move up soon as you wrote about recently?
Yes, the MACD’s are crossing over (up) from a very coiled level. The move could be spectacular.
Bill, Thank you so much for the work you do.
One question, Wouldn’t US junk silver coin be a better alternative for the average Joe? Seems that gold could be so valuable that unless you were trying to acquire a house or something very large it might be very difficult to use in everyday transactions. Regards, James
Thanks James, yes, I have said this many times before. Gold is the metal of kings and silver that of the masses. In other words, tough to get change back if you barter with gold.
As others have said:
Gold is the money of kings.
Silver is the money of gentlemen.
Copper is the money of peasants.
Debt is the money of slaves.
Ran across this quote again recently, “Gold is the money of kings; silver is the money of gentlemen; barter is the money of peasants; but debt is the money of slaves.” Since all currencies are debt based monetary instruments, does that mean the whole world is enslaved? Plus debt money can disappear into thin air at the drop of a dime. The fact people have been brainwashed to work for debt is insane. Counter party risk dominoes are falling as we speak! Stack on…
LOL. Guess I should have read ALL of the comments before commenting!
Trying to get people to understand that the paper dollar will likely go up in smoke and be worthless is like telling people that the world’s oceans may oneday be empty of water. For the vast majority of Mericans, it is an impossible thought.
Personally, I believe it is quite possible. I note that faith and belief play a big part in the glue that supports the existence of this currency. As long as this holds, the dollar holds. People can have such faith far beyond any events that show it to be false.
I wonder if the concept of money alltogether is the same reality? Isn’t everything in society a consensual agreement? If the currency fails, my guess is that Mericans will swoon into an unbelievable gnashing of teeth and fright.
We are due for a wakeup call on so many levels, not just financial and political. I believe EVERYTHING we have come to accept as true will become reevaluated. Imagine a world where all science, all religion, all history, and all social contracts get revisited. Imagine the kind of people we will become as our talents in intellect and morality will be called upon to reset the course of history.
Thanks for all you do, Bill. Your voice shines out.
I agree with you about faith being the glue that holds the US$ together, Andrew. This is likely to remain in place UNTIL a problem crops up that destroys or at least heavily damages it. A banking crisis in the US that brings bank holidays, bail-ins, and perhaps even a currency devaluation is the most likely cause of such a loss of faith. Barring this, people will continue to have faith in the US$ because they always have. Yes, this is a HUGE example of normalcy bias and it is largely unrecognized by most Americans today.
This was a great article….
thank all u guys for your generous works…
the Monecychanger struck again today as always but at least I am not moved and will not be…
it’s our pleasure
this was a great article…
thanks all of u here at Miles for all the hard and generous work u do…
Today, once again, the MoneyChangers struck out once again at the only 2 forms of real money but at least I will not waiver, and will not be moved…
thank u all once again..
What do you make of the strength in the Dollar recently? Especially since its monthly chart is looking positive.
a lead up to war with a stronger dollar means weaker competitor currencies?
Dan… the US$ floats against the other major currencies of the world, so if they are weak, the US$ will be seen as rising in value or stronger than they are. This does not make it good, however. The cleanest shirt in the dirty clothes hamper is still a dirty shirt in need of washing.
But when I look at a $20 bill (FRN) and note just how crummy it looks when compared to a nice shiny American Silver Eagle or Canadian Silver Maple coin, there is just no comparison!
As a poster on SGT Report said recently, “There have been times in history when one could not exchange paper money for hard (gold and silver) money. But there has never been a time when one could not exchange hard money for soft money (fiat currency). Because of this, it is best to hold hard money as our long-term savings and use the flimsy paper money for paying bills”. These seem to me to be words to live by.
yes Ed, it is the “one way street” that becomes a problem when metal goes “no offered”. I am writing about this for Thurs..
Mr. Holter, I get alot from your writings and I thank you for your very useful insights,one thing though. Upon arriving at the point in your article at which you state that “…think of dollars as money when the reality is they are currency.” That is techniclly incorrect for the Coinage Act of 1792 defines a dollar as 371.25 grains of silver. As one that believes that truth begins by calling things what they are I must point out this misconception about a dollar. The problem is that TPTB continue to brainwash us by printing the word dollar on thier FRNs thus perpetuating the illusion of money through language.
When one could exchange a Silver Certificate for silver I would say THAT paper dollar was money.
The Coinage Act of 1792 also state that “..anyone debasing the currency is guilty of treason and shall suffer death.” Alan,Ben,Janet..you got some “splaining to do”
thanks John. If I said “Federal Reserve Notes” my writing would be correct, it does however say “dollars” on those notes.
Thanks for all your insight into things Bill. I have a question that has probably been answered but I cannot find it.
Lets say you run a business where you have dollars going in and out every month. They come in as direct deposits from clietns. They go out checks written for payroll and all sorts of monthly bills. Currently, I have a positive cash flow and I take profits and buy hard assets.
So one day, that bank holiday occurs. I might be a day when I have alot of dollars or fewer dollars based on my accounts payable schedule and when it happens….
I cannot get in there to get cash out due to it being closed. But can I all the sudden go ahead and pay off lots of third party debt and expenses where the checks get mailed “with me thinking” that once the banks re-open maybe a week later, that the dollar will be de-valued perhaps 40%. Yet I already mailed the check therefore paying for my obligation and/or paying off a hard asset (like a truck or inventory).
I guess what I am asking is how will something like that likely settle if i owed $20,000 for say a truck, the bank holiday occurs on a Monday, I mail a check for $20K to pay it off, then the following Monday the banks re-open and the dollar has been de-valued by 40% = $20K X 0.6 = $12K. Would the lender of the truck have to honor my pay-off of $20K or only consider it a $12K amount even if he received it before the re-open? I am thinking it would be bad as my $20K check won’t clear since my band is closed. What would you recommend for this scenario?
your question is one of the “moving parts”. Some past devaluations have seen the debt also adjusted when a new currency is issued. If it is only a devaluation or if it is a bail in, this is unclear what will happen. I would not rely on current bank balances to pay off debts.
For what it is worth..good article.
2) for what it is worth….
I think the low is in for gold at $1280 right now.
The thing about gold is that people all over the world intuitively know that it is GOLD.
There is nothing else on the planet with it’s inherent value.
Please suggest how much gold and and silver should be accumulated by someone with less than $500,000 cash not including properties. It is so difficult to decide how much of each metal to purchase.