A TTAG reader writes:
I was thinking today about owning gold. I bought a St. Gaudens $20 coin in 1989. Total cost: $1695 including a $300 commission. Today, I checked with several dealers and was offered, tops, $1365. Not a fan of gold. But that got me to thinking….
Many people, including commenters here on TTAG, are adherents to the idea of being prepared for the zombie apocalypse. One constant element is gold. Apparently, the thinking is that gold will always be accepted, and it’s better than so-called fiat money.
So, what has this to do with guns, gear and the Second Amendment? Good question.
One of the base ideas of the “gold bugs” is that it will never be worth zero. Yet no one talks about when gold was illegal for individuals to hold (excepting small collector amounts), and the price was pegged at $35 per ounce. Thus, if one buys gold at $1500 per ounce and the government declares it’s only worth $35 (or whatever), holders of gold have lost a very real amount of wealth. For those who are delaying buying their apocalypse guns until the last minute, that stash of gold will buy a whole lot less firepower.
Now let’s fast forward to a government and economic collapse, where paper money is truly worthless (such as during the Weimar Republic). Gold is now king, queen, and ruler. Or is it? Even without consideration for a government mandated price of gold, gold will likely become virtually worthless. How?
During an economic collapse, where does one turn to convert gold into something usable like food, clothing, shelter? There is no official gold market. There is no standards board setting the price for everything in units of gold. What is gold worth?
It’s worth whatever the seller demands for scarce products and services. Even the face amount of gold coins isn’t guaranteed (no government, remember?). So, if you need food, clothing, shelter, guns, ammunition…you deliver however much gold the seller(s) demands. The only process for appeal is superior fire power in hand to convince the seller that the scarce goods aren’t so scarce.
In the apocalypse, guns and gangs determine the law and establish the economy. Holding gold against the end of nations isn’t so useful as first thought. Consider all the refugees from the Nazis who tried to smuggle diamonds in hopes of escaping and using diamonds as currency. Where did most of that diamond wealth end up? How much was it really worth to the refugees?
But you ask, “If gold is worthless, why would anyone want it in exchange for goods and services?” Answer: people will establish governments, economies will be rebuilt. The people who render your gold worthless will hold it against the day when they can make a gargantuan profit, when government and economies eventually stabilize.
The take away? Don’t hoard/buy gold. Buy bullets and weapons. If push really comes to shove, bullets and weapons will give you greater economic power that the guy with a sack full of gold coins and bullion bars.