The New Survivalist
Disaster Preparedness and Self-Reliance

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Chapter 15:
Money

Three videos: "Sound as a Dollar," "Protect Yourself from Unsound Money," and "Fascism in America" will load automatically in the above window.

Money Needs During a Disaster

Every survival and disaster preparedness book recommends that you keep some cash in your stash. The reason is obvious; when the electricity is off, credit card terminals, ATM machines and bank computers will be out of commission. Even if stores are open, without electricity they will not be able to accept your credit or debit cards. All transactions will be cash only.

Keeping a stash of cash for emergencies is good advice and I recommend it too. But your cash is only going to help if the stores are open and stocked with goods, and if they have figured out a way to conduct transactions without computerized cash registers. (Heaven help us!)

Perhaps your neighbor has some goods that you need and is willing to accept your cash in exchange for them. But during a far-reaching and prolonged emergency, a situation could arise in which your cash could be worthless. After all, no matter how much money you have, you can't eat it! If the stores are closed or their shelves are empty, it is also possible that your neighbors will be unwilling to part with their supplies for your money. After all, they can't eat it either. If their goods are essential for their survival, and if they have no immediate use for your cash, then they might not be willing to trade—unless of course you have something that they do need.

This would be a time when it would be far better to have excess stocks of essential goods rather than a lot of money, which after all is nothing but paper. (Perhaps you will find a use for your paper money when you run out of toilet paper.) Certain items in particular tend to be highly sought after during times of emergency and may be particularly useful for barter. These include batteries, matches, candles, fuel, ammunition, etc. Anything of value can be used for barter. It all depends on your neighbors' wants and needs. You can also barter your services. Perhaps you are good at performing first aid or at processing a deer for example.

While reading the next section of this chapter, the reader may initially think that I have departed from the topic of this web site. Please bear with me as I am confident that its relevance will become crystal clear by the chapter's end. The topic of money is complex so a thorough understanding of the basics is essential. I consider this to be one of the most important chapters in this web site. I assure you that your time will be well spent, for by the chapter's end, if I have been successful at setting the stage, you will understand far better than most what I consider to be our most imminent threat, and just as importantly, how you can successfully prepare for it.

A Brief History of Money

Barter

It can be argued that civilization began when people started trading with one another. Before there was money there was barter. Perhaps I was particularly adept at gathering eggs, while your skills excelled in retrieving edible roots. We both had food to eat, but eating eggs three times a day was getting old, and you were becoming bored with eating nothing but roots. Our problems were solved when we each discovered that the other would be willing to part with some of his commodity in exchange for some of the commodity of the other. With this first transaction the seeds of civilization were planted, and just as importantly the free market was born.

The first evolutionary development of civilization, after barter, was the free market.

The Free Market

The free market is that economic system which exists naturally when there is no government interference or coercion of any kind. "Prices" are determined by the remarkably efficient Law of Supply and Demand. How many eggs will I be willing to part with for some of your roots? That will depend in part on how many eggs I have (supply) and on how much I desire your roots (demand.) But it will also depend on your supply of roots and on how much you want my eggs. We will either come to a mutual agreement on the "price," or else we will part company in hopes of finding someone else to do business with. If you find someone who will sell his or her eggs to you at a lower price, I may discover that the demand for my eggs has fallen and will have to adjust my price so that there is once again a demand for them.

The Birth of Money

Suppose in our primitive scenario you discover that your neighbor is particularly skillful at making tools out of animal bones, and has made a nice little shovel that you would like to have for digging up your root vegetables. There is one problem though, your neighbor doesn't need any of your vegetables. To your delight, however, you discover that she really likes and needs eggs. You know that you can trade some of your vegetables to me for eggs, and then trade the eggs to your neighbor for her shovel. Now everyone is happy!

But I am particularly delighted because I am discovering that there is an increased demand for my eggs. It seems that everyone is demanding my eggs. And since eggs are so universally coveted, people are using them more and more as a medium of exchange, and the first money is born!

I am not saying that eggs served as the first money. My story is to illustrate that money is a commodity and that any commodity can serve as money. But the most important point to learn from this story is that the free market determines what money is. Any commodity that is widely demanded can serve as money, and history has shown that many have. Iron hoes have been used as money in both Asia and Africa. Beaver skins and tobacco were both used as money by early American colonists. During World War II American soldiers frequently used cigarettes as a medium of exchange. Even soldiers who did not smoke would hoard and trade cigarettes, because they knew that they could use them in exchange for goods and services that they did want. Cigarettes are sometimes still used today in our penal systems as a medium of exchange.

Returning to our prehistoric story in which eggs are currently the preferred medium of exchange: At first, everyone is happy. Eggs are small, light weight, and are therefore easily carried from place to place. Thank goodness oxen were not the medium of exchange! But soon everyone began to discover that there were some problems with using eggs for money. First of all they were not very durable. They would break easily. You tried storing some under your mattress for a rainy day. But when that rainy day arrived you discovered that your treasure was now a smelly mess! This teaches us another important lesson about money: It should ideally hold its value until you can spend it, even if you do not need to spend it right away. Money is not only a medium of exchange, it is also a store of value. Clearly a better commodity would have to be found.

Fortunately the free market did just that, and through time people at various places throughout the Earth chose gold and silver as the preferred medium of exchange and store of value. These two commodities presented many advantages: They were universally recognized and desired, easily transported, homogenous (every ounce of the pure metal was exactly the same as every other ounce), and they did not rust or rot. You could bury your gold in your back yard and dig it up years later, finding it essentially the same as when you buried it. In fact, gold and silver that was buried thousands of years ago has been dug up in essentially the same condition, and just as valuable, as when it was buried.

"Gold was not selected arbitrarily by governments to be the monetary standard. Gold had developed for many centuries on the free market as the best money; as the commodity providing the most stable and desirable monetary medium." —Murray N. Rothbard

Our oldest historical documents indicate that gold and silver have been used as money for at least as far back as recorded history. Silver and gold are mentioned in the book of Genesis:

Abram had become very wealthy in livestock and in silver and gold. —Genesis 13:2 (NIV)

The New Testament reveals that Jesus was betrayed for 30 pieces of silver. The ancient Romans used silver coins, as did nearly every civilization before and after them. The French word for silver, argent, is also their word for money. The British pound was once defined as one pound of Sterling. The Founding Fathers of the United States of America declared the currency of the new nation to be the dollar, which was defined as a certain weight of silver.

What Has the Government Done to Our Money?

As convenient as gold and silver were, they still provided one disadvantage as a currency. People who needed to carry a large amount found that their pockets were weighted down with heavy coins. The solution was simple. The banks or the government could keep some of the precious metals in a vault or warehouse and issue warehouse receipts that could easily be exchanged upon demand for the real thing. These warehouse receipts could circulate in place of the real thing. Thus paper money was born.

Some people were at first suspicious of paper money. But they soon learned how easy it was to exchange the paper notes for the real thing. A trip to any bank was all that was necessary to convert a paper dollar bill, for example, into a real silver dollar—a huge coin made of 90% silver that contained almost three quarters of a troy ounce of pure silver. Of course you could also ask for two half dollars, or four quarters, or ten dimes, or any combination of these, all of which were made of 90% silver. (Other countries used different compositions for their silver. In Canada, for example, silver coinage consisted of 80% pure silver.) One U.S. dollar face value, whether a silver dollar or a combination of halves, quarters or dimes, contained the same amount of silver—exactly one dollar's worth! That was the time when the expression "Sound as a dollar" appeared in the English language—an expression which no one uses today!

Silver Dollars

The U.S. silver dollar was first minted in 1794. Previously the colonists had used silver coins from other countries, particularly the Spanish Milled Dollar or piece-of-eight, from which we acquired the term "dollar." In 1837 the weight of the U.S. dollar was established as 412.5 grains and the fineness .900 (90% silver.) Silver is a soft metal and coins made out of the pure metal wear too quickly in circulation, so the silver was mixed with a small amount of copper for greater durability. The last two types of silver dollars are illustrated in the photograph above, along with a modern cent to show their relative sizes. The Morgan dollar, named after the designer of the coin, was minted from 1878-1921. The "Peace" dollar, so named because it contained the word "peace" on the reverse, was minted from 1921-1935. These dollars each contained .77344 troy ounces of pure silver, slightly more than three quarters of a troy ounce. (Any image on this web page may be left clicked for an enlargement. All photographs are by the author.)

U.S. 90% silver coins

All of these U.S. silver coins, minted prior to 1965, contain 90% silver. Two half dollars contain the same amount of silver as four quarters and the same as ten dimes. So one dollar face value of U.S. silver coins, dated 1964 and earlier, contain the same amount of silver, which is .72338 troy ounces. These coins are widely traded today as a convenient form of silver bullion because they are widely recognized and their weight and composition are undisputed. Because each $1 face value is the same as any other, regardless of the combination of coins, they are often traded by face value rather than coin type. (Because a tiny amount of silver was lost due to wear over the many years that they were in circulation, bullion dealers generally calculate the amount of silver in "Circulated U.S. 90% Silver Coins" as .715 troy ounces per $1 face value.)

"Only government can take perfectly good paper, cover it with perfectly good ink and make the combination worthless." —Nobel Prize laureate (economics), Dr. Milton Friedman

Paper Money

There was nothing wrong with warehouse receipts, or paper currency, as long as the paper remained redeemable for the real thing, or in other words, as long as there was no fraud. They were convenient and people accepted them because they knew that they could easily be exchanged for the real thing—silver dollars! But bankers and politicians were not satisfied. Since any newly created money had to be backed by gold or silver, they were limited in the amount of new money that they could create. What the country needed, they claimed, was an "elastic" money supply (or one that could be controlled by the banks rather than the free market.) So between 1913, with the founding of the private Central Bank of the U.S known as the Federal Reserve, and 1971, when the government completely reneged on its legal obligation to redeem Federal Reserve Notes with gold or silver, the U.S. monetary system was completely changed from one based on sound money to one based on fiat paper currency with no commodity backing whatsoever. This would have been illegal and immoral in the eyes of our founding fathers, who were well aware of historical precedents which had demonstrated this to be a means toward tyranny.

"If the American people ever allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of all their property until their children will wake up homeless on the continent their fathers conquered." —Thomas Jefferson

It took three generations to complete the insidious transformation of the dollar from a unit of precious metal to a fiat currency with no intrinsic value. Propaganda would be necessary at each step, to convince Americans that the changes were in their best interest. This is the manner in which governments are often able to commit the most villainous of acts, by making changes slowly—in stages—with each stage being introduced, along with the necessary propaganda, to a new generation that had already become accustomed to changes that their parents or grandparents would scarcely have tolerated.

Most Americans believe that the Federal Reserve, the Central Bank of the U.S., is a government entity. It is actually a cartel of private banks which the government has empowered with the ability to create and regulate our money. According to the Constitution of the United States, the power to coin money and "regulate the value thereof" shall reside solely with Congress. In the years leading up to 1913, a group of powerful and influential bankers was able to use their political influence to convince Congress that they could do a better job at regulating the dollar than the government could. Troublesome bank runs had occurred as a result of bank frauds sanctioned by the government, (i.e., issuing more paper money than they could back with real money.) The Federal Reserve would supposedly prevent bank runs by creating an "elastic" (code word for "inflatable") currency and stabilizing the value of the dollar.

Just how well has the Federal Reserve stabilized the value of the dollar? Since its founding the dollar has depreciated by over 95%!

In 1933, the U.S. government confiscated all gold coins from American citizens and made it illegal for Americans to own gold. This was done to prevent the people from using gold as a store of value, thus insuring a monopoly for the dollar, maintaining an artificial demand for the currency as it was being transformed to a fiat currency whose ties with real money were being progressively loosened. They simply could not afford to allow gold to compete with the dollar, for fear that the people would choose to store their wealth in real money rather than in the paper which the government knew to be intrinsically worthless. From this point onward the people could no longer redeem their dollars for gold, a right which was henceforth reserved only for foreign governments and Central Banks.

In 1965, the government began minting coins which contained no silver. Only the half dollar would continue to contain silver, but it would consist of only 40% silver instead of 90%. The half dollar continued to be minted with 40% silver until 1970, when silver was removed entirely from all new regularly-issued U.S. coins. ("Regularly-issued" coins are those minted for circulation. A few special silver coins, consisting mainly of proofs and commemoratives, would continue to be minted to sell to collectors at hefty premiums above their silver content.) One year later President Nixon abolished the Bretton Woods Agreement, which since 1945 had declared that foreign governments and Central banks could continue to exchange their U.S. dollars for gold, and that foreign currencies, rather than being pegged to gold or silver, would be pegged to the U.S. dollar.

The transformation was now complete. Through the cooperation of the central banks around the globe, the dollar, as well as the world's other major currencies, would no longer be redeemable for gold or silver. Currencies would henceforth contain no backing other than by fiat, or government decree. It had taken three quarters of a century and three generations. What had the governments accomplished? As we will see, they now had a system of covert taxation and wealth confiscation that even the Internal Revenue Service would envy.

"In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold." —Alan Greenspan (Gold and Economic Freedom, 1967, written before he was appointed Chairman of the Federal Reserve)

Debasement of Currency

Debasement is the practice of lowering the value of a currency. Throughout the centuries many nations have debased their currencies. Historians have noted that along with currency debasement there is a decline in the civilization which eventually leads to its collapse. The decline and fall of the Roman Empire is a good example. Originally the Roman denarius was almost pure silver, weighing about 4.5 grams. Over time the value of the denarius was progressively decreased by the Roman government, which would collect the silver coins, melt them down, and then reissue more coins with the same face value but smaller in size and lower in silver content. During the reign of the Claudio-Julian Emperors the denarius contained approximately 4 grams of silver. Under Nero it was reduced to 3.8 grams. The denarius continued to shrink in both size and in purity, until by the second half of the third century it was only about 2% silver.

The reason Emperors debase their currencies is for their own financial enrichment. Debasement allows them to create more coins out of the same amount of precious metal, thus "creating new money." The government would collect the coins from the people, through confiscation or taxation, and melt them down to create debased coins of the same face value but lower silver content. The extra silver would be used to create "new" money which the government would spend. But adding new coins into circulation lowers the value of each coin, which we know as inflation.

We have already learned that real money is a commodity, such as silver or gold, and not simply a denomination for a commodity, such as a denarius or a dollar. Since debasement creates no new silver, in reality no new money is created—only inflation. Debasement is therefore a method for transferring wealth from one group to another. In this case, from the citizens to the government. Debasement or inflation is therefore a hidden or covert tax.

Debasement of the dollar

Debasement of the U.S. Dollar: The two silver dollars on the left each contained over three quarters (.77) troy ounces of pure silver. Although the same size as the silver dollars that preceded it, the Eisenhower dollars (or "Ikes") minted for circulation (1971-1978) were composed of a copper-nickel clad with no silver content. When the Susan B. Anthony dollars were minted (1979-1999) even the size of the copper-nickel dollar was reduced making it just slightly larger than a quarter. The Sacagawea dollars (2000- ) were gold in color but contained neither gold nor silver. It's gold color was achieved with a mixture of copper, zinc, manganese and nickel. During this debasement of the U.S. dollar, the once commonly-heard phrase "Sound as a dollar" disappeared from common usage. The government continues to debase the dollar whenever it creates "new money," a process known as inflation.

Debasement of the half dollar

Debasement of the U.S. Dollar as Seen in the Half Dollar Coin: The Kennedy half dollar coin was first issued in 1964, which happened to be the last year that U.S. silver coins were minted from 90% silver. The 1964 is therefore the only regularly-issued Kennedy half dollar that contains 90% silver. From 1965 to 1969 the half dollar was issued as a clad coin with a core of pure copper and a front and back consisting of 80% silver and 20% copper, giving the coin a total composition of 40% silver and a total silver content of .181 troy ounces (.36169 troy ounces per $1 face value.) The half dollar was the only regularly issued U.S. coin to be minted with any silver after 1964. Quarters, dimes and dollar coins minted for circulation were minted from a combination of copper and nickel. After 1970, no silver was used in the minting of the half dollar as well and it became a clad coin composed only of copper and nickel just like the others.

Counterfeiting the Dollar

The U.S. dollar was originally defined as a specified weight of silver. The original weight was based on the Spanish Milled Dollars, which were widely circulated among the colonists at the time. Later the definition of the dollar would be expanded to include its equivalent value in gold.

As long as the U.S. dollar was soundly backed by gold or silver, there was a limit on the amount of money that the government could print, and there was a natural control over the money supply. The government could not print more money than they could back with the gold and silver held in reserves. The transformation of the dollar from a specified amount of precious metal to a fiat currency with no commodity backing removed this limitation. The Fed could now legally counterfeit the dollar producing as much of the paper currency as they wanted. We will see later how this amounted to a huge hidden tax burden on the people.

Another way that the government allows the currency to be legally counterfeited is through the system of Fractional Reserve Banking, a practice which, like fiat currency, had originally been considered fraudulent and illegal. Rather than requiring that banks keep enough money in their vaults to pay their depositors, should they all demand their money at once, they were allowed to keep only a small fraction in reserve. The assumption was that it would be unlikely that everyone would demand their money at the same time. The money which they were not required to keep in reserve could be loaned out to earn interest, although it would also continue to appear in the ledgers for the depositors as well, and thus new money was created not by the printing press but by entries in the bank's ledgers. The people who borrowed this new money would not need it all at once, so much of it would end up back in the bank's vault, but again only a fraction of that money would have to be held in reserve, and so the cycle could be repeated over and over, multiplying the banks assets and the nation's money supply many times over. Some economists consider Fractional Reserve Banking to be a system of legalized fraud which only comes to light when the people lose confidence and make a run on the bank.

In addition to printing new money, another way that the government "controls" the money supply, and thus inflation, is by the effect the prime interest rate has on the fractional reserve system. When the Fed lowers the interest rate there is more demand for loans, since they cost less, and thus an increase in borrowing also increases the money supply, as explained above. When the resulting inflation appears to be getting out of control the Fed will raise interest rates, decreasing the demand for loans and contracting the money supply. By emphasizing this role, the government portrays itself as an inflation fighter. In reality the government is the cause of inflation!

How Does Counterfeiting Effect the Economy?

Counterfeiting has the immediate effect of increasing the money supply, which is inflation. With more money in circulation, there are more dollars chasing the same number of goods. This causes prices to increase due to the law of supply and demand—the supply remains the same but the demand increases due to the additional money that is available to buy them. But it takes time for the additional money to work its way through the system and effect the prices. The people who benefit the most from the new money are the counterfeiters themselves, since they are the first to spend the new money and the prices of the goods and services that they buy have not yet increased. The next people to benefit are the ones who receive the new money from the counterfeiters, and so it goes down the line. By the time the money reaches the average citizens, the prices of the goods and services that they buy have already increased to reflect the additional new money that the counterfeiters had introduced into the system, so they do not benefit from the new money at all. In fact, it is the average citizens who ultimately pay the price for the counterfeited money, because they have to pay higher prices for all the goods that they purchase. The value of every dollar that they own, including those which they had saved, has decreased in proportion to the amount of new money that was introduced into the economy by the counterfeiters. So in this way counterfeiting, or inflation, is a method of transferring wealth from the average citizens to the counterfeiters, and to the friends of the counterfeiters who were the first to receive the new money.

Inflation

People often think that the definition of inflation is higher prices. This misconception is perpetuated by the government because it obscures the true cause of inflation. As explained above, the government likes to create the misconception that it is an inflation fighter. But even a first year student of economics understands that the government is in fact the cause of inflation. Most any dictionary will reveal that the true definition of inflation is "an abnormal increase in available currency and credit beyond the proportion of available goods, resulting in a sharp and continuing rise in price levels." (The American Heritage Dictionary, Second College Edition.) Rising prices are not inflation but a result of inflation. The true cause is an increase in money and credit. (Very recently some newer dictionaries have actually changed their definition of inflation to "rising prices." This is ultimately a reflection of a "new economics" resulting from government propaganda aimed at obscuring the cause of inflation. One is reminded of the "newspeak" described in George Orwell's futuristic novel Nineteen Eighty-Four.)

"To say that rising prices is inflation, is like saying that a wet sidewalk is rain." —James Dines

As we have seen, when the government creates dollars, (increasing the supply side of the supply and demand equation), the value, or purchasing power, of every dollar decreases, including those you are holding in your savings account. This is because there are more dollars chasing the same number of goods causing the prices of those goods to increase. The average citizens pay the price for inflation, because it decreases the value, or spending power, of every dollar that they own. The beneficiaries of inflation are the government, and their bedfellows, because they receive and spend the new money first, before it has had the effect of increasing the prices of goods and services. In this way inflation serves as an additional and covert tax that the governments and Central Banks impose on the people, and a method of transferring wealth from the poor and average to the rich and powerful.

“By a continuing process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens.” —John Maynard Keynes

Politicians are fond of spending money, because it helps insure their reelections. But there is a limitation on the amount of taxes that people are willing to endure. Through the mechanism of inflation, the government is able to tax people without their awareness of it. That is why the government promotes the lie that they are an inflation fighter, when in fact they are the very cause of inflation.

The government can not create real money. They can not make gold and silver out of thin air, so inflation was not a problem when people used gold and silver for money. When the U.S. was on the classical gold standard, inflation was practically nonexistent. In fact, a small amount of deflation was the usual order of the day—and no one was complaining about falling prices! In a free economy without governmental interference with the money supply, a small amount of deflation is the natural and desirable effect of increasing productivity.

What has happened to the dollar since the government and Central Bankers have seized control of our money? Prior to 1913, when the Federal Reserve was created, the purchasing power of the dollar had essentially been unchanged for 125 years. But since the Federal Reserve we have experienced nearly continuous inflation. As the Fed assumed more and more control, and as the dollar's tie to gold and silver was progressively loosened, inflation has continued to escalate. As a result, since 1950 there has been an 88% decline in the dollar's purchasing power. In other words today's dollar is worth about 12 cents as compared to a 1950 dollar! In fact, the numbers have been so bad that the government has begun falsifying the economic data. For example, in recent years they have taken energy and food, two of the areas that have experienced the highest rates of inflation, out of the formula they use to compute the Consumer Price Index (CPI), the measure the government uses to report inflation. This "core rate," as they call it, is approximately half the true rate of inflation. In recent years the Fed has also stopped reporting the M3 money supply, the best measure we had of the new money created by the government. The deception is obvious, but you rarely hear it reported in the news to the discredit to our media!

Large cent and silver trime

The photograph above shows a large U.S. one cent coin (or "penny") as it appeared in the mid 19th century, along with a modern cent and dime below it for size comparison. The thick large cent coin contained (you guessed it) one cent's worth of pure copper. At that time in U.S. history, children could take a penny into a store, purchase a piece of candy, and come out with change in hand! (There were also copper 1/2 cent coins in circulation.) At the bottom of the photograph is a "trime," a U.S. silver three cent coin issued from 1851 to 1873. Most Americans still think that our modern cents are made out of copper, but since 1982 they have been made out of zinc, a cheaper metal, and are only plated with a very thin layer of copper. The U.S. government has debased the dollar to the point where even this small zinc coin now contains more than one cent's worth of metal, and so a ban has recently been issued on the exporting and melting of pennies (and nickels as well) to prevent people from profiting from the fact that their intrinsic value now exceeds their face value! As inflation or debasement of our currency continues, the one cent coin is destined for the same fate as the half cent and the three cent silver trime, and even our copper-nickel coinage will eventually have to be made smaller, or from a cheaper metal such as aluminum! For those who have eyes to see, the handwriting is on the wall!

What Does the Future Hold for Our Money?

The additional revenues that the government has been able to confiscate, overtly through soaring taxation and covertly through inflation, has not prevented politicians from spending more money than they have taken in. Going off the gold standard also opened the door for deficit spending and trade deficits. When the money supply was limited to the gold and silver held in reserves, there was a natural check on budget deficits. Since available credit was limited by a finite amount of money, when the government borrowed money (increasing demand) it drove up interest rates, which made it more difficult for the private sector to borrow and invest—a process known as "crowding out." This created a negative impact on the economy, so under the gold standard the government had a big incentive to avoid deficit spending. Going off the gold standard immediately led to decades of deficit spending, which continues to this day, and has produced the largest federal debt that the world has ever known.

"Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard." —Alan Greenspan (Gold and Economic Freedom, 1967)

Trade imbalances were also unsustainable and self-correcting when currencies were backed by gold. When one country had a trade deficit with another, resulting when it imported more goods than it exported, gold was transferred from the deficit country to the surplus country to pay for the goods. With less gold in reserves there was less lending in the deficit country. The resulting contraction of credit caused the money supply to contract, and with less money chasing the same number of goods the prices of those goods fell making them more competitive to foreigners. The opposite happened in the country with the trade surplus. As gold flowed into the country its reserves increased leading to increased lending and an expansion of credit resulting in more money in circulation. With more money chasing the same number of goods the prices of those goods increased making them less attractive to foreigners. The net result was a slowing or reversal of the flow of goods across borders bringing trade between the two nations back into balance.

With the elimination of the gold standard and the discipline and natural controls which it afforded, the U.S. has gone from being the world's largest exporter to the worlds largest importer. The U.S. trade deficit is now a staggering $700 Billion a year, and the world's largest creditor nation has now become the world's largest debtor. The U.S. federal debt is now $7.9 trillion, which is 64% of the Gross Domestic Product (GDP) and over 80% of the National Income. Deficit spending continues to escalate and more debt is added each year. The national debt has long passed the point where it has surged out of control. There is no hope that this debt will ever be repaid, nor even that its rate of growth will ever stop accelerating at an exponential rate! (These figures were correct as of 2007 when the first edition to this web site was published. In this revision, I chose to leave these numbers in, to illustrate just how out of control government spending and inflation are. As I am revising this in January of 2009, the federal debt (not counting "unfunded liabilities") is $10.6 trillion! Since 2007 the debt has been increasing at a rate of $3.14 billion a day! March 2010 update: the debt is now 12.5 trillion and increasing at a rate of $3.89 billion a day! To see what it is at this minute, visit the web page U.S. National Debt Clock.) This is insanity folks!

Just as one might think that our predicament could get no worse, . . . It does! The impending disaster which will result from our runaway debt will occur at the same time that the baby-boomers are retiring. As of 2008, this huge group of Americans, who have been paying into the Social Security system for decades, are finally reaching retirement age and are beginning to draw from the system instead of paying into it. Since the politicians have already stolen all the money that the baby-boomers have paid into the system, to spend on social programs and pork barrel projects that insured their reelections, the unfunded Social Security system is sure to bankrupt a nation that is already past the point where any legitimate business would have long declared bankruptcy. (As of 2010, the true national debt, counting "unfunded liabilities" such as Social Security, is estimated to be over 75 trillion, and by some estimates could be as high as $90 trillion! So what's another thee trillion—the estimated cost of the proposed socialized medicine boondoggle?!)

Many economists believe that the only solution for a government that is hopelessly in debt is to hyperinflate its currency, and the U.S. government has clearly shown that it intends to do just that. As we have already seen, as more dollars are created, each dollar becomes worth less and less. In this way the government can reduce its debt to a more manageable size. It will pay at least part of its Social Security and other obligations, but it will be paid with dollars that are nearly worthless. Hyperinflation will erode the wealth of every American citizen who is holding assets in dollar denominated instruments. But there is an even bigger problem, which stems from the fact that the U.S. dollar is the reserve currency for many foreign nations. Our trade deficit has created a huge demand for dollars on the part of foreigners. This demand has over the years been able to soak up many of the excess dollars created by the Fed, and has also helped to keep inflation in the U.S. artificially low. But what will happen when the dollar begins to tumble in value as a result of hyperinflation?

It is only a matter of time before foreigners realize that it will no longer be wise for them to hold their national reserves in U.S. dollars. We are already seeing this happening today, with more and more governments each year choosing to diversify some of their reserves into other currencies as well as commodities like gold and silver. As foreigners dump their dollars (increasing the supply of dollars on the market), the immutable law of supply and demand will cause the value of those dollars to decline even more. Rapidly declining dollars will cause more dumping, creating a vicious cycle and even greater hyperinflation. A complete collapse of the dollar will be the result. It is only a matter of time. The only question remaining is how long will it take for this crisis to reach the critical mass required to cause a complete collapse of the economy.

The U.S. dollar will not go down alone! Today, all currencies are floating fiat currencies, and all governments are inflating their currencies at record rates. When one currency depreciates, especially one as important as the U.S. dollar (the U.S. is the world's largest consumer nation), the other nations depreciate their currencies as well (by inflation) in order to maintain a competitive position for their exports, which is necessary to keep their economies afloat. So all of the world's currencies will go down together. (Recently, one noted economist has accurately observed that all of today's currencies are derivatives of the dollar.) But when all currencies are depreciating together, how can one measure the value of any particular currency, since the values of all currencies are floating in relation to one another? It is like trying to measure something with an elastic ruler which can expand and contract along with the objects that are being measured. The answer lies in commodities, which are real things which governments can not create out of thin air.

As currencies all decline in unison, with the dollar leading the way, they will appear to be relatively stable in relation to one another. But the amount of commodities which those currencies will buy will decrease. We see this as rising commodity prices. Two commodities in particular are very reliable indicators of the true value of fiat currencies, and those are gold and silver, due to their monetary role throughout history. That is why gold and silver are considered by many to be the only real money. Since they reveal what governments are really doing, gold and silver will forever remain a thorn in the sides of governments that issue fiat currencies. That is why they are so despised (and at times even demonized) by governments, and why central banks attempt to manipulate the gold and silver markets to keep prices artificially low. But they can not keep gold and silver prices down forever, because the immutable law of supply and demand will eventually win out. When nations decide to dump their dollars in favor of commodities, and real money, there will be nothing that the central banks can do. The free market will win in the end.

People who have their wealth stored in fiat dollars, and probably other fiat currencies as well, will see it disappear. The wise investors will have already diversified some of their money into precious metals, and some will even benefit greatly from this disaster. After an economic collapse, people will resort once again to the free market which will determine the commodity that will serve as their money. Many economists believe there is little doubt that the new currency will be the same commodities that have served as money for thousands of years, since even before written history. There is no reason to think that this will ever change. Historically, the free market has decided that gold and silver will serve as money. Will that be the case in the future? The free market will decide.

What Will Hyperinflation Be like?

Hyperinflation is not new. Many currencies of the past have gone through hyperinflation and collapse. In fact, it has been the fate of every fiat currency that has ever been created, without exception. We only have to look at the historical record to see what it will be like.

Although it is not the most recent example, perhaps the best known example is the hyperinflation of post World War I Germany. During the war Germany had borrowed heavily to pay its war costs. After the war the Allies required her to pay huge reparation costs. The German government, heavily in debt, decided to pay these massive obligations by printing huge amounts of paper money with no backing by gold or silver. By 1923 the greatest inflation in history was underway in Germany, with prices often doubling in a few hours. Inflation was so bad that factory workers were paid twice a day. During their lunch hours the workers' wives would meet them at the factory gates to get their pay so they could spend it before it lost its value. By late 1923 it took 200 billion Marks to buy a loaf of bread! Many Germans who lived in the cities lost everything. Those who lived in the country generally faired better, because some of their wealth was stored in commodities such as land, equipment and food, rather than in a fiat currency. Some Germans actually became rich during this period because they had the foresight to put their wealth in gold, silver and foreign currencies, thereby protecting it from the ravages of inflation. They were later able to use their wealth to purchase businesses for a fraction of what they were originally worth.

It was the political turmoil and economic chaos resulting from post World War I hyperinflation that allowed Adolph Hitler and the Nazi Party to seize control of the German government. What was to follow was the most oppressive fascist government and the most destructive world war that the world would ever know.

"There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose." —John Maynard Keynes

What Can You Do to Insure Your Economic Survival?

The first lesson to be learned is that gold and silver are real money and the only real money. Fiat currencies are pieces of paper that have value only by government decree. When confidence is lost so is their value. Historically there have been many fiat currencies, but in the end they have all proven to have one thing in common: They have all failed! There has never been a case where a fiat currency has succeeded, and there is no reason to believe that this will ever change. The fiat currencies of the past have all failed because the governments that issued them inflated them to the point where they were worthless. In the end they became worth nothing more than the paper they were printed on.

Historically the U.S. dollar has commanded much prestige, but this has resulted from years of being backed by gold and silver and a strong economy. It must be remembered that it has only been since 1971, with the abolishment of the Bretton Woods Agreement, that the U.S. dollar has been completely fiat. So the fiat dollar is a recent experiment that has yet to be proven. Since its backing by gold and silver has been removed, the U.S. dollar has been inflated to the point where today it is worth only 12 cents when compared to the 1950 dollar, and during that same time the U.S. went from being the world's largest creditor nation to the world's largest debtor nation, so it is clear to all but the completely obtuse that the fate of this fiat currency will be no different from the fate of all those that have preceded it.

Obama is accelerating the onslaught of this massive disaster! President Obama's misguided corporate and bank bailouts have resulted in billions of dollars of new debt. For now the massive inflation of this new money creation and debt is waiting in the wings, because the velocity of money (how quickly it is spent) has been drastically reduced by the recession. But soon that velocity will catch up to the new money creation and its effects on the value of the dollar will become apparent. And that is not all. Just when we can afford it least, Obama's social programs, such as socialized health care, promise nothing more than additional bureaucratic waste, more governmental intrusion into our lives, and trillions of dollars of new debt over the coming years. Obama has made it perfectly clear that he is willing to sacrifice the dollar in order to achieve his social agenda. He believes that the end will justify the means. But socialism did not work in Russia and China and it will not work in America either. Will the USA suffer the same fate as the USSR? Why won't our politicians learn the lessons that history can teach? (Watch my video: National Health Care.)

Fascism Has A New Face

“Fascism should more appropriately be called corporatism because it is the merger of state and corporate power.” —Benito Mussolini, fascist dictator of Italy (1922-1943)

"The bailout of investment banks and corporations by the US government is fascism; the control and intervention of government by corporate interests designed to further corporate and state control. The multi-trillion dollar state support of JP Morgan, AIG, Fannie Mae and Freddie Mac and now perhaps soon GM, Ford, and Chrysler is fascism, not socialism.”—Darryl Schoon

"FASCISM IS ALWAYS SOLD AS NECESSITY IN THE NAME OF THE PUBLIC GOOD" (Ibid.)

The New Face of Fascism

See "Fascism Has A New Face"

How to Survive an Economic Crash Depression

The way to protect yourself is to put some of your assets into commodities, such as gold and silver, with intrinsic value that can not be taken away by government decree nor confiscated by inflation, by buying from reputable dealers such as BuySilver.net. The value of gold and silver will always be determined by the open market. Even if the government outlaws their possession, as it did with gold in 1933, their value will be determined by the international market or the underground market and they will most assuredly maintain their valuable status as a medium of exchange and a safe haven and store of value.

Astute investment advisors have always recommend that a percentage of your investment capital be kept in precious metals as insurance against an economic disaster such as a stock market crash, hyperinflation, or a collapse of the economy. Precious metals, particularly gold and silver, have always served investors as hedges against inflation because they typically move in the opposite direction as stocks and the dollar. When currencies are decreasing in value (decreasing in buying power) precious metals are nearly always increasing, and at the very least they will maintain their value insuring that your capital is not eroded by inflation or a falling dollar.

The percentage usually recommended by investment advisors for your precious metal safe haven is 10 to 15% of your investment/savings portfolio, but that recommendation is always increased during times of economic uncertainty. We have never lived in a time of greater economic uncertainty, so I recommend that you consider putting 20% or more of your investment capital and savings into precious metals. Furthermore, I recommend that you take physical possession of your precious metals and keep them in your possession. (Note: For safety, since I have become a high-profile survivalist writer, I no longer store precious metals in or near my home. Your decision to do so will depend on your personal preferences and circumstances.) The government has confiscated the people's gold in the past, and that could conceivably happen again. But they can not confiscate what they don't know about nor get their hands on. But I believe that an even greater danger during an economic crisis is the possibility that the institution holding your precious metals could become insolvent, and you may find it difficult or even impossible to get your hands on your precious metals during the time of an emergency.

What about mining stocks? Certain stocks will no doubt benefit from the bull market in precious metals. Commodity prices in general will increase as a result of inflation and the resulting decline in the buying power of fiat currencies, so it may be wise to shift some of your assets toward these types of equities. But these should not be counted toward the 20% or more that you may choose to put into precious metals that you will take physical possession of as an insurance policy against uncertain economic times. Buy the metals, not the paper!

Which Precious Metals Should You Buy?

I have spoken at great lengths about gold and silver, but there are other precious metals (PM) that are also good safe havens for your money. The platinum group metals, particularly platinum and palladium, also have a monetary history. All of the precious metals have intrinsic value which will endure when fiat currencies fall. The platinum group metals and silver have numerous industrial uses, particularly in chemistry and electronics. All electronic equipment, including cell phones and computers, contain some palladium, as well as gold and silver. Platinum is used in many industrial processes including the refinement of oil. Palladium is the preferred catalysts in catalytic converters for gasoline engines, while platinum is the preferred catalysts for diesel engines. Each precious metal has unique properties which will effect its price movements in a technologically changing world, but all of them will have a tendency to move in the opposite direction as fiat currencies, which means that they will increase in value as fiat currencies fall. The answer I believe is to diversify—to hold some of each PM.

Palladium and platinum

Coins and rounds of palladium and platinum are shown in the photograph above. These two platinum group metals (PGM) have many industrial uses so their spot prices may be adversely effected during recessions, but this may be counterbalanced by increased demand from investors and those seeking a safe haven for their money. Platinum and palladium jewelry is very popular in Asia, with demand for palladium jewelry having soared in recent years.

China Panda coins

The above photograph shows examples of official legal tender bullion coins from the China Mint made from (left to right) silver, platinum, palladium and gold. These Panda coins are minted each year in relatively small quantities and are popular among collectors, so they have a good potential to appreciate in value over time. Although my rule is to invest in metals rather than numismatic premiums, I like these coins because they can be purchased at prices just above their melt value giving me two ways to win—a precious metal investment and a semi-numismatic one as well.

Although diversification is a good idea, there will certainly be some precious metals that you will want to hold more of than others. I still think that gold and silver should make up the bulk of your PM hoard. Between the two, I prefer to hold more silver than gold, although both are available to buy from companies like U.S. Money Reserve or Goldline. The reason I like silver better is because I believe that the percentage increase for silver will be greater than the percentage increase for gold. In other words, during the time that gold doubles in value, the price of silver is likely to increase three or fourfold. I believe that, even considering the recent increases in spot prices, both metals (and in fact all PM's) are currently undervalued, but silver is the most undervalued. Throughout history the ratio of the price for gold and silver has generally been around 16:1 (meaning that one ounce of gold was worth 16 ounces of silver.) Today the ratio is about 50:1. After studying the PM market for years, I have come to the conclusion that the 50:1 ratio is far greater than it should be. I believe that the ratio will eventually be closer to 16:1 again. If the ratio returns to 16:1, that means that when gold is trading at $1,000 an ounce, for example, silver should be trading at $62.50 an ounce. So silver would have to triple or perhaps even quadruple in price, without the price of gold changing a bit, before the 16:1 ratio is reached again. Imagine how much silver will increase as gold doubles in value over the next few years as the dollar continues its decline. I don't know if the 16:1 ratio will ever be reached again, but clearly silver has the highest potential. I believe that gold has a great potential, but the outlook for silver is fantastic!

The fundamentals for silver, the data that investment analysts use, have never been more bullish. For the past 10 years silver usage has exceeded mine output. As a result there has been a steady draw down of silver inventories, which are now critically low. The U.S. government, for example, used to stockpile huge amounts of silver, but over the years it has gradually sold off its stockpile in order to keep the spot price of silver artificially low. The government now has to buy silver on the open market to keep its Silver Eagle bullion program going, because its stockpile is completely gone. Low silver prices have slowed investments in silver mining compounding the shortage. Silver is an industrial metal that has numerous applications, particularly in the growing electronics sector. It is also experiencing a huge demand from Eastern nations like China and India, and as the economies of those countries continue to grow, that demand will surely increase as well. Many analysts are saying that silver is poised for a surge that will dwarf the great bull market of 1979-80, in which the spot price exceeded $50 an ounce. Adjusted for inflation, the spot price of silver would have to reach nearly $150 today in order to attain the same level that it reached back in 1980. But many believe that silver is likely to exceed even that high.

Silver is not just the poor man's gold. It has the potential to be the baby boomer's salvation!
When it comes to taking physical possession of your precious metals, silver has one disadvantage over the others: You get a lot of silver for your money, which means that a given dollar amount of silver will be much heavier and will take much more storage space than that same dollar amount of any other precious metal. You can easily carry $5,000 worth of gold or platinum in your pocket, but $5,000 worth of silver would require a wheelbarrow! Silver will also take up more space in your hiding place or safe. So you must decide, given your circumstances, how much of each metal you will want to hold. The other side of that coin is that silver is much more convenient for small transactions. Try to buy a loaf of bread from your neighbor with a gold coin. They will probably have trouble making change! But you could easily make the transaction with a 90% silver dime.

What Form of Precious Metals is Best to Hold?

As I have mentioned I believe that diversification is a good idea. You may choose to hold various forms of all of the precious metals. But certain forms will certainly have advantages over others. One thing that is important to consider is liquidity—the ease with which you can "spend" your money, or convert it into cash. Liquidity will be highly related to the recognizability of your precious metals. For example, if you have a sterling silver ring that is marked as "sterling" or its equivalent "925" (which means a fineness of .925, or 92.5% pure silver) then it will be much easier to liquidate than a piece of jewelry with no mark. If the item is not marked, the buyer will not know for sure if it is 92.5% silver, or 90%, or 70%, or even if it is simply silver plated. If its composition is known with certainty, then it will be a simply matter of weighing the object and doing some simple math to determine its precise value.

Silver round and silver bar

The most easily recognizable forms of silver and gold are coins, rounds and bars. Rounds and bars are nearly always marked with weight and purity. Usually silver bars and rounds (shown in the photograph above) have a fineness of .999 (99.9% pure precious metal, about a pure as you can get.) The modern silver and gold bullion coins, such as the U.S. Silver Eagles and the Gold Eagles recently minted by the U.S. Mint, as well as bullion coins recently minted by the official mints of other nations, are popularly known as "coins of the realm" and are highly liquid and desirable.

Gold bullion coins of the realm

Examples of modern gold bullion "coins of the realm" are shown in the photograph above. From left to right are two coins from South Africa and one each from the U.S. and Canada. Coins of the realm carry a nominal face value but they will never trade at face value because their precious metal content will always exceed their value as legal tender.

The older silver and gold coins that were originally minted for circulation were not usually marked with their precious metal content but they are widely recognized and their composition is well known, especially if they are U.S. coins. Old U.S. silver coins are highly liquid and therefore one of the most preferred forms worldwide for trading and storing silver bullion. Old U.S. gold coins, particularly the $20 gold pieces minted prior to 1934, (which contain .9675 troy ounces of pure gold) are also widely recognized and highly liquid.

Sterling silver

Sterling silver items that are clearly marked as sterling (stamped with either the word "sterling" or "925") are also highly liquid, but they may be discounted slightly by silver bullion dealers because they are not the most convenient nor preferred form of silver for investors. Most investors prefer to hold coins, rounds or bars. I like sterling silver items because I can often buy them at estate sales for nearly half the current spot price of silver, and although dealers may discount them slightly, they can almost always be sold on auction sites like eBay for their full silver value and sometimes they bring a premium as well.

U.S. Silver Eagles and Mexican Silver Onzas

U.S. Silver Eagles and Mexican Libertads (both shown above) are popular ways to invest in silver bullion, although they will almost always command a premium above their melt value. The Silver Eagles are also legal tender, carrying a face value of $1, while the Libertads have no face value. That matters little since no one is going to spend a one ounce silver round for one dollar! Both types are bullion coins that contain one troy ounce of .999 fine silver, and that's all that matters.

It costs money to put bullion into the form of a coin, round or bar, so these will often carry a premium over their precious metal content. In the case of coins this premium is called the seigniorage. Coins and rounds usually carry a higher premium than bars. The U.S. Mint is particularly bad about charging high premiums for their modern bullion coins, particularly the Silver Eagles (which usually carry a premium of 30% or more above spot.) That is one of the reasons why my favorite way to invest in silver bullion is with old U.S. silver coins. The seigniorage was absorbed by the government years ago when the coins were released for circulation, so these coins can usually be purchased in circulated condition for very near their melt value. Uncirculated coins will usually carry a fairly high premium, depending on the coin's desirability to collectors, which will depend on its condition, rarity (which in turn depends on the quantity minted or remaining) and "eye appeal." This brings us to the topic of coin collecting.

Should You Invest in Numismatic Coins?

Numismatics is the official term for "coin collecting." Coin collectors are often willing to pay high premiums, sometimes extremely high premiums, for the coins they desire. Some investors, particularly those who collect coins themselves, are also willing to pay high premiums in the hope of receiving an even larger profit when they sell the coins. Numismatics is a highly specialized field. It requires a tremendous amount of specialized knowledge, particularly with regard to grading a coin's condition. I have been a coin collector for many years, and I have studied the field quite a bit, but I do not usually invest in numismatic coins and I certainly do not recommend numismatic investments for the novice. It is an area where you can very easily get seriously burnt. (Been there, done that!) Unless you are a serious and experienced coin collector yourself, I do not recommend that you pay the high premiums required for the purchase of numismatic coins. For that reason, I recommend that you attempt to pay near, or very near, the melt value of any bullion coins, round or bars that you buy.

Semi-numismatic coins are coins that may be purchased at prices very near their melt value, but nevertheless may some day command a premium from coin collectors due to their rarity and desirability. The China Panda coins that I mentioned above are good examples of semi-numismatic coins, because they are minted in small numbers and are popular with collectors. I believe that semi-numismatic coins can be excellent investments, provided you don't pay large premiums for them. Most modern coins, including the Silver Eagles minted by the U.S. Mint, even though they are popular, are minted in quantities that are much too high to ever be considered semi-numismatic. Semi-numismatics is another area where you can get burnt if you don't know what you are doing, so always remember this important lesson and you are not likely to go wrong: Pay for precious metals, not for premiums!

If you will always resist the temptation to pay high premiums for any bullion that you purchase you will protect your investment dollars and save yourself a lot of heartache in the long-run. That is why I recommend old circulated U.S. silver coins for your silver bullion investments. (If you buy uncirculated coins, you will no doubt pay a premium.) For gold bullion, any of the bullion coins that were minted by the official mints of the various governments are perfectly fine. Gold bars manufactured by reputable private mints are also good. You can often acquire bars at lower premiums than coins, but when you sell them you might also find that they are not quite as liquid as the coins and so I recommend that you stick primarily with the coins.

Disclaimer: All forms of investment involve risk. Precious metals are no exception. There is no guarantee that precious metal prices will continue to go up. But with precious metals, unlike stocks and paper investments, there is a limit to the downside risk. When you are holding precious metals you are holding something real, which historically has maintained a valuable status since the beginning of civilization. Compare that to something made out of paper which is intrinsically worthless! Many astute investors believe that the best insurance for your investments is diversification: "Don't put all of your eggs into one basket," as my grandmother used to say. I am not recommending that you put all of your money into precious metals—just a percentage, as an insurance policy. The percentage you choose will depend on what you feel comfortable with, according to how you view the economy and geopolitical events.

Even during a prolonged bull market, the prices of precious metals will fluctuate, sometimes wider than you may feel comfortable with. There will be times when the spot prices will move lower and perhaps stay there for weeks or even months. Many investors get "shaken out" of the market during these times. Others see these "pull backs" as buying opportunities and will add to their portfolios while the prices are lower. I recommend that you take a long-term approach, adding regularly to your precious metals portfolio while ignoring the many ups and downs. For example, if you will buy a certain amount each month, as part of a regular savings plan, you will be using a technique called dollar cost averaging. The price you will end up paying each year will be approximately the average spot price for that year. In the long run the ups and downs that occurred along the way will not matter. Or you may chose to add to your portfolio each time there is a pull back in the price. But be careful because sometimes precious metals surge without warning, and if you were not on board beforehand you will completely miss the big move. To keep abreast of the fundamentals which effect all of the markets, including the precious metals market, I recommend that you listen to Jim Puplava's Financial Sense Newshour, a weekly Saturday radio show. It is always available online at http://www.financialsense.com/fsn/main.html. His web site, Financial Sense Online, is located at http://www.financialsense.com/.

Circulated U.S. Silver Coins

In summary, I believe that silver bullion is the best investment, and circulated U.S. silver coins are the best way to invest in silver bullion. They have always been very popular and universally recognized worldwide so they are possibly the most liquid form of silver bullion available. The seigniorage for the minting of these coins was absorbed by the government when the coins were released into circulation years ago, so they can be purchased with little or no premium. Your goal should be to buy your bullion at as close to the current spot price of the metal as possible (and even below the spot price if you are lucky enough to find such a deal.)

U.S. silver dollars have always been the most popular coin worldwide, for foreigners and Americans alike. As a result they will almost always command a larger premium than other U.S. silver coins. You will probably be able to reclaim the premium when it comes time to sell your coins, but you are not guaranteed to do so. Coin dealers love to charge hefty premiums when they sell coins but they are notorious for denying premiums when they buy them back from you. As a bullion investor, as opposed to a numismatic investor, you should remember that your goal is to purchase your bullion coins as close to the spot price as possible, keeping any premiums to a minimum, so I advise you to stick with U.S. silver coins of denominations other than the dollar; i.e., half dollars, quarters and dimes. If you find an opportunity to buy silver dollars at the spot price then by all means take advantage of it. If you ever find an opportunity to buy uncirculated coins at the spot price you will want to take advantage of that as well, but you will usually be buying circulated coins if you are trying to keep your premiums to a minimum. Remember, your goal is to invest in precious metals, not in collectibility or premiums.

There are two basic kinds of circulated U.S. silver coins that are traded as silver bullion: 90% silver coins and 40% silver half dollars. The 90% silver coins include all U.S. silver dollars, half dollars, quarters and dimes dated 1964 and earlier. The 40% silver coins include only the Kennedy half dollars minted from 1965 to 1970. The 1970 Kennedy half was released only in mint sets for coin collectors. No coins were released for circulation. Consequently, 1970 half dollars are scarce and will carry a hefty premium of $10 or more. So for all practical purposes this category of bullion coins will include only the dates 1965-1969. The 40% halves have a couple of small advantages and one big disadvantage over the 90% coins. They did not circulate long because their silver content soon exceeded their face value and people began to hoard them soon after they were released into circulation. As a result there was practically no loss of silver from the coins due to circulation wear. Their other advantage is that, similar to silver dollars, half dollars have always been a very popular coins due to their large size. The disadvantage of 40% half dollars is their bulkiness.

As we have seen, when compared to gold, silver has the disadvantage of bulkiness and heaviness. A small amount of money buys a lot of silver! This bulkiness is even greater when the silver contains other metals, adding weight and size to the coins. The 40% half dollars are 60% copper. So when you store your silver you are also storing a lot of copper as well. As a result, the 40% half dollars are often discounted both when you buy them and also when you sell them. You might be able to buy them paying less per ounce of pure silver, but when you sell them you are also likely to be paid slightly less per ounce of pure silver as compared to 90% silver coins.

Bags of U.S. silver coins

$1,000 face value bags of U.S. silver coins, as shown in the photograph above, are one of the best ways to invest in silver bullion. They weigh slightly more than 50 lbs. (23 kg) per bag. A $1000 face value bag of 40% halves contains 295 troy ounces of pure silver. A $1000 face value bag of uncirculated 90% silver coins contains 723.38 troy ounces of pure silver; and a $1000 face value bag of circulated 90% silver coins contains 715 troy ounces of pure silver. The reason the circulated coins weigh slightly less is because a slight amount of silver has been lost from each coin due to circulation wear. I recommend the circulated coins because they can be purchased at very near the spot price of silver, giving you the most silver for your money. You can also purchase these coins in smaller quantities, by the $10 face value roll, for example.

Where Should You Buy Your Bullion?

You can easily find your local coin and bullion dealers by checking your phone book. Whether you are buying or selling, it pays big to check around and compare the prices of the various dealers in your area. You may find great differences depending on the needs of the dealers at any given time. For example, if they are overstocked in the item that you are offering they will not be willing to pay you as much. So get prices from all the dealers in your area before you buy or sell anything. Like all businesses dealers are in business to make money, and no one (other than the government) can make money by breaking even. To meet their expenses and make a profit, dealers have to mark up everything that they sell, and discount everything that they buy. You will always pay more than the spot price for bullion when you buy from a dealer and you will always be paid less than the spot price when you sell to them. The percentage varies from dealer to dealer which is another reason why you should shop around before making any transaction. But fortunately there is now a way that you can avoid the dealer's fee.

You can avoid the "middle man" and his or her fees by dealing directly with the public through online auction sites like eBay. Prior to the internet it was very difficult to find individual sellers and buyers other than dealers. Today, dealing directly with the public online is the usual way of conducting business. In fact, many dealers have found that to survive they must also conduct some of their business online. Private individuals and dealers alike are using the internet to make bullion transactions creating a more level playing field for everyone. Shipping and insurance charges will apply to most online transactions, but these are more than made up for by the elimination of the middle man's exorbitant fees. This increase in competition has forced online dealers to lower their prices, but there is also less overhead for them to pay so they can afford to do it. You would think that the increased competition would also come into play when it comes time for you to sell your bullion online, but this is offset by the vastly increased customer base. Buying and selling coins and bullion online is a win-win situation for everyone involved.

For the sake of completeness, I should mention that in addition to the auction sites there are other good places to buy bullion online. You should explore as many as possible to insure that you are getting your best deal. The Bullion Direct Nucleo Exchange is another good site where you can buy and sell bullion. If you want they will also store it for you, but when times are uncertain I recommend that you take physical possession of your precious metals. Any reputable dealer, like the Northwest Territorial Mint, will not only sell bullion to you, but will buy it back, paying a fair price, as well.

Buying Silver at Estate Sales

There is one other excellent place to buy silver that I recommend if you have the time and the inclination to go "treasure hunting" and that is estate sales. An estate sale occurs when an individual dies leaving an estate that the surviving family wishes to liquefy, preferring cash over the individual's personal belongings. Estate sales are usually fixed price cash and carry sales handled by professional services and conducted in the deceased individual's home on a weekend. The usual practice is to reduce the prices on the last day of the two day sale, with most estate services cutting the prices of most items in half on the last day of the sale, usually a Sunday. Generally everything in the house is for sale, from kitchen spices to the living room furniture. There is no end to the items that can be purchased at an estate sale. The price is pennies on the dollar and there is no sales tax! Check the classifieds section of your local newspaper, or the online version of your local newspaper, to find the estate sales in your area. Once you have the date, time and address, you can use an online map service like mapquest.com to print a map to the location. By carefully organizing our route, mapping the shortest route from one estate sale to the next, we are able to visit 10 to 15 different estates sales every weekend. We pack a picnic lunch and make it our weekend outing thoroughly enjoying the "thrill of the hunt."

By visiting estate sales we have been able to greatly increase our standard of living by purchasing almost everything that we buy paying pennies on the dollar and avoiding sales taxes. We have even been able to buy fully 90% or more of our survival items at estate sales (including a lot of canned foods.) But just as importantly, I have managed to buy a lot of sterling silver at prices much lower than the spot price of silver. In fact, it has not been unusual for me to purchase sterling silver items at half their melt value! Often I can buy items on a Saturday or Sunday that I could turn around and sell on eBay the following week—doubling my money! But I prefer to hold onto as much silver as I can because I believe that the price of silver is going to soar with the continued decline of fiat currencies, and I am hoping in time to increase my investment tenfold. In addition, I am hoarding silver that I may be able to use as money or barter during any economic collapse that may be in our future.

There are a couple of things that you should be aware of before you rush out to buy all the sterling that you can get your hands on. For one thing, remember that I am not recommending that you purchase sterling silver at melt value, or spot price—at least not for an investment. If you want the item for your personal use and enjoyment then paying melt value is a very good deal and an investment as well. But if you are going to pay melt value for your silver investments you should buy rounds, bars or coins, due to their greater convenience and liquidity. I am recommended sterling as an investment when you can purchase it below its melt value. This is often the case at estate sales but it isn't always. I come across many sterling items at estate sales that I pass on simply because the price is too high. (I will frequently put in a bid for the item, offering slightly more than half its melt value, or I might return the next day to see if I can purchase it at a discounted price.)

The other thing is to make sure that you are buying sterling silver. Most silver items that you find at estate sales will be silver plated. These will have practically no silver value because they consist mostly of a base metal, like copper, with an extremely thin layer of silver covering it. Avoid silver plated items, unless of course it is something that you want for your personal use. Never buy a silver-plated item as an investment (unless you know for sure that you are buying a valuable antique.)

Sterling mark

Sterling silver is always marked as sterling. It will either be stamped with the word "sterling" on the bottom (as shown in my magnifying glass above), or by its equivalent "925" (as seen on the backs of the earrings below.)

925 sterling mark

By definition sterling silver is 92.5% pure silver, or has a fineness of .925, which is abbreviated as 925 without the decimal. This is equivalent to saying that 925 parts out of 1000 are pure silver.

Sterling mark

Tableware, such as the baby fork shown above, and larger items are usually stamped with the word "sterling," while jewelry is usually stamped with "925," but the two can be used interchangeably. It is more difficult to buy jewelry below melt value because there is a lot of workmanship that goes into making it and there is a high demand for jewelry, so it will nearly always command a high premium. But opportunities occasionally arise where you can buy jewelry at spot or below so keep your eyes open.

Sterling silver flatware

Primarily you will be looking for larger items made out of sterling silver, such as flatware (like that shown above), tea sets, bowls, trays, etc., because these are the items that you will sometimes be able to purchase below melt value or spot, especially if you go to the sale on the last day when prices are generally reduced by as much as 50%. Each piece of sterling will be clearly stamped with "sterling" on the back or bottom. (There is an exception: Years ago some items were made out of "coin silver" which, just like old U.S. silver coins, is 90% silver. These are usually stamped with the word "coin.") If it does not say "sterling," "925" or "coin" then always assume that it is silver plated. The two photographs below show a variety of sterling items acquired from estate sales. (Note: For safety, since I have become a high-profile survivalist writer, I no longer store precious metals in or near my home. Your decision to do so will depend on your personal preferences and circumstances.)

Sterling silver

Sterling holoware

It will obviously help to have a scale to weigh the sterling items that you come across. I carry an inexpensive but highly accurate battery-operated electronic digital scale the size of a pocket calculator that easily fits in my shirt pocket. It allows me to weigh the item in either grams, regular (avoirdupois) ounces or troy ounces. I weigh items in troy ounces because it makes my calculations easier. (The spot price of silver is always reported per troy ounce of pure metal.) Remembering that sterling is 92.5% pure silver, it is an easy matter to multiply the weight of the item in troy ounces by 92.5% or .925 to get the pure silver content. This is multiplied by the current spot price to determine the item's actual silver value or "melt value"—the price you would get if you were to melt it down and sell it at the current spot price. (But don't worry, you will never have to melt it.)

Digital pocket scale

My pocket digital scale is shown above with an unweighted (pure sterling) salt shaker weighing about 2.1 troy ounces. Since sterling is 92.5% pure silver I can simply multiply 2.1 x .925 to determine the troy ounces of pure silver (1.94 ozt.) Then I can multiply 1.94 by today's spot price to determine the exact melt value or spot price for this item. For example, if today's spot price is $13.45, I multiply 13.45 x 1.94 to determine that this sterling salt shaker has a melt value of about $26.00.

If you use a scale that measures regular (avoirdupois) ounces you must remember to convert the regular ounces into troy ounces before you compute its melt value. A regular or avoirdupois ounce is equal to .91 troy ounces. So to determine the melt value you would multiply its weight in regular ounces by .91 x .925 by the current spot price of silver. (As a shortcut you could simply multiply its weight in regular ounces by .84, the product of .91 x .925, and then by the spot price.) Something else you should know is that while a regular (avoirdupois) pound consists of 16 regular ounces, a troy pound consists of 12 troy ounces. People rarely report the weight in troy pounds, but this could be important to know if you ever see an item advertised on a site such as eBay with its weight given only in troy pounds. It would be easy to make the mistake of multiplying the troy pounds by 16 to get the troy ounces, but your result would be terribly inaccurate. You would need to multiply the troy pounds by 12 to get the correct number of troy ounces.

Another thing you should be aware of before buying an item stamped as sterling is whether or not the item is pure sterling or has a weighted bottom or is filled with cement for reinforcement. It is easy to tell the difference. A weighted item will be stamped "sterling" on the bottom but it will also be stamped with the words "weighted" or "reinforced" or both. The important thing to keep in mind is that the total weight of weighted or reinforced items is made up mostly of the weight or the reinforcement and not the sterling.
It is common to find candelabras and compotes with weighted bottoms and reinforced stems. If you were to remove the sterling from the cement used to fill and reinforce it you would find that the sterling makes up only about 8% of the item's total weight. Weighted compotes are a little better with the sterling making up closer to 25% of the item's total weight. Of course you will sometimes find candelabras and compotes made out of pure sterling, but usually these items are weighted and reinforced. Don't worry because you can easily tell by looking at the bottom. Other items like salt shakers are also sometimes found with a weighted bottom, while others (like the one shown on my digital scale above) are pure sterling. The important thing to remember is to look, and to make the correct estimate of the item's actual silver content. Sterling flatware and most hollowware, including bowls, saucers, plates, gravy boats and just about every other sterling item that you will find at an estate sale, are almost always pure sterling. An important exception is the dinner knives that come in flatware sets. The knives have stainless steel blades and hollow sterling handles filled with reinforcing cement. The sterling content of the knives is negligible, so when computing the sterling content of flatware sets always exclude the knives. Obviously items made out of pure sterling are more desirable than the weighted and reinforced items because there is no guesswork as to their value.

I have stated that silver and other precious metals are the only real money. But are items made out of sterling, like flatware and hollowware, really money? In his excellent book, What Has Government Done to Our Money?, the great economists Murray N. Rothbard states,

"Since the commodity is the money, it follows that the entire stock of the metal, so long as it is available to man, constitutes the world's stock of money. It makes no real difference what shape any of the metal is at any time. If iron is the money, then all the iron is money, whether it is in the form of bars, chunks, or embodied in specialized machinery. Gold has been traded as money in the raw form of nuggets, as gold dust in sacks, and even as jewelry. It should not be surprising that gold, or other money, can be traded in many forms, since their important feature is their weight. It is true, however, that some shapes are often more convenient than others." —Murray N. Rothbard

According to Rothbard, all silver, regardless of its form, is money. Liquidity, of course, is another matter. You can not walk into your local grocery store and buy a loaf of bread with a sterling spoon. If your money is in the form of sterling, or even in silver coins, you will have to undergo the inconvenience of taking it to a dealer, or selling it through some other venue, to convert it into a form of exchange that is acceptable at the store where you wish to spend it. Cash is always the most liquid form of exchange. Even though U.S. silver coins are only 90% pure silver, while sterling is 92.5% pure, due to their convenience and desirability silver coins will probably always be more liquid than sterling. The inconvenience of having to exchange your silver for cash before you spend it is a disadvantage of storing your wealth in silver. But in our current economic environment the advantages, I believe, far outweigh the disadvantages. As the fiat currencies continue to lose their spending power due to inflation, your silver will maintain or increase its spending power. When the currency collapses (the fate, remember, of all fiat currencies) then you will lose all of your money if it is in dollars, while you will retain your wealth, and perhaps even grow richer, if your wealth is preserved in the form of real money—like silver.

In Conclusion: Watch these important videos:

Hyperinflation Nation (A Documentary in Three Parts)

Action Step 21: Money Check Lists

Below are sample "GET" and "DO" lists for preparing for your money needs during an emergency. Use these lists to help you formulate your own check lists using the appropriate page in your Action Planner. Add additional items as you think of them:

Printer Friendly List Printer Friendly List
    Money "GET" Check List:
  1. [  ] Get silver!
  2. [  ] Multi-column ledger book for setting up a family budget (or a budget program for computer)
  3. [  ] Safe (or other secure hiding place for home storage of precious metals)
  4. [  ] Pocket scale
  5. [  ] Magnifying glass or jeweler's loop
  6. [  ] Etc.
    Money "DO" Check List:
  1. [  ] Put emergency cash in emergency stash.
  2. [  ] Put emergency cash in bug out bags.
  3. [  ] Put emergency cash in car emergency kits.
  4. [  ] Visit local coin and bullion dealers.
  5. [  ] Check online auctions sites like eBay for precious metals.
  6. [  ] Check estate sales for sterling silver and other precious metals.
  7. [  ] Set up a written family budget and stick with it.
  8. [  ] Pay off all debts and don't use credit anymore (except perhaps for large necessities such as your home.)
  9. [  ] Move 20% (or more) of savings and investment funds into precious metals and take physical possession of them.
  10. [  ] Keep abreast of the markets by listening to the weekly Financial Sense Newshour at Financial Sense Online.
  11. [  ] Etc.
Additional Survivalist Resources

Recommended Reading:

Recommended Products:

“Survival Doc” was Featured in The Learning Channel's 1-Hour Special, "Livin' for the Apocalypse" Click Here for the Part About Precious Metals.

Additional Survivalist Resources

Take a stand against Socialized Medicine
Natural Health School .com
by taking responsibility for your own Health Care!


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