What Happens To Gold And Silver Next? Look Out Below?

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Cash and precious metals? Their role after a collapse.




A person recently asked in Glcoktalk about the role of cash and precious metals after a collapse. There's still people that think there's no place for any of this. Paper money is just poor tinder and you can't eat gold. This was my reply trying to explain things better.

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So, country/location: Argentina Time: December 2001-January 2002. Extent: Sociopolitical collapse with anarchy on the street which lasted a few days across the entire country but situations of lawlessness and looting went on for months. President flees in a chopper, five other presidents take its place and then resign in a week. Economic situation: Halts completely. People didn't even invest in a can of paint to paint a fence (actually so that). Banks closed and ATMs ran dry. We'd default on our debt, the greatest default ever in history. The currency devaluates to 1 dollar = 1.4 pesos, a couple days later its 1 dollar 2 pesos, the 3 then 4. The official price tried to keep up with the black market price to avoid "cyclic" schemes where they bought dollars at the cheap "official" price and sold it around the corner at "street" prices. Some people made small fortunes this way.

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So, what does all this mean? That from a survival point of view you need one, maybe two months worth of expenses in cash in case ATMs run dry and bank holydays are declared. People will operate in cash mostly, and while some will still use plastic, specially DEBIT cards, don't count on it. Specially small stores, they will prefer cash and till this day 90% of small stores here operate with cash. (Oh, bribes are made in cash of course, but gold and silver are nice too)

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But soon enough that paper money starts loosing value as I explained above, and prices go up accordingly. The purchase value of your cash stash melting like snow in the Sahara desert and it depending on how bad it gets, it may go from buying you a car and a trunk full of supplies to buying you a candybar in a matter of weeks. It's important to stay aware, not have a ton of cash in the first place, but also use it up if you see this happening.
In my case we had dollars stashed not gold but the principle of how you'll be using it is the same. You sell whatever amount you need for that weeks expenses at the current exchange rate and you pay for whatever you must with the local, devaluated currency. Sometimes dealers are interested in getting the US dollars directly so you may do that if the exchange rate is fair. Its all about knowing the price of your currency or precious metals that day.

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During the worst days, the price would change within the hour, so its important to keep up to date. Even today, almost 10 years later, when you turn on the TV you're mostly waiting for the important day's news, maybe weather, traffic, and dollar-peso price.
That's exactly what you'll be doing with your gold or silver after an economic collapse. Sell what you need to get by, maybe if you have a specific purchase going on the dealer would give you a discount if you deal directly with the precious metal.
It doesn't matter if laws are made to try to control this, there's always going to be a black market, and the more ridiculous the laws get, the worst it gets, the black market becomes stronger.

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In the case of Argentina it worked out the following way:
Knowing that our peso currency was weak, people saved in dollars, both cash stashed in home and USd accounts in banks. Back then the currency exchange rate was 1 to 1, so it made sense to save up on the much more reliable Usd than the unstable national currency. Besides, who were we kidding? One dollar equals one peso with our country's track record of hyperinflation and devaluation? As soon as people saved up a bit of money, they turned it to USD and saved it in the bank. When the economy collapsed people rushed to the banks to close their accounts in USd, since all of a sudden those dollars where worth 3 pesos, then 4 the following day. The banks froze everyone's accounts and closed their doors. Eventually going against the law and constitution they converted people's accounts in dollars to pesos at a 1,4 exchange rate. Given that everything had gone up in price indirectly proportional to how the peso was being devaluated, you ended up loosing about 60% of your savings. Just as the peso went from 1:1 to 1:4, prices had suddenly gone up 300% or more, somewhat keeping up with devaluation.

After the economy collapsed and people had to get by as best as they could what you did was again, save up little by little and convert your money to USD or Euros as soon as possible, and only digging into your cash stash if you had to. As years went by and learning from what happened with banks during the collapse, a lot of wealthy people stored the physical cash, mostly USD, Euros and gold, in bank safe deposit boxes. Eventually the word got around: Money was again in the banks, but not in the accounts! It got to a point where gov. officials wanted to start opening safe boxes so as to see who was hiding physical money and precious metals. I suppose they never went ahead with that idea because many politicians had they money hidden that way themselves!


If something like that ever happens to USA and the dollar goes through a process of devaluation, Swiss Francs will protect most of your purchasing value. In a more extreme case where the dollar devaluates harder or fully collapses, then the SF may get hit hard, in which case precious metals would be the safest haven for your savings.