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The Fallacy of Gold & Silver

Longtime blog readers will know that I have long been a non-fan of gold as an investment or as a collapse strategy.  I base my opinion about gold (and silver) on several points which I think are often overlooked:
  • The gold standard has been gone for over 42 years (1971).  The first "adjustment" actually occurred in 1932, from $20 oz. to $35 oz., which significantly decreased the value of the dollar.
  • Since 1971, the "value of gold" has been highly manipulated. The recent massive drop is but one of hundreds of examples in the last 42 years of manipulation.
  • Gold bugs argue that real money "is gold". This was historically true.  It is not true anymore. What is true is what people use now and in the future.
  • Gold bugs argue that a return to the gold standard is essential. This is true, but it will not happen because fiat currency and fractional reserve banking are incredibly powerful tools that will not be given up by either the Federal Reserve or the federal government -- or any bank.  They make trillions of dollars off of these accounting techniques, virtually fabricating "money" out of thin air. It is extremely unlikely that this will be stopped (somehow).  All efforts to return to a gold standard have failed.
  • Money today is digital. Digital money is no more "real" than fiat currency, but it is widely accepted in the form of bank transfers, wire transfers, credit cards, checks, loans and payments, all done by computer (ie, "digital money"). No real assets are transferred, it's just computerized accounting now. This too is extremely unlikely to ever "go away" or be replaced by the actual transfer of "real money". Transferring real money is problematic (slow, cumbersome, risky and outdated).  It's not important that you may object on moral grounds to this point, what's important here is what is actually occurring and what is likely to continue to occur.
  • Nobody will accept gold as a form of payment - not even a bank.  You cannot buy food, fuel, land, cars or any tangible asset with gold or silver. You cannot pay off a loan with gold. You cannot even deposit your gold in your bank as a "deposit".
  • In order to do any of the above, you must first convert gold or silver into cash, but it's harder to do than most realize. You must find a coin dealer / gold seller or a pawn shop and exchange the gold coins / bullion for a check (they won't even pay you in cash anymore). Your gold is now "fiat currency", the only kind of money that can actually be "spent" these days.
  • Gold and silver must be "timed" correctly to realize a profit (higher price) than what you paid.  The market is very volatile and it is not always easy or convenient to do this (you may have to wait a long time, ie., years, or accept a loss if you're in a hurry to spend your gold).
  • Gold dealers charge you a premium for gold and silver coins and bullion.  Essentially, you're always "paying more than what it is worth". To realize a profit, it must then be sold for at least as much as what you paid.
  • Dealers and buyers are limited.  They are not ubiquitous. There are none in my area for example, I would have to drive at least 90 miles round trip to find one. There are many places in the United States where you simply cannot find any.
  • Gold and silver must always be converted into cash, a multi-step process, in order to "spend" on anything. This can take a bit of time, from a few hours of your time to a few weeks, depending on who you sell it to and how long it takes to get paid (mail companies can be quite slow).
  • Gold and silver have no practical value (actual usefulness) to the investor. You can't use it for anything but jewelery and some electronics applications, but in reality, even this is beyond the average investor.  You can't eat it, spend it readily, or put it into your gas tank. It won't grow food, it won't multiply, it won't do anything.
  • The value of gold and silver is completely outside of your control.  Its value is "what they say it is", ie., the "market", which has long been known to manipulate the value of gold and silver.
  • From a practical standpoint, it's a poor vehicle for investors or those seeking to hold onto their wealth.
  • Inflation affects gold and silver just as much as it affects the dollar or the price of goods.  Since gold or silver must be converted into cash to spend, you are still paying the current inflated prices on whatever it is you are spending your gold-into-cash on.  You've actually saved nothing.  Nor have you "profited" anything either, even if you sold your gold at a higher price then you paid.  The cost of goods you may need have also gone up during the time you held your gold hoping for higher returns.
  • Investors hope that gold appreciates in value faster than other goods appreciate (or inflate) over the same length of time. Sometimes this does happens, sometimes it does not.
  • It makes more sense to avoid gold and silver altogether, and simply obtain (at today's lower price) the things that you need, versus having and holding gold and silver, going through the hassle of exchange for fiat currency, then buying what you needed all along.
  • Gold and silver has been confiscated during times of economic collapse. There are no guarantees at all that any gold or silver you have will be worth anything.  Confiscation usually means "at a set price" (which is not market prices, but far lower), with violators facing arrest and jail for refusing to relinquish their metal.  This has happened a number of times in history.
  • Inflation is often the claimed reason to invest in gold or silver. Inflation affects everything, including gold and silver. It also affects the goods you would be buying after converting your gold and silver into fiat currency.
  • Gold investors also fear a financial collapse. Yet if this did happen, gold would be nearly useless, as you would have find someone who still wanted gold (instead of food, fuel, or material goods for example).  And if there WAS a total collapse, what would you rather have?
  • Gold in a total collapse is also useless (money of all types will be useless).

What's better than gold?

A revealing video on what the average person thinks of gold: Gold Failures in the Real World

The revealing truth is - gold (and silver) have very little meaningful or practical "value" in the minds of most Americans. They don't recognize this item as being necessary or essential (at any price, even when they could have made a very large profit). As this video shows, you can't even give it away.

As a so-called "barter" item - it's actually useless since it is unrecognizable as having any real value. That perception of gold and value has changed dramatically from the days of old - when the gold standard was still valid. It is no longer valid today. Trading gold for food or gasoline or much of anything these days is very, very rare. The value of gold is almost entirely pure hype these days. It is an impractical, nearly non-useful way to store money. Don't plan on trading your gold for food - it's unlikely to happen.

The truth is, gold and silver are only "valuable" as long as the market says it has value, and at what price the market brings, and only as long as there even is a market to buy and sell this commodity. A financial collapse by no means guarantees a market for gold or silver (good or bad), it only means that fiat currency has either collapsed or inflated -- and so has everything else. Gold confiscation is certainly possible and it's happened many times before.  Even in a financial collapse, computers will still work (digital money, fractional reserve banking and fiat currency still exist). Gold will forever remain a secondary store of value for this reason. We would have to lose all the computers, and the Federal Reserve, and all the cash (fiat currency) before anyone could reasonably hope to see gold actually used as money again. This is extremely unlikely -- and if it did happen, you would STILL need to dump your gold to buy food, seeds, tools, ammunition, land, fuel and everything else you would need to survive at "market prices" which would probably be very poor. Gold would be basically useless in such a collapse.

Gold is only useful during "good times" - in other words (when it's safer to own and possess), where it's value might go up and you time your sale correctly. The value of gold might be up during collapse, but it actually trades at junk prices (junk jewelery prices) during a financial collapse.  This means it's drastically devalued when finally sold during a financial collapse - the most oft-cited reason to "invest" in gold promoters. Investors find out only then what it's really "worth" and having no other choice (they need to eat), they wind up taking tremendous losses.

Gold for "collapse" is a poor strategy all around. I've been asked often enough if I will accept gold or silver for food. The answer is no. Not now, not ever, because it's a massive headache all around. I can't use it, eat it, or spend it. I can't pay my suppliers with it, and they won't take it as payment either. Just like you, I have to get rid of it first before I can realize its current value.  I actually do not know anybody that runs a business that will take it as payment for anything. Doctors won't accept it, gas stations won't accept it, supermarkets won't accept it. "Buyers" (in good times and in bad) are limited to individuals who perceive gold as having value, knowing that they can still exchange this for fiat currency.  I'm no fan of fiat currency either - just aware that this is the defacto means of exchange throughout the world when it comes to buying and selling goods.

Countries and major investors invest in gold, which is an entirely different horse then private investors. They're manipulating the market and the price by this activity.  They can get away with this (despite being illegal) and the small investor is constantly trying to play catch-up and time his or her "buy and sell" activity to realize any profits or avoid significant losses. But notice that the value of gold or silver is the same everywhere (nationwide, even worldwide) which leaves YOU unable to take advantage of any local variability, an oft overlooked point. For example, real estate value is different depending upon location and region. Arizona desert land sells for less then ocean view waterfront. You have a choice of where to buy land and what you will pay -- you do NOT have a choice on how much your gold is worth or what you have to pay to obtain it, you pay market price - everywhere. You also have a choice to improve any land you may own. Build a house on it and it is worth more. Clean it up, plant some trees and it has greater value. There is nothing you can do to gold or silver to "improve" it's value, you just have to wait and see what the markets will do (to you).

Nobody "needs" gold or silver. It's a commodity like lead that you don't "need", except lead is actually a better investment (the kind that goes bang). Gold is a store of value in accordance to what the market will bear, nothing more. It is NOT a guarantee of anything, not even the value you paid for it.  Production costs of extracting and refining gold continue to go up, which is also why it goes up (and down) in value, but not always. A lot of gold's "value" is simply hype and perception (manipulation) which fluctuates all of the time. Since you can't eat it, use it or even spend it easily on anything, gold is really a bad idea for anyone who is seeking security in this world, financial or otherwise.

What you do need

Nobody "knows" what their money will be worth (even if it is gold or silver buried in the ground) or loaned to a bank (which is what your "deposit" really means, it's a loan to the bank, they now fully own your money and you get an IOU deposit slip).  Your 401(k), Social Security check or retirement account could be virtually worthless by the time you need to use them. Or they could be raided by the government or the corporate board, it's been known to happen.  Money of all types then becomes a problem of sorts. It's subject to theft, confiscation, devaluation and inflation. There is no guarantee that money of any type will remain valuable.

Money is used to buy the things you want and the things you need.  The things you need should always come first, and we all need the same things. These are the only things that have intrinsic value. They will remain valuable forever because they are always going to be essential and necessary as long as life exists on this planet.

Humans place "value" on a lot of unnecessary and wasteful things. They do this because they can (and of course, because it is profitable). During times of abundance, superfluous items become plentiful and popular.  Demand elevates prices. Competition tends to lower prices until the market is saturated. At a certain point, the minimal cost of goods is achieved and prices won't fall any farther -- until such time as demand completely bottoms out, then they'll give the things away to get rid of them.

This will never happen on the things you need versus the things you want, because essential needs are always in demand.  Needs do not diminish, they maintain or they increase, with population being the primary factor.  Gold or silver isn't a "need" and never has been. It's a important component in some applications (fabrication of electronics for example), but it's not a personal need. Billions upon billions of people have lived their entire lives without it.  Billions and billions more people will continue to live their entire lives without it (if we somehow survive climate collapse). But not a single one of them, now or in the future, will survive without meeting their essential needs; which are water, food, shelter, clothing, tolerable climate, heating / cooling, fuel (even if it's just wood), etc., are all examples of essential needs for human life.  Money, or even the representation of money, isn't one of them. Money is only a useful means of exchange, and in today worlds, fiat currency is the money people use.

I've already said I'm no fan of fiat currency, and I'm most definitely not. What I am a "fan" of is obtaining what my needs are, which are the same as yours, the same as every other human on this planet.

These needs are ubiquitous, common to all and in the modern world, "bought" with fiat currency.  This is a tragedy of epic proportions because it puts you, me, virtually everyone at the end of a very long line of mining, extraction, processing, packaging and production, with a global distribution system to support it all, every bit of it financed by fiat currency and fractional reserve banking.  Our essential needs are now being met and provided by others, which in point of fact, keep us all alive now.  All we have to do is slave away every day for their currency in order to "buy" from them the sustenance for our daily existence.

This is the tragedy, but I've only barely scratched the surface of how vast this tragedy really is. We also exchange our freedom, our liberty, our mobility and our quality of life as part of this dubious "deal" to "buy" our essential needs because we are no longer free to live as we please, go where we want or spend our time doing what we like. We are now chained to this treadmill existence, working in factories and cubicles, assembly lines and production processing, pushing paper, pencils and keyboards in a daily grind that robs us of our humanity, compassion and experience.  We are slaves, toiling away each day for our bread and porridge so that we can deposit our weekly tokens at the supermarket in an endless repetitive cycle of connedsumptive slavery. And every bit of this activity, every tiny slice of connedtribution that we make and contribute to this Ponzi scheme of trapped humanity helps reinforce the bars of our cage.

The longer we play this game of theirs, the more enslaved we will be. Our refusal to acknowledge our slavery is our own fault. Fiat money, fractional reserve banking and personal dependency are key components to our ongoing slavery. None of these mechanisms resolve any of our needs, they only increase our dependency to have our needs met by others, who see no wrong in what they feed us, where they house us or where they spend their obscene profits -- or those who they destroy in the process. Our continued participation in their schemes increases their destructive activities and ability to do even more damage to all of us. If you want to know why our world has "spun out of control", there you have it. We did it to ourselves.

The answer is the same as it always has been. The more control you have given (or allowed) of YOUR life to others, the less freedom you will have. The greater your dependency, the more "victim" you are - of their policy, prices, practices and procedures and all the terribly, terrifying evils that go with it. The more personal responsibility you abdicate, the more they will grab to try and control you even further. Repeated by hundreds of millions the world over and you wind up with entire nations of dependent, blind, incapacitated slaves, incapable of independent action, thought or deed, completely and totally dependent upon the corporate-slave-state to keep them alive, parroting patriotic phrases and accepting endless deceptions.  They know nothing else, and cannot even imagine a different world.

We don't really "need" these plantation owners at all and never did.  Just the opposite is true -- they need us to continue to provide their sustenance (slave labor and money) to support their Ponzi schemes and demands for total control and worldwide domination, which has come to mean endless resource wars and wide-spread planetary destruction.  Continuing to play this farcical game of theirs and we will NEVER gain any freedom, only the illusion of freedom. Remain their slaves and we will remain their paying victims.

What we need is to break away, completely and totally and relearn how to provide for ourselves the essentials in life that have always provided for our freedom. Reduce your dependency (and your participation) by any means possible. This is the essential core need that underlies everything else.