saving my silver for a rainy rest of my life?

[billionaire]

Hey theres been some talk about the US dollar going down in 10-20 years on the internet and some other places. I was just wondering if any of you guys believed this. If so the media stuff said people were gonna need to use silver and other metals for currency. I might need to hit up the banks soon and get a lot.

 

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[Diggin-N-Dumps]

Well Im sure the Dollar in this country will never go up. But if you are wanting to CRH to try and get rich, its not gonna happening quickly. But if you have the mind set of doing it as a hobby, it will all add up

 

[Brush64]

The value of the dollar has been going down for decades...this is nothing new. And as long as 'helicopter Ben' continues to print more fiat currency like there's not tomorrow...well, then the dollar will continue to decrease in value. This is exactly why I have invested in metals and will continue to CRH.

 

[NjStacker22]

The fall out of the US dollar may certainly happen in my lifetime. When it does, it will obviously no longer be the worlds reserve currency. This is when precious metals will pack a serious punch.

 

[TheMcs]

I look at it from two perspectives;
1 - right now silver has a better return than a measly savings account. It's a bit more historically stable than many other forms of investment. Any solid portfolio should include PMs.
2 - If SHTF or a larger black swan event occurs, those PMs are going to be valuable as currency. However, there is the possibility in a true end of days scenario that PMs will be cast aside in favor of actual barter goods. I don't see that prevailing as our mindset has PMs ingrained as things of value.

 

[jerseyben]

Hey theres been some talk about the US dollar going down in 10-20 years on the internet and some other places. I was just wondering if any of you guys believed this. If so the media stuff said people were gonna need to use silver and other metals for currency. I might need to hit up the banks soon and get a lot.

Listen... I know in some previous post you indicated you are a young kid. I have a helpful message for you and others out there.

Be careful about what you hear and read. Everyone has an opinion, especially when it comes to politics and the economy. If some topic comes up that interests you, the best thing you can do is to educate yourself about that topic. Consider your sources and make sure you understand if what you are hearing or reading is factual or just someone's opinion. Take the information you gathered and form your own opinion on the subject. That way you don't have to rely on other people's (often horribly wrong) opinions. Good luck out there...

 

[quietprofessional]

It is only when the worst happens that we realize what should have been done. I think that even the people who acquire PMs randomly would be better off in that kind of event. The total fall of the dollar is a catastrophic event. Thus the amount of prepairedness has to equal that event to come out on top. Just a thought.

 

[NjStacker22]

Catastrophic could potentially be an understatement if the dollar dropped out.

 

[Generic_Lad]

If you look at every currency that has not been backed up by a commodity, it dies in hyperinflation.

The first experiments in fiat currency occurred in about 1200 AD during the reign of the Song Dynasty in China. Although it started off being "fully convertible" to gold, silver and silk, soon they were printing more notes than they had commodities to back up. Once that was realized, merchants stopped accepting the notes and they quickly became worthless.

In the aftermath of the American War of Independence, the Continental Congress issued paper money that ended up not being backed by anything. Hyperinflation went rampant and a few short years later the bills were worthless.

During the American Civil War, the Confederates, facing a shortage of gold and silver bullion, issued paper money with a promise to repay when a peace agreement was signed with the Union. As supplies ran out, the CSA started printing higher and higher denominations that they could never pay back in real money. The CSA notes became worthless.

After Germany's defeat in WWI, the leading German economists of the day removed the gold standard from the German mark and had the "Papiermark" to pay its war debts. Since the war took a huge toll of Germany, money was printed left and right and things that used to cost a fourth of a mark, ended up costing 5 marks, then 50 marks, then 5,000 marks, then 500,000 marks, then 5 million marks, then 5 billion marks, etc. Savings held in marks virtually evaporated overnight. Papiermarks were burned because they were cheaper than firewood. All the while Germany's economists stated that the problem was that Germany was suffering from DEflation and that more money was the answer! Those who saved money in the form of physical bullion (gold or silver coins) ended up more or less unscathed. Urban legends include that those who had saved even a small amount of gold were able to buy property and land at very cheap prices. One famous tale is the tale of a bellhop at a German hotel who received a gold coin as a tip, he kept it and ended up buying the entire hotel with it! Granted, I don't know of any reliable sources that tell of it, so it could just be a myth.

The German mark stabilized when they returned to the gold standard with the Reichsmark.

To understand why the US dollar hasn't collapsed yet, you need to know a bit of the history of the dollar.

Prior to the crime of '33, the dollar was equal to 1/20.67 of an ounce of pure gold, essentially making 1 ounce be worth about $20. So a $20 gold piece (double eagle) would contain about 1 troy ounce of gold. In 1933 this all changed when FDR made an executive order that made it forbidden to own gold, the dollar also became devalued with it theoretically worth 1/35 of a troy ounce, however individuals could not redeem their gold certificates and had to turn them and their gold coins to the government who in turn got to profit from this mass theft of wealth. (because the dollar was worth much less and their contracts were denominated in dollars because gold-clauses (clauses in contracts that said that you could get paid in dollars or gold bullion at the rate of 1/20.67 an ounce of gold) were unenforceable after 1933)

After WWII, most of the world's countries were part of what was known as the "Bretton Woods System" in this system, rather than holding gold reserves directly, countries would instead hold US dollars, which in turn were (theoretically) backed up by 1/35 of a troy ounce for each dollar. Individuals could not redeem their dollars for gold, but countries had a right to, however it was generally agreed that they wouldn't ever demand physical delivery of gold because they wanted to appear to trust the new superpower.

The Vietnam War changed all that though, the US simply could not afford to pay for it, so they did what governments do and print up more banknotes than they had gold to back up, since few countries ever redeemed their paper dollars in gold it seemed like it would be a foolproof plan. However, European countries knew that the US was lying and so countries such as France and Switzerland began to redeem their dollars for gold. Since the US did not have full gold reserves to cover all the dollars they had printed, Richard Nixon "closed the gold window" in 1971 meaning that he stopped allowing countries to redeem paper dollars for gold. This severed the last link to gold and so the dollar was pure fiat currency.

However, the wheels of bureaucracy are slow to turn and many international organizations require transactions to be done in US dollars. For example, OPEC trades solely in US dollars. Because of this, the US dollar remains in use despite the fact it is worthless.

In recent memory the currencies of Zimbabwe, Georgia, Peru, Argentina, Mexico, Ukraine, Bulgaria, Moldova, Tajikistan, Armenia, Bosnia, the Congo, Nicaragua, Russia, Uruguay, and a whole host of other countries have been rendered worthless due to inflation and had to be superseded by a brand new currency.

There is nothing stopping the US dollar from becoming the next Zimbabwean dollar, or the next Papiermark. The powers that the Federal Reserve have are the exact same powers as the Reserve Bank of Zimbabwe. Holding real, physical and tangible assets is very prudent. No, I don't think that gold will skyrocket or that we will have $500 silver tomorrow (unless the dollar collapses overnight) but the dollar -will- collapse. There has been a 100% track record of fiat currencies collapsing, the US is not immune to the effects of economics, nor was the Roman empire, nor was post-WWI Germany. This isn't something to panic about or be scared about, this isn't some apocalyptic scenario, its just part of history. Empires are born, they decline and eventually they die. Will the US collapse tomorrow? Its unlikely, Rome wasn't built in a day nor did it collapse in a day.

What does this mean for the average American? Diversify. Hold foreign stocks that aren't tied to the US dollar, consider opening bank accounts outside of the US (not for tax purposes, but most foreign banks offer MUCH higher interest rates on low-risk investments like savings accounts and CDs and are much more stable than US banks), perhaps even looking at getting a second passport and having an "escape" to a different country during the chaos that follows a hyper-inflationary event.

The important thing is to be rational and don't let emotions overtake your judgement. This isn't the apocalypse but an event already played out by many countries in the world.

 

[quietprofessional]

That was a very long response for a conclusion asking for rational. Keep in mind the standard of living following hyperinflation. Have you ever been to Zimbabwe? Or any other third world country? Plan for the worst hope for the best. Trust in your planning brings self confidence individually. Then it becomes easier to tackle the larger issue of the "dollar".

 

[NjStacker22]

I like the idea of obtaining a second passport to escape the chaos. However, the issue is how do I bring my metals with me when escaping?

Also, I would imagine that obtaining this would be very difficult.

I would love to hear any suggestions.

 

[Generic_Lad]

Less-developed countries allow you to have in some cases a much higher standard of living for much less, provided you have an external source of income because in general land/housing is much cheaper, food is much cheaper in many cases, and labor is much, much, much cheaper. Someone in the middle-class in the US could easily afford to hire a maid in Mexico or much of Latin America. The big problem is, if you don't have an external source of income, your quality of life is going to diminish fast unless you can start up a successful business. Of course in general, technology is more expensive (internet/cell service costs more and you generally get less) and high-quality goods will have to be imported.

As for a second passport, it just depends on what you want and how much you are willing to spend.

The easiest although not the cheapest route would be a "Citizenship by Investment" such as through St. Kitts and Nevis, I believe the cost is either you donate $250,000 to a government-sponsored charity there or you can buy $400,000 worth in real estate. And I believe that St. Kitts is pretty good for visa-free travel. There's also Dominica which is cheaper (I think its like $75,000?) but there's not as many places to go visa-free. I think those are the only 2 countries where you can buy citizenship/a second passport. I'd beware of companies who tell you otherwise.

Its possible to obtain citizenship from decent in several EU countries such as Ireland and also countries such as New Zealand and Australia. If you are Jewish I believe you can get citizenship/a second passport through Israel. However, I think as an Israeli citizen you can be drafted and have additional tax burdens.

It is very important to do your research when looking at second passports because there are a number of con-men out there who want to take your $$$ and leave you with a worthless piece of paper that isn't accepted. For example, the World Passport which isn't accepted by the US, the EU, Japan and nearly every other country out there except for a couple in Africa. Also, its important to know what liabilities having a second-citizenship can have because it can increase your taxes or subject you to having to serve in the military.

 

[NjStacker22]

Thank you for the reply.

I have spent some time in Argentina and with out a doubt in my mind, I could happily relocate there tomorrow. Obtaining citizenship is an entirely different story in itself but just based off the lifestyle, cost of living, etc. it would be a great place to be.

 

[quietprofessional]

Generic Lad you talk as if we would be "allowed" to use these luxuries after an event like this. I believe you are comparing this situation to countries who have been money poor for a long time. After the dust settles if you will. Sir I can agree to disagree.

HH

 

[CoinFetcher]

What's the difference between being poor, and being 150000 dollars in debt? I think out debt situation is unique, and makes us vulnerable.

Sure, we are country #1, we live in a VERY nationalistic society, we are raised to believe the mantras. I, however, can't get over our rampant imperialism, dumbed education system, and general waste. It's vein to even think we are #1. We seem to be falling fast. Wake up, and smell chicory root!

 

[NjStacker22]

What's the difference between being poor, and being 150000 dollars in debt? I think out debt situation is unique, and makes us vulnerable.

Sure, we are country #1, we live in a VERY nationalistic society, we are raised to believe the mantras. I, however, can't get over our rampant imperialism, dumbed education system, and general waste. It's vein to even think we are #1. We seem to be falling fast. Wake up, and smell chicory root!

I cannot 'like' from my phone... But you get 1 like from me on this comment!

 

[billionaire]

If you look at every currency that has not been backed up by a commodity, it dies in hyperinflation.

The first experiments in fiat currency occurred in about 1200 AD during the reign of the Song Dynasty in China. Although it started off being "fully convertible" to gold, silver and silk, soon they were printing more notes than they had commodities to back up. Once that was realized, merchants stopped accepting the notes and they quickly became worthless.

In the aftermath of the American War of Independence, the Continental Congress issued paper money that ended up not being backed by anything. Hyperinflation went rampant and a few short years later the bills were worthless.

During the American Civil War, the Confederates, facing a shortage of gold and silver bullion, issued paper money with a promise to repay when a peace agreement was signed with the Union. As supplies ran out, the CSA started printing higher and higher denominations that they could never pay back in real money. The CSA notes became worthless.

After Germany's defeat in WWI, the leading German economists of the day removed the gold standard from the German mark and had the "Papiermark" to pay its war debts. Since the war took a huge toll of Germany, money was printed left and right and things that used to cost a fourth of a mark, ended up costing 5 marks, then 50 marks, then 5,000 marks, then 500,000 marks, then 5 million marks, then 5 billion marks, etc. Savings held in marks virtually evaporated overnight. Papiermarks were burned because they were cheaper than firewood. All the while Germany's economists stated that the problem was that Germany was suffering from DEflation and that more money was the answer! Those who saved money in the form of physical bullion (gold or silver coins) ended up more or less unscathed. Urban legends include that those who had saved even a small amount of gold were able to buy property and land at very cheap prices. One famous tale is the tale of a bellhop at a German hotel who received a gold coin as a tip, he kept it and ended up buying the entire hotel with it! Granted, I don't know of any reliable sources that tell of it, so it could just be a myth.

The German mark stabilized when they returned to the gold standard with the Reichsmark.

To understand why the US dollar hasn't collapsed yet, you need to know a bit of the history of the dollar.

Prior to the crime of '33, the dollar was equal to 1/20.67 of an ounce of pure gold, essentially making 1 ounce be worth about $20. So a $20 gold piece (double eagle) would contain about 1 troy ounce of gold. In 1933 this all changed when FDR made an executive order that made it forbidden to own gold, the dollar also became devalued with it theoretically worth 1/35 of a troy ounce, however individuals could not redeem their gold certificates and had to turn them and their gold coins to the government who in turn got to profit from this mass theft of wealth. (because the dollar was worth much less and their contracts were denominated in dollars because gold-clauses (clauses in contracts that said that you could get paid in dollars or gold bullion at the rate of 1/20.67 an ounce of gold) were unenforceable after 1933)

After WWII, most of the world's countries were part of what was known as the "Bretton Woods System" in this system, rather than holding gold reserves directly, countries would instead hold US dollars, which in turn were (theoretically) backed up by 1/35 of a troy ounce for each dollar. Individuals could not redeem their dollars for gold, but countries had a right to, however it was generally agreed that they wouldn't ever demand physical delivery of gold because they wanted to appear to trust the new superpower.

The Vietnam War changed all that though, the US simply could not afford to pay for it, so they did what governments do and print up more banknotes than they had gold to back up, since few countries ever redeemed their paper dollars in gold it seemed like it would be a foolproof plan. However, European countries knew that the US was lying and so countries such as France and Switzerland began to redeem their dollars for gold. Since the US did not have full gold reserves to cover all the dollars they had printed, Richard Nixon "closed the gold window" in 1971 meaning that he stopped allowing countries to redeem paper dollars for gold. This severed the last link to gold and so the dollar was pure fiat currency.

However, the wheels of bureaucracy are slow to turn and many international organizations require transactions to be done in US dollars. For example, OPEC trades solely in US dollars. Because of this, the US dollar remains in use despite the fact it is worthless.

In recent memory the currencies of Zimbabwe, Georgia, Peru, Argentina, Mexico, Ukraine, Bulgaria, Moldova, Tajikistan, Armenia, Bosnia, the Congo, Nicaragua, Russia, Uruguay, and a whole host of other countries have been rendered worthless due to inflation and had to be superseded by a brand new currency.

There is nothing stopping the US dollar from becoming the next Zimbabwean dollar, or the next Papiermark. The powers that the Federal Reserve have are the exact same powers as the Reserve Bank of Zimbabwe. Holding real, physical and tangible assets is very prudent. No, I don't think that gold will skyrocket or that we will have $500 silver tomorrow (unless the dollar collapses overnight) but the dollar -will- collapse. There has been a 100% track record of fiat currencies collapsing, the US is not immune to the effects of economics, nor was the Roman empire, nor was post-WWI Germany. This isn't something to panic about or be scared about, this isn't some apocalyptic scenario, its just part of history. Empires are born, they decline and eventually they die. Will the US collapse tomorrow? Its unlikely, Rome wasn't built in a day nor did it collapse in a day.

What does this mean for the average American? Diversify. Hold foreign stocks that aren't tied to the US dollar, consider opening bank accounts outside of the US (not for tax purposes, but most foreign banks offer MUCH higher interest rates on low-risk investments like savings accounts and CDs and are much more stable than US banks), perhaps even looking at getting a second passport and having an "escape" to a different country during the chaos that follows a hyper-inflationary event.

The important thing is to be rational and don't let emotions overtake your judgement. This isn't the apocalypse but an event already played out by many countries in the world.

Wow can you put all of this in a quick reply?

 

[FormerTeller]

All of that being said, the US still holds the largest gold reserves of any one country, and more gold reserves than any other entity besides the European Union. That should make it one of the last countries to go down in flames. If you really want to hedge against the dollar, a gold ETF (Exchange Traded Fund) is not a bad idea. GLD has more physical gold than most countries, including China and Switzerland.

Nothing wrong with holding physical PM's; personally, about 10% of my retirement funds are in physical PM's and ETF's. However, I strongly believe that hyperinflation in the US will not occur in my lifetime, if ever.

 

[FormerTeller]

There is nothing stopping the US dollar from becoming the next Zimbabwean dollar, or the next Papiermark. The powers that the Federal Reserve have are the exact same powers as the Reserve Bank of Zimbabwe. Holding real, physical and tangible assets is very prudent. No, I don't think that gold will skyrocket or that we will have $500 silver tomorrow (unless the dollar collapses overnight) but the dollar -will- collapse. There has been a 100% track record of fiat currencies collapsing, the US is not immune to the effects of economics, nor was the Roman empire, nor was post-WWI Germany. This isn't something to panic about or be scared about, this isn't some apocalyptic scenario, its just part of history. Empires are born, they decline and eventually they die. Will the US collapse tomorrow? Its unlikely, Rome wasn't built in a day nor did it collapse in a day.

I would argue that the US is no more likely to collapse than any other country that prints more currency than they hold gold reserves - that is, a LOT of them. Admittedly, I don't follow history quite as close as you do, but I would question when Zimbabwe and Germany's currencies were devalued, what was the ratio of their currency to their physical reserves? Personally, I don't see the US approaching that point anytime soon.

...consider opening bank accounts outside of the US (not for tax purposes, but most foreign banks offer MUCH higher interest rates on low-risk investments like savings accounts and CDs and are much more stable than US banks)

Not bad advice necessarily, but you always have to be aware of your investments wherever they are. Many US and European citizens held bank accounts in Iceland and Ireland, when the interest rates were in the double digits. When Iceland went belly up, those accounts became worthless.

When we were in Hong Kong last year, my wife wanted to open a savings account at one of the banks there, as the interest rates were much higher than in the US. However, you have to consider the costs of currency exchange fees when opening the account, potential tax liabilities (both in the foreign country and at home), currency exchange fees when you cash out, and the potential of the foreign currency devaluing in relationship to both the US Dollar as well as the rest of the world. You also need to consider how you will physically open the account and transfer the money, as well as judge the risks of the solvency of the particular bank, as well as the country in which you wish to invest. Ain't nothing easy about overseas accounts!

Regardless, if you have bank accounts overseas, or hold foreign currency or stocks, always keep informed of that country's economical and political situation.

 

[AdDicted2Ag]

Like it was stated before, I keep my finds and roughly ten percent of my savings in precious metals. I don't plan on selling anytime soon since it doesn't look like the endless devaluation of our money will stop anytime soon. Also, like others have said, diversity is the best option.. Don't put all your eggs in one basket..