View Full Version : Gold & Reserve Currency Status

07-22-2013, 08:58 PM

This is a continuation of a discussion started "below the fold" in the extended section. The recent declines in physical gold inventories, Germany's request to repatriate their gold being delayed 7 years, and some mysterious price moves got me trying to connect some dots and try to understand what's going on.

What I've seen so far is concerning. The kind of thing that CNBC will do a special series on in a few years, to explain "how this happened".

I'm still looking for solid information for how to best prepare ones finances to see you through what might be "next". But that's where my thoughts are going with this thread.

07-23-2013, 09:09 AM

This is a "big picture" perspective of why the above information is very, very important. It may seem like we peons aren't affected by happens in those "rarified" circles of high finance... but sad, to say, we are: through the policies of Congress and the Fed; our retirement accounts, our small business incomes, savings and even social security/medicare.

For the US to have just competition for Reserve Currency Status - from China, and the other BRICs - while the dollar is this strong relative to other currencies - is to create a sense of false security:

in that, we won't see the cliff we're driving over because of the mirage that the dollar will never crash; will never lose it's important Reserve Currency Status. China has been amassing many tons of Gold Reserves; Russia has too. Turkey just had their hands smacked for trading gold for oil from Iran: because of the sanctions. That trade now gets laundered through Dubai. Russia has been selling petroleum resources for gold, as well.

Since all this stuff is beyond our control, I'm most interested in what we can do to best prepare ourselves. Some of it's the old mantras we all know: junk silver, PMs, stack the pantry, grow, preserve and eat your own food... and what I'm looking for is the "more". And it's time buy to buy Ferfal's book.

07-23-2013, 09:03 PM
I just watched an episode of the Real West on History Channel. It was about the Sioux and the encroachment of the Americans on their Bad Lands home in the late 1870s. The whites were mainly interested in the gold there. One of the Indian's quotes was that "we always knew about that yellow metal that makes white men crazy. We always left it alone because it wasn't good for anything."

The point is, gold is only worth something as long as people agree it's worth something. So its future value depends on how much S is really gunna HTF. It will be worthless if we have a complete breakdown in society, but will retain value if it merely comes to a deterioration of our country from our accustomed position of world leadership. ("We're going to fundamentally change America."...the only promise BO has kept.)

I'm not so worried about financial security as I am about food security. All the gold in the world won't buy food from an empty store.

07-24-2013, 10:59 AM
This isn't another "buy gold" thread. Silver's way more affordable and food a lot tastier - LOL.

This is going to be a "how to hang on to some of our own money" (and why) in the face of how it might be taken from us, when TSHTF at the US Treasury level.

07-25-2013, 11:30 AM
So we already know the food-water-fuel drills... how does one go about protecting one's income -- and whatever amount one has saved or is in a retirement account... if things really DO head south, in a hurry, in the US economy?

I think it starts with changing one's mindset... accepting the fact that "the game is rigged" and not in our favor. Then, instead of falling into negativity and helplessness about that - figuring out ways to work around that situation.

We will always need income. Whether we raise or make something to barter with, for things we don't have... or provide our services to someone else for money - or goods, in exchange. I can sew, make hooked rugs, paint portraits, raise herbs & veggies, build out of wood (and want to add metal to that), and bake well (cooking... I gotta be in the mood.) For instance. I've been buying bolts of basic fabrics to put back, patterns in multiple sizes, and just retrieved the hooked rug frame my grandpa made for grandma; my mom had a roll of burlap saved back for it... so I have that too. I'm not sure I have the hooks - but Grandpa made a hook from a large nail - grinding down the hook part and making a wood handle to fit easier in the hand. I'll probably do something similar with a large crochet hook.

It's been 5 years or so, since I made bridesmaids dresses for DIL's wedding. I haven't sewn much since. So when I went exploring online for fabric, I was astounded at the increase in prices. I made the decision to buy now -- because nothing is getting any cheaper. If I waited, it would cost more... so I reasoned, that since I could afford it with going into debt, that I was saving money or "investing" it, this way. But then, that requires dedicating storage space for it.

Investments and Savings are tricky, these days. You know by now, of course, that when you deposit money in a bank account, that it's legal for the bank to use that money any way they choose, right? They are only obligated to return your money to you, upon demand. But while it's deposited, if they choose to risk it on their own investments... this is legal. FDIC insurance applies to most consumer accounts, up to $250K. So, most people believe that this insurance protects their deposits. And when only a handful of small banks have issues, this is a safe assumption. If there is another large banking crisis, like '08, that turns into a dangerous assumption.

Note that when demanding large amounts (I've heard some people say as little as $5K), that SOME banks are now delaying delivery of your cash, by up to a few days. One way around that, is to have multiple accounts at different banks, so that with some work on your part, you can collect the sum total, without running into that withdrawal restriction. The other option, is to "pickle jar" your cash at home, and keep yourself "minimally banked".

Read up on what happened in Cyprus, when the banks froze consumer accounts - then, forced a "bail in" of those bigger banks through using customer deposits. Turns out this practice is being looked on favorably by the PTB, as an extraordinary technique in certain emergency circumstances. You of course, if you had an account there - were screwed - and had no recourse to recover those funds; it wasn't a "loan" to the bank that they are obligated to pay back. The legal sleight of hand, was calling those depositors: unsecured creditors.

The stock market is one the main things the financial MSM point to, to support the idea that we're in a recovery. You can, if you have the time and inclination, still make some money in the stock market. And what goes up can come down - in just a few hours. Be aware, that these "new record highs" are fueled by the FedReserve's QE. The QE program is supplying the credit liquidity for the large investors to make leveraged (credit-funded) trades. And the stock market is quite often subject to what they call, external shocks -- I call them, emotional reactions. For instance, if the middle east erupts into all out cross-country war -- people will sell their stock as fast as they can, to move to the last remaining "safe" asset: cash. (This morning's WSJ had an article on how people had sold the highest amount of bond mutual funds ever and moved to money market - cash - funds, yesterday.)

But if the shock is coming from the uncertainty of our own domestic situation - and you can pull any one of the headlines from this year or any of the Fed Gov scandals - if one of them grows bigger and adds more stress and fear into people's assessment of the future, well, it's a slightly different kind of problem. And if the unemployment picture does not improve with more full time (40 hr/week) breadwinner jobs - not the part-time service jobs - then, the tax base is going to shrink, putting more pressure on the Treasury to borrow... and... you know where this ends up, right? Same place as if you used borrowed money to secure another loan.

Gold & Silver have long been the recommendations for preparing for that situation. But the question is always: jeez... who can afford that? followed by: well how much is enough? Having actual cash on hand, is recommended for all kinds of situations - like evacuating for a hurricane or surviving in it's aftermath, with no power. Again the question is how much is enough? And what good is it, if inflation or a dollar collapse, severely diminishes the purchasing power? You can't eat it - people may not have any extra to sell - and the federal reserve notes may only be good for starting fires. It's not going to lose all it's value in one day, unless we hit a hyperinflation situation. I can't even begin to assess the probability of that happening, but the "insurance" against it is physical preps and Gold & Silver.

Because all that is overwhelming, and a whole lot of moving targets changing on a daily basis, I looked at things from the other end of the situation. What are my monthly expenses? Assuming that we don't ever face a complete MadMax end of the world as we know it situation... we still know that "hard times" beyond what we've seen in our lifetimes, looks like a real possibility. But TPTB have already protected themselves and aren't going anywhere. I have to assume that means, neither are the electric bills, the property taxes, the water bill... etc. Those will only go UP and perhaps availability will go DOWN.

Then, I wondered how long we would live in those conditions. I think we could see a severe, month long - maybe up to 3 month - "emergency situation". And that first year after, would still be awfully hard... but it's not like the gov or the international monetary groups haven't had a plan for this kind of situation. It's been out there for years and it's been updated regularly, too. (I don't want to have to participate in their plan; nothing personal.) From that list of monthly expenses - I looked at what could be cut out. From either a stocked-up pantry, emergency power, fuel storage, etc preparation. And then, I went back to the PMs and cash and investments... and decided how much I would try to work up to, in today's face value dollars. No one can afford to just do that, all at once. Overall, I'm trying to wrap my head around planning for a 10 year - minimum - "great depression" in the Western Economies.

And hope I don't need that plan.

07-25-2013, 01:56 PM
For instance. I've been buying bolts of basic fabrics to put back, patterns in multiple sizes,

If you can find "older" bolts of fabric and/or patterns and/or thread at yard/estate sales, I'd be sure to pick those up (providing no damage to fabric of course). Today's fabric and thread are just not as good as they used to be. But better to have fabric than not.

Investments and Savings

Note that when demanding large amounts (I've heard some people say as little as $5K), that SOME banks are now delaying delivery of your cash, by up to a few days. One way around that, is to have multiple accounts at different banks, so that with some work on your part, you can collect the sum total, without running into that withdrawal restriction. The other option, is to "pickle jar" your cash at home, and keep yourself "minimally banked".

Even in good times, one should not have all their monies in one institution. Cash on hand is always good, just don't advertise. Depends on the age, trustworthiness and maturity of your children if they know where the 'pickle jar' is located. I'd vote for more than one 'jar' but not so many you can't grab them quick in a disaster situation.

See above thoughts.

07-25-2013, 02:40 PM
Good idea on having multiple jars -- and I vote for one (or more) outside of the house. Just in case.

07-25-2013, 10:48 PM
Darn--wrote a nice post for this thread, and it disappeared just as I was getting ready to post it. Try again.

I don't think keeping very much in FRN dominated investments is a good idea, whether it be stocks, bonds, CD's, the bank, or that pickle jar. Now, I think that it is important to have a nice wad of cash for those "everyday" kind of SHTF, but if the fed does manage to inflate the dollar out of existence, things around here will be more like Germany during the 20 year intermission between the halves of the great war, or more recently Argentina or Zimbabwe. I mean, it would be nice to have some FRN's with the word millions printed on it, but if it takes several of them to buy a loaf of bread---not so nice.

WHI asks about plans--well this is mine. Buying rural property, and trying to make it as self sufficient and viable as I can including building expandable infrastructure for that day when family who laugh at the crazy old coot show up at the front gate. Stocking up on tools, capturing water run off, and building up a supply of obvious barter items, and some not so obvious too. And, I think it important to have precious metal (mostly silver)where it can be accessed quickly if need be.
When I finally (if) sell my home in town, and free up that equity, I'll pay off the new homestead and be essentially free and clear, and have the where with all to add some solar and wind generating capacity so as not to be grid dependent. I only keep enough to go from deposit to deposit in the bank for paying bills (SS, and VA), and I'm well aware that if my nightmare comes true, those deposits will either stop or not be worth anything. Hence the "free & clear" goal.

I hope and pray that my nightmare never happens, that Washington can pull it's collective head out of it's butt, that we can somehow manage to stop the madness and return to a representative government that listens and cares more for the people than it does for a long list of special interests. I would like to feel secure that my ever expanding clan of grand children will get to enjoy the vision of the framers, and the constitutional government they gave to us. However, I am an Eagle Scout, and I would much rather be prepared for something that doesn't happen than wake up on the morning TSHTF and find it all over my face.


07-26-2013, 09:30 AM
Current rate of inflation for US is ~2%; banks paying ~1% for savings: you're losing buying power when saving money in a bank, so buy "stuff" now while it's more affordable.

They can't print more land and world population increases while more farmland is going under the bulldozer to build parking lots: buy land, but beware, land values are high and not increasing as fast as they were (even falling in some places), so choose your spots (literally & figuratively) wisely.

The US stock market is the tallest midget in the room right now. It's going up, not because the fundamentals (state of the economy) are good, but because the rest of the world's economy is so bad and investment there even less safe & The Fed continues to devalue money by printing it, causing inflation of stock prices.

Mathematicians have analyzed share prices for decades and can conclude nothing except that the stock market is a form of legalized gambling with prices dependent only on imagined expectations that share prices will rise or fall without good correlation to the fundamentals. One may as well take advantage if you got the cash to use. Just don't get too greedy. Take profits (sell) when you can.

And always keep some in the jars.

07-26-2013, 11:56 AM
Current rate of inflation for US is ~2%; banks paying ~1% for savings: you're losing buying power when saving money in a bank, so buy "stuff" now while it's more affordable.

always remember what J Paul Getty said " if you owe the bank $100 , you have a problem... but if you owe the bank $100,000 then the bank has a problem" that is particularly true with these low interest rates.

07-26-2013, 01:38 PM
Doc, I'm following the idea of "investing" in the maintainence and productivity of my place, rather than saving it or investing it all. I have some invested, gambling on the QE fueled returns... for a little bit. But the return on investment for upping our self suffiency may turn out to be more profitable, in the long run.

I do think the official inflation rate is false, however. And that's just more reason to spend the money now, while the purchasing power still gets some value.

Also, reviving some old ideas from my grandma, saving everything that be reused for another purpose later, when they might be scarce.