Prepper Precious Metals

Survivior

 

What Causes People to Prepare

If you are a “prepper”, you are probably focused on what happens when all the systems that most Americans rely on every day collapse. It could be an act of God like a hurricane or an earthquake. These events may temporarily disable utilities, internet, and transportation systems until they can be repaired. It may require you to be nimble on your feet and make backup plans to do things like work from home, take care of kids who have no school, and rely on food stocks for a few days until trucks roll back into local stores.

Houston Hurricane Flooding

Houston Hurricane Flooding

Or it may be a financial collapse that freezes credit in the system and the banks ability to service their business. In this case, the effects could be longer lived. For example, when credit froze during the 2008 recession, so did company hiring. This left many people without jobs and pay, forcing them to live off of their savings if they had any. And many businesses that relied on financial liquidity to make ends meet ended up going out of business.

Store Closings

Retailpocolypse

A much more severe event could be an EMP (electro-magnetic pulse) that disables the North American electrical grid. It is estimated that only three carefully placed nuclear explosions above the US could take out the grid across the continent. Even a single nuclear explosion in the atmosphere over America could cause massive amounts of damage to the electrical grid. And because the grid is run off of large, specialized transformers that are not produced here, it would likely be down for several months or even years before repairs are completed.

Or, maybe we are talking tactical nuclear war from a foreign rogue nation. In this case, it is likely key military and civilian infrastructure is targeted ahead of a series of cyber-related, and eventually physical hot war, attacks on the country.

Civil Unrest

Preparing for Any Scenario

The first things to take care of in many of these situations are water, food, shelter, and personal security. The main thing is to make sure family members are safe, and to reach out to neighbors and help where one can. The faster the local communities return to some semblance of normal, the better it will be for all involved in maintaining a safe and livable lifestyle.

In the case of more severe crises like EMP or some type of physical attack, then it may not be possible to return to something like normal for quite some time. The most important asset one can have during those times is, in my opinion, skills that help you live in a more primitive society and that can also be bartered for what one needs but does not have.

Those skills may include bush craft, metal working, carpentry, automotive repair, hunting, agriculture, medicine (both herbal and modern), and radio communications (like a HAM operator). Some of the much less useful skills in this scenario would be computer programming, finance, hospitality, and other service economy jobs.

Making a Campfire

 

These are some of these skills that we have been practicing on the last few years in case we need them.

  • Licensed radio operator
  • Gardening
  • Carpentry and basic home repair
  • Basic electrical and plumbing
  • Medicine (both modern and herbal)
  • Self defense
  • Welding
  • Map reading (including topographical)
  • Animal management
  • Food Storage (canning and sealing)

What About Money?

Beyond the typical survival topics lays the realm of finance. And this is one that often perplexes the most dedicated prepping family. This can occur because much of the ‘junk’ we are taught about finance is nothing other than financial obfuscation. It is designed to keep people from understanding the system and how it enriches the few.

But it also goes beyond that. We have complex financial systems to support our wants for ever increasing lifestyle and more production. Humans have developed very fragile and interconnected financial systems to meet these needs. This system relies on precise timing and the continual expansion of financial credit and liquidity. However, once this system reaches a breaking point and collapses, then so will the benefits we have grown accustomed to in our normal lives. This is where alternative money comes into play.

Gold and Silver as Money

Precious metals have been used by societies for six thousand years, dating all the way back to Mesopotamia. Here is a chronology of silver and gold use that I came up with in researching them as money. I focused on silver because it was more abundant and implemented earlier than gold as money, but gold is also covered here as well.

Silver as Money

Gold and silver have been money for the bulk of human civilization for the following main reasons:

  • they are nearly indestructible
  • they are attractive and also symbolic of wealth
  • they are fungible which means they can be divided into smaller units
  • they are rare and cannot be cheaply reproduced
  • they can be used for other real purposes beyond money

Other uses include jewelry, mirrors, electronics, and medicine. Silver, in particular, is used more today for industrial purposes than it is as money. The industrial demand for silver has caused it to become very precious and rare. Most above-ground silver is sitting in landfills in very minute amounts, though billions of times over.

Uses of Silver

Should the SHTF, and precious metals once again function as money, silver could become as valuable as gold for a time due to its rarity. This is really what happened in ancient Egypt when silver and gold were discovered in nearly equal amounts as my research on the timeline above indicates.

Should I Get Gold, Silver, or Both?

To understand how we might use precious metals as money in the future, we should first take a look back at the past. In the US, silver was the first ‘dollar’ as declared in the Coinage Act of 1792. Gold was established in the Constitution as money as well. There was a lot of discussion among the Founders whether gold or silver should be primary metal used in money. In the end, a compromise was struck to use both. Therefore, both are part of the history of our country and likely to be accepted in the event of, say, a financial system meltdown. That is where the similarities end, however.

Silver

Silver is more rare above ground than gold. About 95% of the above ground silver stocks we had in 1950 have been used up. Much of that silver is in landfills, and pulling it out could be very expensive at current silver prices. Another huge chunk of it,  in millions of ounces, has been used in development of the nuclear arsenal and the military expansion. Much of this silver is not likely to ever come back into circulation.

Recycling of silver in scrap electronics has increased in recent years, enough so that we are barely keeping up with the increased demand. For instance, the increase in demand for solar panels and green automobiles (hybrids and electric cars) have used up the silver we successfully get back from scrap. Therefore, I expect when the financial system finally melts down, silver will be worth a lot more than it is today.

That is why silver should likely be the first step of your financial safety net. Silver is cheap now, but has every reason to become much more expensive in the future. The silver market is very tiny; any demand for monetary metals in a grid down scenario will spike the price very sharply.

Your best bang for buck is to buy the cheapest, but most recognizable silver coin you can get while it is cheap. The rise in price of silver will be a financial equalizer for many smart investors who have been disadvantaged by today’s current financial system.

Gold

Most of the gold ever mined is stored above ground as jewelry, coins, and bars. Some is used in industry such as for electrical connections and in circuit boards. However, silver is both more conductive and cheaper to produce, so gold’s use is limited.

The main advantage gold has over silver is malleability. Gold can be stretched extremely thin, many times thinner than a single human hair, while still retaining its properties. That is why there is so much gold recycled from computer motherboards, for example.

Gold is stored by central banks around the world as a Tier 1 asset. This means it is one of the primary assets supporting the value of currencies. Even though banks are no longer officially on the gold standard, they still use gold to stabilize their portfolios.

Western central banks have leased out much of their gold, and have said so in public documents. While they hold it as an asset on the books, the reality is that the leased gold is in the hands of someone else. Much of it is believed, by several very experienced gold market analysts, to be held in Chinese and Russian central banks. Some of it is also held in the hands of the very rich. It is easier to store than pallets of fiat bills while also more safe than in an increasingly insolvent banking system. Further, many of the very rich know that the system is collapsing and are holding gold as financial insurance.

Gold will increase in value because a very small minority of people in the US and other Western countries actually have any. Plus, the sheer amount of fiat currencies, debt, and financial derivatives expansion means that gold is severely under-priced once those assets collapse. Gold will serve as financial insurance, stability opposite failing currency systems, and a store of real value in crisis times.

What Types of Gold and Silver?

On the surface, this seems like such a simple question. Just get some gold and silver coins, and it is all good. But I think the reality is much different from this. I will explain why.

Junk Silver

Silver’s case is a bit simpler than gold. It would be hard to confiscate or tax silver heavily due to its use in industry, including the military. The US government is unlikely to tax something they depend on for their own uses. And they use a lot of silver.

You can use silver coins minted by the US Treasury, or similar by the UK, Canada, or Australia. The US stopped using silver in its currency in 1970 with the Kennedy half dollar. Most other coins stopped being minted in silver in 1964. The dimes and quarter coins were widely circulated as money, and are very recognizable because they share the same basic designs with their modern, base metal counterparts. They are commonly referred to as ‘junk’ silver because they have no numismatic value, meaning they are not collectors coins.

Years ago, it was easy to get junk silver coins more cheaply over spot price (the going market price of silver) than any other type. However, the demand for junk silver is so strong now that these coins carry about the same markup as silver rounds and bars.

The only real drawback with junk silver coins are their resemblance to current US coins. Most people could not tell the difference, such as by looking for the ‘copper stripe’ on the rim of the cheaper coin. One can also tell by bouncing the coin off of a hard surface, and listening for the distinctive ring that mostly silver coins give off. After the reset, however, people will quickly learn that 90% silver coins are more valuable than their modern base metal versions.

Silver Coins & Bars

Regular silver coins and bars are made by independent, private mints or large distributors. The most recognizable names include Englehard, Sunshine, Johnson Mathey, Pamp Suisse, RCM, Scottsdale, Valcambi, and APMEX among others. As long as the round or bar is not totally generic, it should be fairly useful as currency in the future.

Silver Indian Coin

Silver coins and bars have cheaper mark-ups than US government minted coins like the Silver Eagle. They are slightly less recognizable, but like I said before, I doubt it would make a huge difference in the long run in a crisis situation. You may lose a percentage point or two of value at most, but it is not likely to be a big difference. Just buy the cheaper silver coins, bars and junk coins that you can find now.

If you feel safer with government minted silver coins, I suggest the Canadian Maple Leaf. The design is simple and gorgeous, and the coins gives off a really attractive luster. The American Silver Eagle may be the most recognized in the States, however. Other notable government silver coins are the Austrian Philharmonic, Mexican Libertads, Great Britain Britannia, and South African Krugerrand.

Buy silver in one ounce denominations – here is why. When silver gets really valuable, trading of a 10 or even 100 ounce bar may become very difficult. It may also make you a target carrying around those bar sizes. People will rightly assume you prepared ahead of time, and may follow you back home to take the rest of your stuff. Be careful how you trade the silver later!

Gold Coins & Bars

This is where things get a little more complicated. Gold has been reserved by governments as a monetary asset while silver has been used up for industrial purposes.

I have divided gold investing into three strategies. Each has its advantages.

First, regular old bars and coins from major mints has the same bang for buck proposition as silver coins and bars. It balances the smaller mark-up with slightly reduced recognizability. But to reduce the latter problem, you can purchase Pamp Suisse or similar well known minted bars in their assay cases. It assures that future buyers will know the bar is straight from a highly recognized mint, and has not been in circulation before. It will suffer no scuffs or pock marks, and should retain its original purity and investment safety in most people’s eyes.

The second strategy is to buy government minted gold coins, such as American Eagles, Canadian Maple Leafs, Austrian Philharmonics, or South African Krugerrands. These are highly recognizable coins which come with a larger premium on purchase. Depending on how the stuff hits the fan, it is likely we don’t get the initial premium back. However, the gold will be worth much more than it is now anyway, so American Eagle buyers will get the premium paid back when it is time to sell.

Krugerrand

The third strategy has advantages in the event of a gold taxation or confiscation event. It is likely taxes on normal assets will rise when governments face insolvency, including state and local municipalities. These taxes may be applied to monetary instruments, a bucket in which the regular modern government minted coins fall.

Collectible coins are older and more rare, and otherwise known as numismatics. These are coins that have ‘collector’ value above the melt cost of the gold. Some people believe collectibles will not retain value during an economic crash, but there is reason to believe they may become even more valuable.  Collectible coins were exempted from confiscation in the 1930s in America, where standard government coins were not. Because many of the pre-1933 US coins were taken and melted into bars, they have become the new collectible coin class for investors today. They fit the mold of both rare and having significant historical value.

What happens to collectible value in the extreme event of war? Well, it is very likely investors would have disposed of them by then because of the financial melt down. The way things are going, it looks like the meltdown will happen first, and even contribute to the prospect of war between nations.

The tensions between China and the US in the trade war recently are prime examples of this. Two major powers, one established and one rising, are vying for financial dominance. Rarely does this type of battle go off without a shooting war at some point.

Politically, there is tension between the US and Russia, US and Europe, and US and the Middle East. And then there are tensions among the various countries around the world. One only need to see the Brexit fiasco to understand how financial disagreements lead to political disagreements between participating nations.

Collectible coins have an excellent chance to escape taxation schemes aimed at modern gold coins and bars, as they were during the 1930’s confiscation. Because the wealthy hold these collectibles as a store of immense wealth, many believe they will be taxed at capital gains rates and not subject to confiscation.

How Much Precious Metals Do You Need?

Along with what types of precious metals to hold, this is probably the biggest question that you need to answer in preparing for an alternative money system.

The BIGGEST Mistake Made By PM Buyers

The biggest question people rarely answer is how much is enough? I hear the phrases ‘keep on stacking’ and ‘dollar cost average’ into the metals. But rarely do people talk about how much we actually need to stack while averaging our purchase prices. It ends up being a very personal matter because everyone’s financial situation is different.

Precious Metals Budget

This is why we sat down and developed an excel spreadsheet to determining just how much we needed. The spreadsheet did three things.

  1. calculated net worth, and told us how much debt we had
  2. provided a number of ounces we needed to protect and insure ourselves
  3. provided a specific roadmap to fulfilling the gold and silver investment plan

In addition, it highlighted how much counter-party risk we had. We had never thought of that before.

What is counter-party risk you ask? Well, we used invest in real estate. In fact, we ran a real estate business for 17 years in our local town. We bought, fixed up, rented, and sold properties.  Real estate was our road to wealth until we realized how much risk it brought to our lives.

Counterparty Risk Example

First, real estate comes with taxes. And when the financial system blows up, guess what is going to get raised as soon as possible by local and state authorities that are desperate for money? That’s right, taxes!

Second, real estate comes with mortgages and interest expense. While the economy is good, it doesn’t matter as much. But when less people have money to buy and rent houses, real estate can become the albatross hanging around the property owner’s neck. Banks are going to expect payment on the loans, we did not have enough gold and silver to pay them off. Plus, we wanted to keep precious metals for my family and our home. After all, we only needed one house to live in.

Third, municipalities can pass any codes they want when you are in the city limits. These codes are created many times to increase fees to property owners. These compliance fees swell the coffers of the city, who then uses to expand their offices, pay their pensions, and fund more government employees on the payroll.

This cycle generally doesn’t stop until it reaches absurdity. This is where we believe we are in America today. Just one look at the local code book reveals the rampant creep of needless lawmaking that is taking place all over America today.

These are all counter-party risks, and real estate is not the only asset that has them. Take a moment to think about the possible counter-party risks you have in your stock portfolio, on your home, on your cars, or any other financial assets. Gold and silver held in your possession have no counter-party risks!

Calculate How Much You Need

What gold and silver can be used for is to extinguish counter-party risks. This is their most important value. But, it also helps to reduce your counter-party risks before executing your precious metals plan. Or, you may end up draining it all and not having enough to exchange for food, gas, water, clothes, or even security when the time comes.

That is why we developed an online version of this calculator for our subscribers. This calculator not only estimates net worth, debts, and liabilities. The calculator also estimates monthly free cash flow with which to finance a precious metals plan. Lastly, the calculator estimates how much gold and silver will be needed for several different SHTF scenarios.

That way, if you are trying to estimate how much gold and silver you will specifically need under different crises, the calculator can help you answer that very question. And the money you save from not purchasing too much gold and silver can be used on other preps, such as food, water, security, and energy.

To become a subscriber and make full use of this very special calculator, sign up here: Subscription Options. After signing up, you can find the precious metals planner here:

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