I received another request to repost my 2006 article, “Food Storage Yes, Wealth Preservation No: A Mormon Enigma in Preparing for Hard Times?” Just go to the link and read it, please.
That was one of several times on this blog when I’ve urged people to consider adding a component of precious metals to their investments in order to protect their wealth should stocks tank or the dollar plummet. Now that printed money has become our national diet and counterfeiting (in essence) our primary economic engine, a primary source of hope and subsistence for our fiscally insane society, the time of accounting must come when trillions of fiat dollars in the economy pulls down the dollar even further. Every nation that has relied on the printing press to support its appetite for spending has seen their currency erode or even fail catastrophically (e.g., Yugoslavia, Zimbabwe, the Weimar Republic). The factors that have helped us defy economic laws of gravity could change overnight or gradually over the next couple of decades. China may no longer feel it is wise to rely on the US dollar. Trading in petrodollars may fall out of fashion in the world of oil. People might notice that we’re flooding the earth with trillions of dollars created of thin air – or rather, our of your thinning wallets.
While we have been told over the past few years that deflation is the primary threat and that inflation is not occurring, the cost of many real goods has continued to climb. In spite of the collapse of the government-created housing bubble and other economic challenges, the monetary pressures that threaten to weaken the dollar have not gone away. Are you prepared?
For those of you who have followed my advice over the years and invested in or acquired precious metals as part of your preparations for the future, you may be a little better off today. Maybe you bought some silver around March 25, 2006, when I issued the post mentioned above, “Food Storage Yes, Wealth Preservation No: A Mormon Enigma in Preparing for Hard Times?” If so, you bought when the spot price of silver was under $11 an ounce. Today it’s over $23. Or maybe you bought some gold later that year when, on July 14, the price had run up to $666 an ounce, prompting another tongue-in-cheek reminder from me about the importance of adding a little precious metals to your savings. If so, you’ll be happy to know that today, gold is at $1,350 an an ounce, also more than double. If you also picked up some gold or silver stocks, you might be feeling very grateful now also, if you held onto them while they and everything collapsed for a while in 2008.
These prices can come crashing down for a while, but for the long-term, the fundamentals are strongly in favor of continued investment in precious metals as a component of your portfolio. In my opinion, some of your savings really ought to be in something that doesn’t depend on other nations propping up the US dollar and sustaining our voracious appetite for debt, an appetite that is eroding the future of the country. Even a handful of old silver coins, “junk silver,” can be a great start if you’re not able to use your 401k to invest in previous metals (e.g., exchange-traded funds or the Canadian gold and silver bullion-backed fund that I prefer for its safety, CEF, which trades like a stock).
The economic experts will tell you that I’m insane (do your own investigation, they may be right) and that it’s crazy to invest in commodities that are now at highs and have run up wildly this year. There certainly is a possibility of a sharp correction and a slide in price. For the short term, I expect that–maybe a 10% drop or more, but don’t rely on that happening. Have the prices reached dangerously high levels that would make investing foolish now? That was what the experts were saying in 2003 when the price of gold was at $350 and silver was around $6 an ounce, after having run up from lows of $250 and $2, respectively, over the preceding couple of years. It’s what experts were saying when gold went to $400, %500, $700, and $1000. But the fundamentals for precious metals have only gotten better–meaning the economic practices of our country have only become less responsible. But do your own diligence. I may be crazy and have often been wrong, and many unpredictable events could change the landscape in wild ways.
Food for thought–or maybe I should say metal for thought. Hope you’ve got the food storage part down already. But challenging times are ahead–a few little steps to diversify your portfolio could really help.
"Junk silver" could be a very good place to start. It has one advantage over exchange traded instruments backed by precious metals. In a situation of dire economic collapse, where brokerage accounts are inaccessible, old silver coins that are held physically could be useful for trade because of their known silver content. The small amount per coin arguably makes them more useful in this regard than coins like the one ounce Gold Eagle, whose relatively high precious metal content may make it difficult to spend economically.
One thing I thought of while reading your post was that there are different types of wealth that we should focus on preserving. If we have an education or marketable skills then that may be more important than keeping a reserve supply of silver or gold. In some dire circumstances then having the precious metals will be important, but if we follow the advice of the prophets and apostles (the advice that we have been getting for many years) then we will get as much education or training as we can. This arguably is more precious than precious metals. The precious metals will only last you until you run out, but a marketable skill will last much longer.
Now I want to point out that I do agree with you, I have my only supply of junk silver, but I sincerely hope that I never have to use it. I would much rather that my marketable skills be the thing that keeps me fed in hard times. I think that is why we have been counseled so much to get all the education and training that we can, because those are skills that we can always take with us and we can always trade for food or other supplies. In my line of work my knowledge of astrophysics may not be a an asset if the economy completely collapses, which is why I also focused on learning how to program and maintain computers, and how to be a good, effective teacher, which are skills that should still be in demand if the dollar becomes worthless. Those skills will still feed me and my family long after I run out of junk silver.
Jeff, do you read lewrockwell.com? Fabulous resource on economics and info on how to preserve your wealth. You should also be a member on ldsfreedomforum.com! RP 2012!
While completely agreeing with your thesis (I bought my silver when it was around seven dollars/oz., the danger that lurks is that of deflation that may come with debt repudiation that may occur (tens of trillions of dollars in derivatives, writing off the value of reposessed real estate values by the banks & etc.). All of these things 'remove' the number of dollars in circulation which thus make the remaining dollars more 'valueable.'
The Federal Reserve may try to print money to compensate for this, but with the typical U.S. citizen up to his eyeballs in debt, he is not inclued to borrow any more–The federal reserve can print money, but they can't print borrowers.
I myself am not sure which scenario will occr. I suspect that we will have deflation followed by massive infation.
I suspect a very wild ride for people who own gold and silver.
Here's why it may be unwise to wait for a significant drop in silver's price before getting on board: http://www.kitco.com/ind/Mack/oct122010.html
Here's an active link: http://www.kitco.com/ind/Mack/oct122010.html