AA+ is that it?

I'm not really knowledgeable in the subject. But the AAA->AA+ fallout and the following news looks scary. Anyone to explain what to expect? And how to prepare to survive for an average Joe? Wondering why there is no thread about that already? Considered to be a political question?

Staying away from anything political.

Nations have credit ratings, much like your credit score. The higher the rating, the better the credit worthiness/ability to pay off debts.

By lowering the credit rating from basically 100 (AAA - able to pay all debt on time) to like 95 (AA+ - more likely than not to be able to pay all debts on time) Standard and Poors has stated they think the US will have trouble paying debts on time. The reasons for this are many and varied. So not going there.

What impact does this have on Joe Sixpack? Rates on credit cards, loans, mortgages and other credit may rise. The value of the dollar v. other currency may drop, making things cost more. Inflation may rise.

How to survive. Live within your means. Pay yourself each paycheck, as in put some cash away and forget about it. Don't buy stuff because you want it, get only what you need. Look at your credit cards, use the one with the lowest rate, cut up the rest and pay them off. Call your credit card company if you have good credit and ask for a lower rate. Any credit you are currently carrying, pay off ASAP and save that money. Learn to live below your current income. It's not easy, and the sacrifices are not that great.

Thanks for the explanation, JBMat. What about investing the existing cash savings into, lets say, fine firearms right away?

Firearms are an investment in three different ways: protection, leisure, and future resale value. I've chosen to invest in the first two, but not the third except incidentally. What income I have available for investment is going first into tax-deferred retirement accounts, and next into carefully selected stocks. While I'm not smart about that sort of thing, I have friends who are.

It's bad when Standard & Poor can bring down markets with their silly ratings of a country's ability to pay a debt they never defaulted on. There should be laws against this.

On the upside, if you've got a lot of gold you're willing to sell, it's now over $1700 an ounce....nearly an even trade with platinum.

I think you'll find that a question like this often brings out either excessively "passionate" responses, shall we say, or a lot of fringe and conspiratorial answers, like rants about the New World Order, etc. Reading the comment sections of various other websites is pretty sad reading and makes me glad to scurry back to the warmth and sanity of ETS.

That said, the world of economics and finance is *very* important to all of us, yet most of us are woefully unprepared to really understand much of what is going on in the world now. I have spent a lot of time in self-study but as with many things, you eventually realize that the more you learn, the more realize what you don't know.

I'll just say one more thing--no one--NO ONE--really knows what is going on now. We are essentially in uncharted waters and no Nobel laureate in economics or Chairman of the Federal Reserve or hedge fund manager or financial journalist can really predict with any certainty what is going to happen. Many are very experienced and have great insight, but things now really are incredibly volatile and perplexing to everyone. So take everything with a grain of salt and try and gain your own knowledge base so you can evaluate what you're hearing. That's good advice under normal circumstances, but even more so in these turbulent times.

And if you're living within your means already, so should the interest rates on bank accounts.

My take on this may be a wake up call for some...

If you were surprised by what has happened over the past week, then you need to re-examine your belief systems, where you get your news, and who you trust for financial information. College trained economists who embrace high levels of debt and the printing of fiat money to pay those debts are not to be trusted, no matter whether they have a Nobel Prize or not.

I'm a prospector so I've been pro gold for a long time. I sold all my stocks like Ford and Apple and Microsoft in April and went to 100% gold, silver and a little cash. I, along with many others, were anticipating the latest action in the markets.

I'll leave you all with one final note. This entire topic is not about debt, stocks, or political parties. It is about the demise of the US dollar. Gold did not go up in value this past week. The dollar went down in value. The sooner you embrace that dynamic, the better.

What you are witnessing is the demise of the United States currency towards worthlessness. Protect yourself from that and you'll be fine.

RA, stocks, gold - are not reliable in this economy anymore, they can permanently go down with the dollar any moment. IMO, only real goods, which are hard to wear off from moderate use, compact, and in a good demand is the way to go. In the USA (hoping for the firmness of the 2nd amendment holiness) I can think of guns only.

Yep, I'm with NuggetHoarder on this situation. But gold - still not good because it's too late already. And it's useless when the market will be down to pure hand to hand trade for a while (I'm talking about investing in it, not prospecting off course).

Regarding the ban on politics. It seems to me - the rule of thumb must be: talk about what you are going to do or done yourself, not about others (like governments, politicians, bankers, etc.).

It would probably be even sillier if they could only downgrade AFTER a default. Would make the ratings kind of... pointless...

Good point.


I suspect the problem may be harder than just converting dollars into gold. If US currency becomes worthless and the economy tanks, stuff will not be manufactured anymore, so you wouldn't have anything to buy with that gold.


FWIW, when the Soviet Union collapsed and their currency became worthless, guns weren't the most popular items at all.

The United States has already defaulted.

a government bond gets a triple A rating when it is willing to pay the interest on their debts in a stable currency. The US Dollar is not a stable currency.

Now there are two ways a government can default, it can default by not paying the interest and restructuring its debt as happened in Argentina and in other countries repeatedly, or it can repay the interest and the debt in a depreciated currency. The United States has chosen the latter, and is now paying the price for this in the marketplace.

Like I said before, this is all about the dollar. Forget stocks and ratings and everything else. Focus on the dollar. It is headed towards CharminLand.

The downgrade of the past week is just the first of more to come.

Huh! I know better - for sure. The demand for guns in New Russia since 90s skyrocketed despite the heavily enforced total ban on any rifled firearms sales. People were even prospecting them from WWII battlefields.

There's obviously a lot I don't understand about the national debt and debt default.

The U.S. Debt Clock says our National Debt is $14,587,715,000,000+ and rising by the minute.

It has never been paid and will never be paid. What would this debt do to YOUR credit rating?

You can't eat gold.

Sue

I agree. My story is that I've been removing myself from any influence of western banking little by little for a long time now. That basically means living a simpler life in the country and providing more of my day to day needs myself. If the price of eggs goes through the roof, it doesn't really affect me anymore. If some banks collapse, no big deal for me. So in that sense, it's not really about the convertibility of gold it's separating yourself from a system that is failing miserably.

I guess there is no contradiction between what I said and what you say. The demand for guns may have skyrocketed, but guns still weren't the most popular thing to trade at all, at least between regular people (as opposed to organized crime group firearm suppliers). So if a regular person wanted to go buy some food or clothes and wanted to trade something for it, guns or ammo weren't the most popular trades, nor the safest ones. If you offer ammo in exchange for food, most people would refuse, and those who accept are pretty likely to kill you instead of paying.

Gold has been money for at least 5,000 years. Our constitution says that only gold and silver may be used as money. The fact that the United States government said that gold was no longer money in 1972 doesn't make it so. You can't compare 40 years to 5,000 years.

Gold IS money. The rest of the world understands this. Throw out your public school education and embrace what the rest of the world already knows. Gold has and will continue to reassert itself as money in the United States. You've seen it quite plainly in the last few days, but the demise of the dollar in earnest began more than 10 years ago when gold was a paltry $250 an ounce.

You are correct that I can't eat gold, but I can use it to buy lots of farmland - something that takes more and more dollars every day as the dollar loses value.

Good point. Nothing works the way it is "supposed to" now. Stocks for the long run and capital appreciation? Fixed income for when you retire to live off the interest? Cash is for suckers? Real estate never goes down? Gold is a "barbaric relic"? Each generation has a higher standard of living than the previous one? The "invisible hand" of the market will regulate the markets and rationality will keep things from blowing up?

Ack, it's like I've woken up in some alternate universe!

Basically its a very large Ponzi scheme. Take for example the Accounts for the Royal Bank of Scotland. It has a balance sheet that doesn't balance and through creative accountancy its balance sheet (which is normally a snapshot statement of assets and liability finance) has shrunk by over £1,800,000,000,000 in the last 2 years or an amount considerably more than the GDP of the UK, yet appears not to have produced any substantial operating losses on its profit and loss statement. It's essentially a Zombie Bank.

The only explanation would be that the accounts are fiddled with huge off balance sheet transactions from the secretive shadow world banking system (the Federal reserve at its heart), which is unaccountable to share owners and even Governments, who are meant to regulate through company and tax law. (even its previous Company Directors haven't been struck off)

Unaccountable and the corrupt auditing of the bedrock of capitalism is nothing short of gangsterism, hence the correct term bankster and the term Enrononomics.

Multiple this effect of this one institution again and again, with the Banksters attempt to socialise their losses through Government debt default and austerity measures to plug the gap left by the Bankster bail outs to shore up the even larger derivatives Ponzi scheme bubble, whilst the good time profits remain in their hands will eventually just lead to situations such as the current London Blitz.

Yes, they don't call it the 'Gold Standard' for nothing!

I agree that gold certainly has more value than our dollar, and that it retains value over time. Maybe not the same value, but it never becomes worthless. I would say your plan is a good one as a financial medium of exchange.

But at $1700/oz, most struggling Americans can't afford it. They couldn't afford it a thousand dollars ago, but even less so now.

If a struggling family wants to store something, gold is not the priority.

Sue

In all honesty, I feel like anyone who puts all their money into precious metals is just as bad as someone who puts all their money into the stock market, and vice-versa.

Like any good financial adviser will tell you, you first need to get to the point where you are living within your means, and you need to stay there. That's the hardest part, because our inquisitive human nature always wants us to seek out the latest and greatest, which we mentally try to justify purchasing (and often succeed). It's also worth mentioning that, living within your means includes making sure you are properly insured and have proper health/medical care, which are again, sometimes difficult prospects nowadays.

Once you have that, then it comes time to put together an emergency fund. If you or your significant other (or both) lost their job, for example, would you have enough readily accessible money to support yourself for a while? Say six months at a minimum? This money needs to be reasonably isolated from the ebb and flow of the world (i.e. not in the stock market), and it needs to be reasonably accessible. Meaning, you will likely want to keep some of it in your place of residence, in case you need emergency cash at 3am on a Tuesday or something. However, you don't want to keep it all in your home either, for obvious reasons. Once you have that fund, it needs to be left the h*ll alone unless dire circumstances arise.

That emergency fund is where I think having some gold on hand is good, as gold is a hedge against (hyper)inflation/currency devaluation. One tends to balance out the other. When currency value is down, gold is usually up. When gold is down, than currency is usually up. Gold also has an added benefit that, it's usually able to be recovered after a fire, flood, or bug infestation. Whereas, paper money is much more fragile. That's why, wherever I keep emergency paper money (say in my safe or my safety deposit box), I like to keep a little gold and silver with it. Usually in an equivalent amount.


In the end, if you're living within your means, you've got proper health care, you've got proper insurance, and you've got an emergency fund that can cover standard living expenses for a while...well..then you're already doing better than most people. (As people typically have a liquid savings of less than one month's living expenses; with a quarter of the population under two-weeks.)

Paul. It seems to me that when the dollar is melting down the wiser tactics would be to keep your dollar debts on hold (even increase them) and invest in some liquid goods (gold is included) instead. When it will stabilize at the bottom - you can repay your debts much easier. Am I wrong? IMO, it's obvious.

For the gold - I'm with Susan. First - you can not eat gold. Your neighbors can't either, so they will not buy it. You can't use it to buy something on a street market, to pay for labor individually, e.t.c. The only feasible way is to exchange it to some currency first (I'm excluding bulk purchases of industrial proportions). That means you will depend on a banksters mercy again. Second - its price is overinflated today, and that's not just because of weakening dollar trends.

Be aware that so many people have lost their jobs, the jobs picture is so bad in many areas/industries, and inflation is still relatively tame. I think that you're more likely to lose your house or be forced into bankruptcy due to a job loss before inflation makes it "easier" to pay off any debt in inflated dollars. Is anyone getting raises because of inflation? Cost of living increases to their Social Security? Nope.

Then again, you also need to consider whether paying down debt makes sense, too. Many of my neighbords are underwater on their mortgages. Should they try to pay extra and pay down their mortgages? It's case-by-case, but for many, their homes continue to decrease in value so paying down their debt is throwing it into a financial hole that they may never see again in nominal or inflation-adjusted terms.

Arney. Why did not you take into account the second part of my message? Instead of paying off the debt - invest in liquid goods (in equal to the debt amounts). You lost your job - start selling the accumulated goods.

By the way. Exactly what happened with the Soviet Russia currency collapse - people lost all their savings (bank accounts and cash in socks).

The organized crime (illegal gun buyers and sellers) is ruling that country now.

"Liquid" does not mean that you can get as much as you think you'll get later, so that is why I'm saying "be aware" about increasing your debt load. Liquid just means you can sell it for something quickly.

There are a lot fewer absolutes in today's environment. Gold could take a temporary tumble just when you needed to raise a lot of cash, like if interest rates are suddenly jacked up (remember how Paul Volcker popped the gold bubble?). A bad economy or or bout of deflation could dampen demand and/or prices even for firearms/ammo to a surprising extent. Food will always be valuable, sure, but not necessarily the easiest thing to sell in quantities to pay off the balance of your mortage. It's very conceivable that you could find yourself wishing you had simply stuck that cash in the mattress or at least hadn't taken on more debt to buy all that extra (put your favorite liquid asset here).

I'm not saying "don't" but just trying to present the other side of the equation for people to consider.

Edit: One other factor often not stated in relation to "What do I do with my money?" is what is each person's personal timeframe.

I guess this question particularly resonates with me because I have had to make the calculation myself. I have a situation where I may need to pay down/pay off a rather large debt within a year or so. The amount is large enough that I can't really afford to lose any principal in price fluctations because my salary won't allow me to make up the difference on short notice. Look at silver, it got slapped down hard this year at one point. If someone had bought or sold at the wrong time and needed to at least get their original stake back right then, they would've been better off in cash.

With my timeframe and tolerance for capital loss, I have decided that holding this amount in "cash" makes the most senes to me, even knowing that I'm gradually losing purchasing power in real terms with each passing day. If this money were for retirement 20 years from now or "just in case civilization collapses", I'd almost certainly do something totally different with that chunk of change.

Interesting topic. My personal opinion is that gold, other previous metals, real estate and even other commodities are very useful as a means for moving wealth and purchasing power from one side of an inflation/hyperinflation event to the other side. There is a reason that most central banks stockpile gold as a reserve asset.

James Turk's interview with Jim Sinclair at http://www.goldmoney.com/video/sinclair-turk-interview.html is a really good listen. Two very smart people in an intelligent conversation covering current events.

As for the current price making it too late to start buying gold, consider that JP Morgan Warns Gold to Go Parabolic and Rise to $2,500 By Year End. From $1700 to $2500 is almost a 50% gain -- not bad.

Whether you want to believe that gold is climbing in value or the dollar is tanking is really of no consequence. The issue is where do you want your savings -- in a passbook savings account making 1% interest while the dollar's value falls 30%, or in a few pieces of gold maintaining value regardless of dollar (or GBP or Euro) fluctuations?

I look at it this way. The economy plunges. Barter becomes the way to go. I trade you something you want for something I want. This supposes a total economic collapse -

Gold, while it has value, is of no value. I can't eat it or plant it or wear it as clothing or use it for much. I may take some, if I think the economy will regain it's feet, but not much.

Land doesn't move. I can sell it for cash, if someone has cash. At best, I can use it to make a garden.

Trade goods. Ammo (think .22LR, 12ga birdshot) for hunting. Knives. Toilet paper. Liquor. Clothes. Tools. Cooking supplies. All can be used or consumed. How-to books get rented out by the day/week, with considerable collateral. Fishing supplies.

Sure, invest in gold. But it today at $1700 an ounce, and watch what happens when you can't sell it.

Y'all have been doing an excellent job of discussing this subject without going political. Thanks, I really appreciate that!

As for gold, the thing to remember about it is that you don't buy good to use during a collapse. You buy gold as a way to get your wealth through a collapse. Once the collapse is over and things are getting better you sell the gold for whatever the new money is.

Back when my wife's family was getting ready to escape China they bought as many gold rings inside China as possible with their Chinese money. Chinese money is worthless outside of China but they knew the gold rings could be sold anywhere they ended up. The gold was a way to transport their wealth through to a new money system.

-Blast

What about e-currencies like Bitcoin? Could that be the future of currency transactions?

I'd say investing in any useful firearm or ammunition is a good investment. Pick a useful firearm or ammunition. Track prices over the last 7 years. I found their values (measured by the market prices) increased more than ANY other investment I have. It's not even remotely close.

Note that cash (e.g., U.S. Dollar, Japanese Yen, etc.) can decrease in value just like any other investment. Cash is desirable because it's convenient. That's a big advantage, but I see no unique benefit otherwise.

By the way, I just compared the Japanese Yen to the U.S. Dollar. I wish I had been exchanging my Dollars for Yen over the last several years!

Make sure you're buying physical gold if you decide to get some...

If you don't hold it, you don't own it.

One of the big lures of physical gold bullion is that it is an asset that you can clearly and freely own with no counterparty risk. With other assets, whether Treasuries, stocks, real estate, or even bank savings accounts... there is some other party on the other side of deal at all times. If you buy and hold physical gold, then no one else can make a claim against it and there is no entity on the other side of your deal that can default. It also does not carry any tax burden while you hold it (think property taxes that come every year). Holding physical gold in your possession also provides you with a high level of privacy that other asset classes can't match.

Be careful with unallocated storage or pool accounts where your gold is pooled with others, or buying shares in GLD. These are only paper claims on gold, NEVER actual gold itself. If things get bad, you'll never see any gold, only a check made out in depreciated dollars.

Hence the rumors that Fort Knox is actually empty...

http://www.youtube.com/watch?v=MagCoUYvIXE

ireckon, that's my thought exactly. So far I've got only GP100 .357 and S-12. Could you recommend something maybe even more useful for my "investment" collection, please? A rifle, a pistol?

Invest in firearms that interest you, what you like to shoot! The chances are somebody else will like it.

Here's the ammo I have: .40 cal, .22 lr, .308 Win, 12 ga (many different shot sizes).

I bought almost all the ammo I have right now more than 5 years ago. I could sell most of my ammo at 200% what I paid for it and still undercut current store prices. I kid you not, the prices have gone up so much that I don't want to shoot up my ammo at all. I blame it entirely on ammo prices (i.e., ammo values).

I know this is a hard pill for anti-gun folks to swallow, but I'm primarily making an economics argument, not a pro-gun argument. Anyway, the more laws you pass to control guns, the more valuable my firearms and ammo will become.

The theory behind Bitcoin is very intriguing to me from a technical perspective, but for the time being, I'd steer well clear of it unless you were committed to basically becoming a day trader in Bitcoin and were strictly speculating in it, not trying to invest or even park wealth in it. Even then, the major exchange for trading Bitcoin was hacked just a couple months ago, so it is still suffering some major growing pains.

In the long run, unless the government itself puts forward an e-currency, I can't see how it would gain widespread popularity and acceptance except in fringe transactions. Look at all the other digital or alternative currencies since the dot com days that have bitten the dust. You'll never be able to pay, say, your taxes in one of these alternative digital currencies.

If you (we) hit bottom, what's going to be your source of income to repay these debts? Is it still going to be there, or will it have ceased to exist?

I have the funniest feeling that we aren't talking about 2008 here. Try 1930.

Sue

Susan, the idea behind is the investments you are making in liquid goods as an alternative to paying off your debts - in contrary to the JBMat's advise in the second message of the thread: "pay off your debts asap and don't buy anything". IMO, that mantra works in the stable world only.

I tend to agree. My house is currently underwater by a large amount. I will not be trying to pay off my entire mortgage right now. I will only being paying the minimum. I also will not be paying extra to get above water. That's known as "throwing good money after bad".

In other words, I have a failing investment (my house). Instead of throwing extra money at my house, I should be putting my money into something that is more likely to appreciate. It is quite likely that I would not be able to receive a positive return on my house for another fifteen years, and I'm only talking about being a little above the purchase price. So, if you consider inflation, I'd still be losing money. For all practical purposes, my house is a losing investment for the rest of my life. I really should do a short sale or a strategic default.

What about the damage that will cause to my credit score, you ask? Who gives a crap about credit scores? Banks surely don't. My average credit score is over 800. I still can't get anything done that someone with 680 can't do. I can't modify my mortgage, and that's all that really matters to me. The concept of a "credit score" has been about the biggest scam to control my behavior as a consumer. I have not benefited at all from having an ultra high credit score. Striving for an ultra high credit score has only limited my lifestyle. I'm talking zero benefit over the last 10 years.

Even if my credit score goes south from a strategic default or short sale, it will rebound to a respectable number in 3 to 7 years. Meanwhile, my house value will behave as explained above (15+ year outlook). So, should I stick with a failing investment, or should I sacrifice my credit score while saving a lot of money?

The answer to me is obvious. I just need the balls to "pull the trigger".

Everyone should have a handgun (and train with it regularly). While a handgun is a compromise, often it's the best compromise for a given situation.

Everyone should have a rifle (and train with it, although it's not necessary to train as often as with a pistol). I'm partial to Modern Sporting Rifles (http://www.nssf.org/MSR/facts.cfm).

Personally, I have enough rifles and handguns for all the shooters in my household.

Shotguns are darn handy, and can't be beat for home defense from a static position.

If you're missing one of these, I'd suggest you'd start with what you're missing.

Not trying to be political here, I just want to state some historical facts and perspective and give you my prediction for the future of the US.

When Canada was dropped to AA+ back in the '90s it amounted to a half point increase in interest rates but that in itself didn't last that long. It normalized over time. At the time the Federal Government was about 73% debt to GDP (which is less than what the US is now). After some severe cutting (approx. 14% of the budget) and increases in taxes, off-loading onto the provinces, deferred projects, practically wiped out our own military, etc. We honoured every debt because the consequences of not doing so would have been much much worse. The ratio of cutting spending to taxes was about 6-1. A value-added tax (the GST) replaced the hidden manufacturers tax and and added revenue. The reasoning is that a VAT is inherently more fair than an income tax as it is a tax on consumption. After about 8 years, the deficit came under control and then we enjoyed many years of surplus budgets until the crash of 2008 required stimulus monies. The bond agencies liked that and returned the AAA rating. Unfortunately, a few of the provincial governments (Quebec and Ontatrio) haven't learned their debt lesson and kept on spending and need some austerity.

We had to endure all kinds of name calling by the international community who likened our currency to the Canadian peso and being called an honoury third-world country. The CDN dollar dropped to 0.62 US dollar.

The insults hurt. That's why I tend to temper any comments regarding the US economic position even though the US is in worse financial shape now they Canada ever was.

We were lucky, in the sense that the world was on an economic upturn during our recovery and our expanding resource base helped us grow out of the situation. We've got resources that the rest of the world needs and especially our neighbour to the south.

I would expect that it would take at least 8-15 years before the US economy can recover and that's if the stars are aligned and the US goes back to the gold standard. Unemployment is going to remain very high. Current real unemployment is about 16% when you included the discouraged non-searchers not the fabricated 9.2%. Employment is the real driver of the economy. If interest rates moderate a couple of percentage points, the worse the debt situation will be, BUT people will be off the "cheap money" borrowing that stimulates inflation and encourages more debt. That time frame estimate is IF your government ever gets serious about handling the debt issue. 2.4T cuts is only a first step. Considering the US has more headroom and leeway to increase taxes than practically any nation on earth, an increase in taxes should be in the mix to recovery. I think the cuts should be closer to 5-6T and add an additonal 2T in taxes revenue. This will hurt the unemployment but in the medium and long term it will stimulate the economy because of less debt.

I have no economic degree (just a 2yr diploma) nor am I particularly wise about handling money as I was once down and nearly out financially. JMHO. I have to wish America all the best because 70% of our economy is tied to yours. (I, we, us) can't afford to throw stones even though you will hear a lot of this in the coming months and years.

A few of my rail crews have been talking about exactly this problem. The conclusion they came to was to continue making the minimum payments on the $400,000 house and set in motion the plans to buy a $165,000 house (not that much different, now). Use the good credit to get the second house, then let the first one go. Make regular payments on the second home and repair the credit rating.

Sue

That's what I'm thinking.

I know there are those out there who may see those actions as immoral. I don't. In the current system, banks treat me like I'm an enemy when all I want to do is modify/refinance to a lower rate. I have perfect credit and good income. Allowing people like me to modify to a lower rate would reduce the overall number of foreclosures, and would thereby save the banks money in the long run. They won't even let me modify at 80% loan-to-value. They're now requiring 70%, which is completely out of reach. They know this.

I played by the rules my entire life to get my high credit score. What do I get for it? I get "F-you go away". I can't even short sale right now because my payments are all caught up. Why should I continue to play by the rules in a system that hasn't kept their promise to me, and is even arrogant about it?

[/rant]

I don't see gold being of much use unless you're planning on plating contacts on electronic equipment. Other than that, what is it really good for except making Bling-Bling jewelry for people who want to call attention to themselves? It's just a heavy, soft, shiney metal that happens to conduct electricity well. Nothing really magical about it that I can see.

There's a good reason why gold has been chosen as money for the last 5,000+ years. It has all the qualities that make it the ideal money. There have been many forms of money... Stones, diamonds, carvings, fur, seashells, foodstuffs, and paper money to name only a few. All of those have shortcomings.

Gold is the perfect form of money because it is:

• rare - unlike paper fiat currencies that can be created at will or like seashells that are virtually limitless, gold is scarce. This doesn't make gold worth more, but it certainly means that gold will not be worth less over time.
• divisible - it is infinitely divisible and can be made into small or large coins and can be weighed with precision - unlike carvings of wood or seashells for instance.
• homogeneous - my gold is the same as your gold. melt them together and there is no difference - unlike diamonds where every diamond is unique
• portable - it is compact and can be easily carried to use in transactions - unlike Pacific Island stones or furs which can't be carried easily
• durable - gold is extremely durable compared to other forms of money - unlike fur for instance which wears out and can be damaged easily or foodstuffs.
• has intrinsic value - gold has intrinsic value because it is beautiful and can be made into other products and does not need a value assigned to it by others. paper currencies with no backing cannot stand up to this over the course of time since they have no intrinsic value.
• Veritable - gold can easily be verified as genuine. Unlike paper currencies or even coins made with base metals, it is impossible to counterfeit gold coins. You might pass one off for a short time, but there are simple tests (weight, dimensions, specific gravity) that anyone can perform with the most rudimentary tools to confirm if your coin is genuine gold. (A ruler, a scale and a beaker of water in this case).
• Workable - Gold is malleable and can be easily and cheaply worked into coinage or bars unlike some other metals that are very hard such as tungsten, or items that are expensive to fashion into their final state, such as wood carvings or diamonds.

Over the last 100 years or so, gold has been demonized as a barbaric relic and a terrible currency. This is put forward by those who want a currency that can be manipulated, controlled, and expanded at will, and to their advantage. This is to the detriment of the common man. The best currency for the poor man is gold since it's value cannot be diminished by the actions of bankers and politicians.

Eventually ALL paper currencies fail. They are ALWAYS replaced with gold. That is the history of mankind. You are right in the middle of one of those transitions and it's taking place right before your eyes. My friendly advice to all is to embrace this repetition of history, understand it, and protect yourself from the destruction of paper currencies that is taking place now throughout the western world.

Well said Nuggethoarder.

You can't eat gold. Nor can you eat paper money. Nor the figures on your computer printout representing what you "have" in the bank. Or the real estate you may be holding (unless it's under cultivation).

But there is a hierarchy to one's safety net.

Stored food, good neighbors, tools and materials for home repair, defense firearms, some barter goods, books of how to do things for oneself (home repair, gardening) should come first.

THEN hold some of the precious metals to preserve some of your earned wealth against loss of value in the paper money and the figures on the printout that no one will honor.

Gold having value seems absurd from a logic standpoint.
But from an empirical and historical standpoint - it works.

It cost a bottle of whiskey and an ounce of gold to get on a flight out of Saigon when it fell. Argentinians were trading gold rings as barter when their crisis occurred (after the govt seized their 401k-equivalent holdings BTW).

These are uncertain times. We are all struggling to figure out what the best strategy for future survival is.

That's for sure. My thoughts on the best strategy goes something like this...

Let's pretend that last night the Chinese dumped all their treasury bond holdings and we all woke up this morning and the headlines said "US Dollar collapses, Treasuries in Freefall - Interest rates skyrocket" and "Banks Closed in Emergency Move"

Now, what set of circumstances in your personal life could you conjur up that would make you say "So what, that's not a big deal for me"

The answer is that you would own your own land free and clear, you would have zero debt, and a good portion of your land would be under cultivation and you would own some livestock. Most, if not all, of your daily food would come directly from your land or from your immediate neighbors. Like Unimogbert said, you'd also have stored food, good neighbors, tools and materials for home repair, defense firearms, some barter goods, and books of how to do things for oneself. Sounds a bit more like 1911 instead of 2011.

In addition to that, you'd need some wealth stored up. Gold and silver are obvious choices. Energy will also be an issue and you can either store it, which is difficult at best, or have something of value to trade for it.

Notice that by doing all these things you will have separated yourself, by and large, from the banking system. You are insulated.

Now we can go further into the details, like how would you get healthcare, but those are just details. When the dollar collapses, I guarantee that you will be able to find a doctor who will trade you a chicken for setting a broken arm. It really is that simple.

My main point is that to survive the collapse of the dollar, you have to separate yourself from the banking system as much as possible. Even with all this preparation, things won't be easy. It will be hard, but at least you'd have a fighting chance at getting through it relatively unscathed.

In the end, lots of politicians will be voted out, lots of bankers will die broke, and we will most definitely get a new currency. But it will take time - on the order of many months of unrest, upheaval and uncertainty. Currency collapses are never pretty.

We're still a ways off from the demise of the dollar. There is still plenty of time to get started. Going by history, the next phase in most currency collapses would be hyperinflation. That phase could start at anytime. Once the hyperinflation starts, the inevitable currency collapse will take place within months, not years.

This sounds a bit like survival exercise/role play that some here have mocked. In it Jeanette has to barter. What does she have? Medical gear, other tools and the knowledge to use them.

What are we facing now? Potentially the same thing.

Jeanette Isabelle

True Jeanette, but one is real and the other virtual. Moving from the virtual world to the real world (where some peeps do not follow the rules) is easier said than done.

Yes it is virtual. The whole point of a virtual exercise is to learn how to deal with a situation before it happens.


That is also true. For one, I do not have the money to put into practice what I have learned so far.

Jeanette Isabelle

It's an interesting mental exercise for dealing with different situations, but you will not know how well what you learn works, until you try it in the real world. Reading history is another way to learn.

Does your computer model take into account deceit, treachery and a general lack of honesty in its virtual construct? When times are tough, expecting everyone to be totally honest is a bit naive IMO. Human nature won't change much.

If you are referring to thieves, yes. We will be dealing with them in many forms.

This is perhaps the biggest area where virtual falls short. Protecting ones self in the real world cannot be compared to protecting ones self in a virtual setting.

Jeanette Isabelle

I have to admit NuggetHoarder makes some convincing arguments. If the sky doesn't fall, that just means I picked up some new hobbies and skills. I'm reminded that I need to reconnect with my brother-in-law who's a general surgeon.

As for people who mock this level of preparation, who cares? It doesn't matter what people say. Use your own reasoning skills. If you play sports, then you fully understand that all the talking outside the game doesn't show up on the scoreboard. What matters is how you play the actual game.

I would also add that although the advice given above is very sound, it should also take into account, that if there was a collapse as described that what actions you take to mitigate this collapse on a personal level, the emergency civil powers enacted (secret powers even Congress hasn't a clue about) by the Government should also be taken on board.

This would most likely involve the collection of Gold and Silver (making monetary trades in metals almost impossible (as occured in the US during the depression years of the 1930s), the collection of firearms (as previously occurred during the Katrina debacle) and possibly even the collectivisation of agricultural land (as occurred during the commie collapse of the Soviet Union in the 1930s).

So what ever you do, don't let others know what you are doing.

Or worse.

Is it basically because gold is one of the heaviest methods and most other things heavier than gold are actually more expensive, so cutting a gold coin with platinum wouldn't make sense?

Also, tungsten has specific gravity very close to gold. Isn't it possible then to cut a golden coin with tungsten?

Yes, it's possible and there's a rumor that some large bars on the exchanges have been cut open and found to have a tungsten rod inside. There are some sophisticated steps beyond specific gravity that can test for tungsten cores without having to cut the bar in half... xray or gamma ray I'm not sure. It might be a sonic test - basically hitting the bar with a tuning fork and measuring the resultant ringing sound (similar to what you can do with silver). Those huge 50lb bars are out of my league so I don't pay much attention. I do know that there is a lot more scrutiny on this since the rumor surfaced last year.

As for gold coins having tungsten as a form of counterfeiting... it is not profitable for a counterfeiter to use tungsten. Tungsten's melt point is 6200F, three times hotter than gold, and requires a lot of energy to melt. Tungsten's hardness, way over 10 times harder than gold, requires much more energy to stamp the coin.

A counterfeiter won't make any money using tungsten at today's gold price. But, ramp up gold prices to $10,000 and I'm sure we'll see some attempts at counterfeiting. Just have to hope the marketplace responds with some enhanced verification tools.

As for platinum as a filler for gold coins. Historically, platinum has always been at par, or higher in price than gold so it makes no sense to use it as a filler. Only in the past few weeks have we seen gold surpass platinum in price. It will be interesting to see if this holds for any length of time.

IIRC, it's the 400 oz gold bars that have been found with Tungsten filler.
Chinese Discover 5600 Gold Bars, 400 oz., With Tungsten Core; Arrests

It will be interesting to see if Gold plated Depleted Uranium Platinum coins will soon show up especially now that gold is at a par with Platinum in terms of cost.

I see gold as the premium currency when things start to stabilize again. During a Crash/Panic/Depression, it's value probably wouldn't be much, because it isn't really usable in its own form for what would be currently needed.

But if you're already storing food, seeds, fertilizers, tools, how-to books, meds and first aid materials, just settle down and forget your supply of gold for a while.

If you've got some old gold jewelry and no supplies, it would make more sense to sell the gold today ($1746/oz), turn it into cash, and then buy food, seed, fertilizers, tools and how-to books. Right now and possibly soon, these things will have more value to you than gold.

Once you're fairly self-sufficient, and your kids are playing down by the nearby river and run home to show you these pretty, heavy, goldy lumps they found in the river bank, it's a different situation, and you would/should handle it differently.

Sue

That's when you test for hardness. Drop a calibrated weight on the material in question & examine with a calibrated magnifier.