Thursday, May 1, 2014

Are Gold & Silver Worthless When SHTF?

I don’t think so. While precious metals can go up and down in price given the impression that one risks “losing” money, at the end of the day there’s nothing better so as to protect assets from an economic downturn or collapse.
Some will say that gold and silver would be worthless during an economic collapse because you cant eat it nor can you shoot it. This viewpoint neglects the fact that gold and silver have been used as currency for over 10.000 years.
In fact, a perfect example of such usage was unearthed a few days ago in Echt, Limburg. 
Gold coins where used as payment for German warlords by the Roman empire. Smaller pieces of silver, some cut from larger silver objects such as table wear, those where used as payment for soldiers. Keep in mind that the denarius, a small silver coin about the size of a nickel, was the standard minimum wage, which a common soldier would earn per day of work.

 Roman Treasure Uncovered, Limburg

The recent discovery of a gold-and silver treasure in Echt, Limburg, is casting new light on the collapse of the Roman Empire in the Netherlands, around 411 AD. 
This treasure, a combination of golden coins and chopped silver, is the first one found in the Netherlands from the time of Roman ruling. It points to the time of Roman decline in the area because the silver is cut into bits, which typifies how soldiers were paid in times of economic crisis.
This was announced by the Free University of Amsterdam (VU) in Venlo on Friday after archaeological research. The golden coins were partly made by Kaiser Konstantin III (407-411). They were buried ‘fresh off the press’, the VU reports. It’s possible that the treasure was buried after a defeat of the Romans.
The University posits that the silver shards are especially indicative of an economic and military crisis in the Late Roman Empire. The valuable silver plates were cut into shards to serve as a method of payment. Romans paid German warlords with these valuable plates to close an alliance with them and avoid future invasion. The German warlords subsequently cut these plates into bits and paid their soldiers with them.
Konstantin III tried to ward off a German invasion in the area between Maas and Rijn by flaunting the money, and thereby forming alliances with the German warlords. According to the archaeologists, the treasure found in Echt belonged to a German officer who quickly buried his winnings, when Konstantin III led a defeat in 411.
 The Roman Era treasure found in Limburg.

In my opinion, if gold and silver have been of value for so long, chances are they will be continue to do so for another 1000 years.


Greek Caste System said...

It's not "Kaiser Konstantine III", we are not in the 19th century Germany, but in the 4th c. W. Roman Empire.
It's Constantine III, Western Roman Emperor.
Unlike W.R.E., Eastern Roman Empire (known today as "Byzantine Empire"), managed to survive the crisis of 3rd century AD and its golden coin, the Solidus, remained exceptionally strong for the centuries to come.
There are still lessons to be learnt from the crisis of the 3rd century, and why WRE collapsed while ERE survived and recovered.

TampaMark said...

It really depends on how severe the collapse its and to what extent any commerce remains. The wikipdeia citation from the previous post notes that once the Roman trade network broke down, "...Large landowners, no longer able to successfully export their crops over long distances, began producing food for subsistence and local barter. Rather than import manufactured goods from the empire's great urban areas, they began to manufacture many goods locally...". My understanding that in the Western Roman Empire all coinage virtually disappeared by then or shortly thereafter. Silver would still maintain it's value but with little trade it was hidden (in the example linked to this blog posting) or flowed to the Eastern Roman Empire. Soldiers were originally only paid in silver by the Greek lords so as not to ravage the countryside for food and such. That started the coin money economy. Before that it was running up a tab, credit if you will.

If we experience a severe enough collapse the whole economic system of debt and fiat money will too. Food will be the prime medium of exchange, if there is any to hand. With only 3 days supply of food in US grocery stores we may see a huge crash in population after 3 months. Gold and silver will hold value but not until some sort of economy that values the ease of metal over sustenance. Subsistance farms as cited above will be the only way to survive. Go to 'Our Finite World' blog for more detail.

Don Williams said...

You can also see Roman silver coins being severely degraded by increasing amounts of base metals as time went on.

Compare a US silver dime of 1963 to today's dime.

Don Williams said...

1) It is interesting to speculate re what could cause a break down of long distance commerce within the USA.

2) Global trade has usually been by water transport and has required the protection of a strong naval power from pirates-- the British Empire's Royal Navy or currently the US Navy.

In Roman Republic times (prior to the Empire), Pompey Magnus had to exterminate the Mediterranean pirates to ensure massive grain shipments could feed Rome from Egypt and North Africa.

3) But this requires lots of taxes and if the central government loses the support of the people it can become costly and difficult to collect taxes.
Yet that is vital to sustain an Empire heavily indebted by past deficit spending.

The tax collectors themselves have to be paid. The Romans eventually resorted to "tax farmers" who alienated the people even further.

4) Circa 440 AD, the Catholic priest Salvian described how the common peasants formed militias and ended up supporting the German invaders as preferable to the predatory tax collectors of the Emperors.


5) The other thing that could destroy long distance commerce is lack of fuel to run the railroads and highways. Peak Oil. The oil companies are already having to spend massive amounts to extract the remaining deposits. In the past, we used steam locomotives fueled by coal but much of the large coal deposits (e.g, the Pocahontas in West Virginia) have been mined, although there are still major deposits in the western US.

6) Absent long distance trade, cities become less viable and shrink greatly --see Detroit.
They require massive imports to sustain them. They tend to survive and dominate , however, so long as they have a government powerful enough to sustain them.

TampaMark said...


Everything in the global economy is so interconnected that just one critical part could fail and bring down the whole system (Liebig's law of the minimum). Things just start to cascade downwards and no telling when it will stop.

'Yet that is vital to sustain an Empire heavily indebted by past deficit spending. ' That is the key. The whole system is leveraged with debt, public and private. We almost had a total collapse of the economic system in 2008, we were hours away from it. Without it we get no new oil exploration because there isn't enough credit from new workers (18 to 28 y.o. unemployment is very high now, living at home and can't get work) buying cars and homes with debt.

'The oil companies are already having to spend massive amounts to extract the remaining deposits.' They are cutting back on exploration. See: http://ourfiniteworld.com/2014/02/25/beginning-of-the-end-oil-companies-cut-back-on-spending/

This goes to the point on gold and silver being worthless in a SHTF collapse. I have some because I don't know how fast or slow it will be. Which scenario will play out; do we have what we have now, a long and drawn out decline that takes 20 years? Or a stair step collapse where we plateau for a while and then a sharp drop, plateau and then another sharp drop, etc. Or a Lehman Bros. event that the Government and the Federal Reserve can not stop because they have exhausted everything in their bag of tricks?

We live in interesting times.