Friday, August 08, 2008

What currency after SHTF?

This came up the other day: What currency will work best after the SHTF? You know, what forms of payment for debts, public and private and all that stuff...

My answers?

Gasoline, any amounts, but one and five gallon containers for counting purposes.
Toilet paper
.22 caliber cartridges

What do all three of these things have in common?

Once used, they cannot be reused. Well, in the case of the .22 cartridge I am sure some enterprising person will figure a way...

But gasoline once used is gone forever. Same with toilet paper thankfully.

But in many cases, hauling a couple of rolls of Charmin down to the trading post or swap meet may not be handy, will there be a more liquid form of money?

For many in the preparedness community, it has always been considered that gold and silver would make a comeback for post-SHTF money. After all, precious metals have a real intrinsic value that any of us would relate too.

However, I think some may question whether or not a Silver Eagle is indeed what you say it is. That is why I suggest that "junk silver", pre-1964 U.S. silver coins such as dimes, quarters and halves have a more convinient value than gold or specialty silver coins.

For those just joining us, junk silver coins have 90% silver content and are easily recognizable as legal U.S. tender.

More to the point, small silver coins will have greater value in common trades say for a dozen eggs, a bag of roofing nails or a quart of honey. What's more, common coins are easily recognizable and in most cases, trusted as not being forgeries. WHo knows if that Silver Eagle or Kruggerand is really a foil coated fraud or not?

My advice is as always is to stock up on real everyday tangibles first. Then, and only after your preps are at a comfortable state, consider investing in some junk silver coins.


Miserly Bastard said...

I basically agree with your view to put tangibles first. But after tangibles, unless you're expecting a "Mad Max" situation, currency will still be in use, because it is too inconvenient to do "pure barter." Which is worth more, a dozen eggs, or a box of roofing nails? Money is a simplifying mechanism for trade, so absent the long-term and permanent disappearance of government, money will return post-dollar collapse. Also, consider that most every society destroyed by hyperinflation survived afterwards--Argentina, Yugoslavia (in the form of new republics), Germany, etc. After a dollar collapse, the USA will still exist, and a new currency will be formed. It seems highly likely to me that any post-dollar currency will be backed by precious metals, so that alone is a good reason to hold silver/gold (aside from the "barter scenarios")

John said...


I agree with your sentiments, but for one thing.

The U.S has not collapsed entirely ever. The Depression was setback, but hardly a collapse on the scale of Yugoslavia or Argentina.

My own opinion is that "if" the U.S. economy collapses, trying to explain the so called "fiat currency" scenario or the difference between a 1963 dime and a 1986 version will be meaningless. In a society where people shoot each other over incorrect lane changes in the most prosperous nation in history, economics lessons will be pointless.
Lay low, hide your true position and stock, stock, stock true tangibles like your life (it will!) depend upon it.
Thanks for reading and posting!

Miserly Bastard said...

Hmm, I dont think you're right at all. People in hyperinflatinoary economies learn very quickly: suppliers learn to hoard physical supply, wage earners learn not to save; and alternative stores of value are quickly established, even if relatively unknown beforehand. For example, in Zimbabwe, gasoline ration coupons and old coins have taken on monetary value.

While it is true that most people under the age of 50 probably don't understand 90% silver coinage (let alone weird things like "silver" war nickels or 40% half dollars), the information is widely available and can enter the public consciousness very quickly. I feel quite certain that gold and silver--which have been universal stores of value for human beings for thousands of years--will quickly monetize in the event of a dollar collapse.

Of course, you put a big "if" around my hypothesized dollar collapse. I think this is really a question of "when", not "if." At some point, it is just a math problem--$10T in nominal Treasury debt, plus another $60T in unfunded entitlements, plus however much GSE debt is out there = inflation or default. Either way, it's a dollar collapse.

The Federal Reserve Note in its current form, ie completely unbacked by "hard" metals, is a relatively new animal, having come into existence only in 1971 as Nixon took the US off the gold standard entirely. I'm not predicting the imminent demise of the dollar, mind you--and unlike most "gold bugs", I'm actually rooting against it, since our family is highly compensated in dollars.

But I do think it is an eventuality. And I think that eventuality will be accompanied by an economic depression, as economic activity contracts from hyperinflation. So I basically agree with your emphasis on tangibles (and not just ammunition, as some survivalists would have you do). But I also think that if you have "skin in the game" today, i.e., meaningful net worth, having a large store of precious metals should also be an integral part of your contingency planning.

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