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October 25, 2010


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The important thing to keep in mind here is that gold is not an investment insomuch as it is an alternative form of money. It gains when other currencies fall and when confidence in paper falls. It is a life jacket in a sea of paper, but it is not necessarily something to use to grow wealth.

Gold will not grow wealth for you, but it can capture redistributions of wealth when confidence in paper declines. Keep in mind that that can cut both ways, though.

While I do think we may (and I mean MAY) have a brief period where junk silver and gold chips will be used in place of currency for transactions, I seriously doubt this period will last longer than a few weeks to a month before a new paper system is put into place. Paper is just too convenient; the problem with paper isn't the paper itself, but the fact it doesn't represent anything. No, I believe in holding PMs as part of a portfolio because as the poster above stated: they bridge wealth between periods of devaluation/currency destruction.

So, for me at any rate, it's bullion and only bullion. And the handful of junk silver I've sorted out of my pocket change over the years - but I'm not really counting that.

FMF, Thanks for the interview. I enjoyed doing it.

Rod Ferguson, You bring up a good clarification point. I consider the 90% junk bags bullion silver as it is one of the lowest ways to buy silver as close to spot as possible AND you get the added benefit that "if" we were to ever go to a barter situation again, one would have the ability to use actual U.S. coins to do their bartering with.

One thing that I don't understand are his statements about how gold and silver would be valuable in a "barter economy". If we have a collapse of the US economy to the point where we have to resort to barter, I would think that the most valuable metal would be "brass" (i.e. bullets). You can't eat gold. You can't run a generator on silver. You can't burn platinum for warmth. I would think the most valuable things in a barter economy would be things of practical survival value like diesel fuel, food, ammunition, clean water, etc.

I can certainly see investing in gold for diversification purposes, but I can't see buying it in preparation for a barter situation.

Two points:

1) American Eagles have a lower gold content (purity) than some other coins such as Canadian Maple Leafs.

2) Coins and bars aren't the only easily purchased thing. The author overlooks gold ingots. 1 oz. Credit Suisse ingots come sealed in a plastic "bubble" certifying their weight and purity. They are easy to purchase and carry, and you don't pay the coinage fee.

@MBTN (and others who are probably thinking similarly):

In a world wide SHTF scenario you're right (probably). But more likley even if the U.S. economy collapses (and MasterPo does think there is a better than 50/50 chance of it in the next few years all other things remaining equal, but not to digress...) other nations economies will survive. Maybe even thrive.

Canada comes to mind. Almost certainly they will come in to "assist" and you may have to barter with Canadian suppliers for food, medicine, fuel etc. (same with any other nation that comes in, probably under a U.N. guise of 'relief')

Yea, MasterPo knows what you're thinking: Very tin-foil-hat stuff! Believe it or not, MasterPo agrees. 5 years ago MasterPo wouldn't even waste a single brain cell considering something like this. But times, they have changed. :-(


Discussions on holding physical gold are likely to bring out the bunker dwellers. Oops, already has. More are likely coming.

MBTN, the most recent example of a modern day barter economy was in Argentina. Everything you mentioned would be good for a barter economy. I don't dwell on this too much other than to say that for investors, farmland is something that can be relied on if there were a few more issues with the banking system, which I believe will easily occur with J.P. Morgan and B of A having 1.5 trillion plus of sub-investment grade derivatives coming due in the next 1-5 years. Who will be the counterparty to these transactions?

In Argentina during their hyperinflation, entrepreneurs would set up swap meets where items of value (gold, silver or anything else) could be exchanged for the "scrip of the day" that could then be used to purchase the necessities. Our society would adapt if it were to devolve to that level. There still needs to be a way for everyday transactions to be consummated and this is just one example of how it would work.

MasterPro, what you said is misleading. The Canadian Maple leaf and the American Eagle gold coins each contain one ounce of gold. The American Eagle gold coin weighs actually more than one ounce as it contains other metals to make it a stronger overall coin. The Canadian Maple leaf is pure 24k gold and is exactly one ounce. The Canadian Maple leaf can lose value if not handled properly as any scratches, dent's, etc., means the coin loses actual gold content. That's why I recommend the American Gold Eagle 1 oz. coins over the others and of course because it is stamped in English and ounces, something we here in America recognize.

You also said I overlooked ingots. In an interview such as this, it's impossible to address the issues with each gold investment. I said the American Eagle 1 oz gold coins are what I recommend because they are easily traded/exchanged and don't have to be assayed when it comes time to redeem. Also, many places don't buy back the gold bars they sell you. I prefer easily recognized coins over bars that can vary with minting, size and ease of redemption. They just aren't as recognized. Lastly, bars are not insured by many homeowners policies, but the American Eagle's are.

Regarding Canada or anyone else stepping in to help, keep in mind that all currencies have their own issues (government printing presses and abuse of their monetary and financial system). All currencies have lost 160% or more to gold in the last 10 years. The U.S. just happens to lead the pack.

Apex, not a bunker dweller here, but I do analyze the economic and banking data and make recommendations. I would never recommend someone put all your assets into physical gold and silver. I'll let the next two articles posted on in the next couple days help explain things more before commenting further on this. I do realize the bunker dwellers are out there. I just want to help educate people as to the options.

@Doug - According to the websites MasterPo has read an American Eagle is .915 pure gold while a Maple Leaf is .9999 pure gold. If that doesn't indicate a difference in purity then what does? Adding "other metals" dilutes the purity.

MasterPo agrees about all currencies can loosing value. Just pointing out that if the American economy and/or currency were to collapse chances are it wouldn't be a world wide "Mad Max" event. Other countries would likely survive, maybe even go relatively untouched, and Canada is a physical neighbor that is also a decent sized economic power. If for no other reason than seeing an opportunity it's likely Canadian businesses (as well as the Canadian gov) would come in to 'assist'. And since the dollar would barely be worth TP then gold and silver would be a natural means to barter for supplies.

Thanks for the reply.

@Apex - Do a Google on 'Weimar Republic'.

Of all the articles regarding PMs on here, I like this one the best so far. It offers what I think is a much more reasonable thesis on hedging against currency risks.

The apocalypse scenario is a tired, well-beaten horse, and yet, some still insist it's one you can bet on the tracks. But that's all I'm going to say because, beyond that, I'm tired of the PM debate. In the end, some are so thoroughly convinced of the Worst Case Scenario, there's really nothing you can do or say to change their minds.

MasterPro, each of the coins in question, the American Eagle and the Canadian Maple Leaf contain one troy ounce of pure gold. The American Eagle coins also contains 3% silver and 5.33% copper to keep the coin from losing gold content due to scratching or marring. This makes the coin weigh more than one ounce (Gross weight: 1.0909 troy oz.) So the entire coin is 91.67% gold, but still one full ounce of gold.

I can see your faith in Canada. After all, their currency has fared better than the U.S. dollar of late. But if the U.S. faltered, 50% of Canada's trade is with the U.S. They provide health care for their citizens which is where a good chunk of their taxes go each year. Any change for the worse in the economy, they too would have to add to the already 75% debt to GDP ratio they have (similar to the U.S. ratio at present). They also have a primarily service based economy, just like the U.S. They barely have a surplus in trade. In a sense, as America goes, so goes Canada.

Like Australia, another strong currency, Canada has a housing bubble beginning to pop; and

As far as a "world wide Mad Max" event, my goal is just to have people to prepare for a further fall in the dollar based on the fact our congress, fed and government do nothing to curtail their spending/QE while at the same time projecting that the "status quo" is unsustainable. Something's got to give, and I don't think it will be congress and that only leaves the currency. That's what I keep an eye on; congress and the data.

Thanks for the response....just trying to give facts so people can judge things for themselves.

@Doug - MasterPo too VERY much hopes nothing bad happens but doesn't see any way *some* kind of collapse/SHTF event can be avoided based on the path we're on. Doesn't matter how we got here but now we're barreling down the road at warp 10 and no one in command seems to care.

Nothing would make MasterPo happier than to come back here in 5 years with unemp below 4%, the Dows at 20k, S&P500 at 3000, gold down to $400/oz, etc and say it was all a big to do about nothing. But history isn't looking good for that to happen.

It's not 'faith' in Canada or any other nation. Just a recognition that when a boat sinks not everyone goes down with the ship.

Thanks again for the response.

ps- Not to go off topic but what are your thoughts on Platinum?

@ MasterPro...Thanks for the reply...I hold out hope for America, but agree our government doesn't really seem to understand how to stop the ship from sinking. Until that time, gold and silver are needed for proper diversification to counteract U.S. dollar risk.

As far as platinum, I don't view it as a monetary metal and thus don't recommend it as diversification for portfolios against a U.S. dollar decline. As a commodity investment, along with palladium, sure. Each have their own reasoning for ownership. But I don't dwell on these, and just concentrate on gold and silver.

MasterPo, sorry to keep calling you MasterPro...

Just buy PHYS and short GLD. If things head south just take delivery. Or if you dont have that kind of money, buy eagles or leafs and short GLD. If you think spot of gold and silver is not in in a bubble form, then you are kidding yourself. You are more then likely going to lose 25% to 50% of that 10% he wants you place into gold and silver. Might as well hedge it out.

What about tax issues? Gold, being a collectible, gets taxed yearly, whether you sell or not.

Geoff, yes, gold is a collectible, but it doesn't get taxed every year, but upon sale.

Apart from US, Which countries have significant value for their gold coins like American Eagle Gold coins? As i am not from USA, am not interested and its quite difficult to buy 1-oz American Eagle Gold coins.

Hi Justin, I have noticed that some countries, the Philippines for example, don't sell gold bullion coins. But all the other gold coins should be good for you to purchase. Pick up some neighboring countries one ounce gold coins. Also, we ship anywhere in the world and only a 1% fee, so call me and we can discuss. 888-604-6534 or cell: 310-975-9057

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