Built as they are on flawed philosophical and intellectual foundations, current political and economic arrangements may prove remarkably tenuous, upended by random, seemingly trivial perturbations, which SLL has analogized to a crashing Jenga tower. (“Orwell or Jenga?” 10/13/15). While those who are currently in power clearly desire increasing centralization, supranationality, and state control, those desires are running smack into the centrifugal forces engendered by modern technologies and markets, and the obvious incompetence and corruption endemic in present state structures.
There is no shortage of material on preparing for outcomes running the gamut from Orwellian police states to anarchy. If for no other reasons than that the world is embarking on the biggest debt contraction (after the biggest debt expansion) in history, most governments are essentially bankrupt, and police states are an expensive proposition, a probability distribution of possibilities skews toward disorder and the more anarchic outcomes.
“Orwell or Jenga” suggested that current financial arrangements based on fiat currencies and debt could well be a source of Jenga instability. SLL maintains that such currencies and debt are not money (“Real Money,” 9/9/15), because they are liabilities of either governments or central banks and have no intrinsic value. Precious metals, on the other hand, are not liabilities and have intrinsic value. They have been money in the past and it’s possible they will be so again, both during an anarchic phase that it is to be hoped will be transitory, and later as new political and economic arrangements emerge.
When prices were close to their recent lows, SLL suggested that it was a good time to buy gold and silver. (“Buy Gold and Silver,” 7/20/15). Prices have rallied somewhat, but your perspective should be your ability to exchange precious metals for goods and services, not “value” as measured in fiat debt units. You buy gold and silver for the same reasons you stockpile essentials and keep your firearms and shooting skills in good working order: as reasonable preparations for a future that may be far different than today.
However, obtaining precious metals raises a number of issues. SLL has discussed buying them, but has said nothing about the mechanics of doing so. Although the SLL website carries various online advertisements, it does not endorse specific businesses. (It has yet to come up, but SLL would not hesitate to criticize an advertiser, or carry a guest post that did so, even if it meant the loss of that advertiser’s business) While no dealer will be recommended, here are some guidelines for buying precious metals.
Precious metals can be purchased online or at physical stores. There is something to be said for developing a relationship with a local dealer. Go with recommendations from people you trust, but whether you have a referral or you’re trying to evaluate a dealer cold, there are a few reliable benchmarks. The longer the dealer has been in business, the higher the probability it is reputable. Check online reviews. Compare dealer prices against both the premium to spot metal prices and “live” prices for the same items posted by Internet dealers. If you have a smart phone you can do it in real time. One trick to keep dealers honest is to ask for both bid and ask quotes, without indicating whether you are buying or selling. Compare bid-asked spreads to those on the internet. If they’re wide or the dealer won’t give you a two-way quote, find another dealer.
It is difficult to buy precious metals from a reputable dealer without generating a paper or computer-stored record. Assume any Internet transaction will generate a record, but cash transactions at a store probably will as well. Dealers are subject to the Patriot Act’s anti-money laundering rules. They also have to report cash receipts in excess of $10,000, which is not a large transaction for precious metals (http://www.fincen.gov/statutes_regs/guidance/html/faq060305.html). If you make a series of sub-$10,000 transactions, the dealer may have to file a Suspicious Activity Report. Assume most dealers will want at least your name and address for even small cash transactions, if only to protect themselves if they’re audited by the government. For those worried about government access to your purchase records and a repeat of President Roosevelt’s 1933 confiscation of gold, there is reason to worry. However, there doesn’t seem to be legal ways around the problem if you are buying gold or silver from a dealer. SLL welcomes knowledgable information on this issue in the comments section.
There are a number of reputable online precious metals dealers. Check and compare online reviews and Better Business Bureau complaints, the time dealers have been in business, posted prices and premiums, bid-ask spreads, selection of products, shipping rates, volume discounts, and online and phone customer service policies. Many dealers offer to store your metals (some offer storage in foreign depositories) and guarantee that they will be segregated, identified as yours, and delivered on demand. This solves the security issue of keeping metals safe at home or a business, or the risk of keeping them in a bank safety deposit box, where they may be subject to government seizure.
However, since the focus here is on Jenga-style upheaval where gold and silver become a medium of exchange, what good will yours do you if it is in a depository, especially if it is in a foreign country? Don’t think a depository outside the country will protect your metals from confiscation; the long arm of the US government reaches around the world. With access to purchase records, it may force you to bring your stash back to this country and cough it up.
If gold and silver are mediums of exchange, you want your immediately available reserve in small units. Who’s going to make change for a 100 ounce silver bar or a one ounce gold ingot or coin? There is no reason to pay the premium for gold and silver coins over ingots if ingots are available in the same weights as coins. You may want to keep the bulk of your precious metals in a depository as a store of wealth, but have a sufficient number of smaller units at home in a secure place in case of sudden apocalypse. Smaller units are also less likely to be confiscated.
However, do not convert all your financial assets to precious metals. There is the confiscation danger, and if things get really bad, their exchange value against scarce day-to-day necessities like food, water, medicine, fuel, and the like may be low. Make sure you have an adequate stockpile of essentials before you spend much on precious metals. A hunk of metal will not sustain life, and items you can barter from your stockpile may have far more exchange value than precious metals. A carton of toilet paper may command more than a ounce of silver. Your precious metals should not be ends in themselves, just components of a well-devised and diversified plan for a risky, uncertain future.