This is a serious post for anyone who cares to help me. HELP -I DON'T GET IT (financially, that is). As the days go by, there are more and more posts talking about gold, silver, futures, shorts, longs, etc.. Mostly, I try to ignore them cause they give me a stomache ache. Almost 30 years ago I took an economics class because I thought it would spare me the horrors of geometry. I should have stuck with the geometry! This particular part of my brain simply refuses to function. BUT NOW, I really want to understand and so I know if someone will take a few moments, and if I concentrate real hard, I'm sure I'll break through the self-imposed barrier I've placed around myself. You should know, I'm one of those people who is probably just a couple of paychecks away from total disaster. I'm sometimes overwhelmed by the problems some of you have, i.e., what to do with that extra $700,000.

Question: When you all talk about gold/silver purchases, are you purchasing it because you think this is how trade will be transacted? If not, then why are you doing (talking) about it?

If so then: 1) doesn't it come in different shapes and sizes? 2) how is it that you see a standard being set? 3) how is your local store supposed to make change? 4) if no one else has the darned stuff, how will it be a vehicle for transactions?

I have a lot more questions, but if someone can address this, I'll be happy. By the way, I know I'm grngrl and that I usually have a very different avenue of interest on this forum. But I think I have some friends out there who will recognize this as a genuine plea, and by answering, you'll be helping more than just myself. I can't be the only one who DGI (financially speaking, of course) Aloha - grngrl

-- grngrl (jhandt@gte.net), October 07, 1999

Answers

well, i would like to know the answers to this, too.

-- (Oxsys@aol.com), October 07, 1999.

Aloha Oxsys- guess we'll just have to wait till everyone else wakes up. I'm in a way south time zone, have to go moi moi (sleep) now. Hopefully, someone will answer us. Aloha til later - grngrl

-- grngrl (jhandt@gte.net), October 07, 1999.

Grngrl: Perfectly legitimate questions. Money serves both as a store of value and as a medium of exchange. The people who argue that gold should be part of preps seem to focus on the store of value function and to be extremely vague about the actual mechanics of post-2000 exchange.

-- Peter Errington (petere@ricochet.net), October 07, 1999.

Question: When you all talk about gold/silver purchases, are you purchasing it because you think this is how trade will be transacted? If not, then why are you doing (talking) about it?

First, I doubt that many will try to buy a loaf of bread post-Y2K with gold. Although you may be able to use gold as a down payment for a car or house or bigger ticket item.

Due to the current banking climate (fractional reserve, over extended indebtness, defaults on loans) it is possible that either market volatility and/or a lack of accurate information due to computer snafus will slow down or disrupt business transactions. If X can't get paid by Y, than X is not going to ship product to Y. The impact on international trade and international finance may result in a global recession.

Confidence in paper money may drop - which it could be argued is already started as in the weaker dollar, rise in price of gold in dollars, rise in price of oil in dollars.

Individual ownership of precious metals is a hedge against a loss of confidence and loss of value in paper money. Gold and silver are a portable (if you need to bug out to another location) means of carrying some value across the rollover.

Perhaps, in the early days of 2000, the gold (and/or silver) market may not be open so that sellers and buyers do not have a basis to strike an acceptable price. In this case gold or silver would only trade amonmg individuals at widely varying prices. In the event of a disruption of this magnitude, it is probable that a market for tangible commodities would be established to balance supply and demand prior to a return in confidence in paper or other forms of IOUs.

Gold or silver should not be first in Y2K preps - basic essentials are more important. Once you have the basics and some cash for liquidity, then you may wish to consider precious metals as a means to move value across rollover for conversion into other goods after Y2K recovery.

-- Bill P (porterwn@one.net), October 07, 1999.

The answers are : Yes, Yes, Negotiation, Negotiation, he who has wins. Now, the more informative answers are: Yes, that is exactly why those of us who are holding gold and silver are doing it - To be a store of wealth (don't look at me, i ain't gots none of either, either, but that's why) and as a future medium of exchange.

Question: When you all talk about gold/silver purchases, are you purchasing it because you think this is how trade will be transacted? If not, then why are you doing (talking) about it?

2) how is it that you see a standard being set?
3) how is your local store supposed to make change?

Now, most of us who are holding, haven't given a thought to how either of these metals would become a medium of exchange. It is pretty much axiomatic to the holders of metals that the exchange medium would just "BE" because they are precious metals.
The fact is that the medium of exchange would arise out of many little haggling negotiations. EACH shopkeeper would end up setting his/her own value on each type of metal.

Understand that the way commerce is accomplished in the US today will have very little to do with the way it will be accomplished under this scenario. The scenario would result in much more of a 3rd world, Middle Eastern, haggle-based commerce. The "posted price" will bear very little resemblance to what you end up paying for something.

1) doesn't it come in different shapes and sizes?

Yes, it does come in difgferent shapes and sizes, and this is true for both metals. The key is that you are doing exchange by the weight of the metal and the purity present in the Coin, Medalion, Commemorative Bar, Round, Bullion Bar, nugget, powder, etc. Nowadays, you are buying based on an ASSUMPTION of reasonably HIGH purity, at known weights, and at a price simply based on what someone is willing to pay.

4) if no one else has the darned stuff, how will it be a vehicle for transactions?

This is where the saying comes from:

The Golden Rule:

He who has the gold, makes the rules!

I'm sure that the gold bugs and the silver bears will show up with more data for you but this should start to help.

Chuck (who hopes he closed all the tags!!)

-- Chuck, a night driver (rienzoo@en.com), October 07, 1999.

Problems with gold as a medium of exchange:

Security: If you offer gold as payment in the marketplace, you will be known as one who owns gold. Some of those who don't may be inspired to take it from you. If you hold a substantial amount, and carry it all with you, you will need bodyguards. If you don't carry it with you, where will you keep it safe? If you hold only a little, that little will soon be exhausted.

If you accept gold as payment in the market place, you will become a target of thieves. Round-the-clock security will increase the cost of doing business.

Value: For each separate transaction using gold, both the exact weight and the purity of the material used must be determined. Not all merchants have scales able to weigh fractions of an ounce accurately. Those who do are unlikely to have the analytical apparatus for assay. Counterfeiters and tricksters will be ingenious. Not all merchants will be persons of integrity. Who will you trust?

Civil order: If it is absent, good luck.

-- Tom Carey (tomcarey@mindspring.com), October 07, 1999.

My family has a very long memory. I grew up hearing my Grandfather talk about how to store wealth. He had seen people loose all of their money because of bank failures, and his grandfather had seen the same. Paper can never be depended on to preserve wealth. He always said that land never disappears and can not be stolen, hence, he put most of his money in land. He also happened to live during the time that land went from $1 per acre to $500 per acre. In my adult life, I have not seen that kind of increase. He also said that other ethnic groups used gold and silver and gem stones to preserve their wealth. Since I live on a farm which has been in my family since 1660, I was not raised with the idea that wealth needed to be mobile. My wife's family has a tradition that wealth needs to be mobile. How many of you have heard stories of women sewing their gold and jewels into their hems of their dresses. Today most Americans have most of their wealth preserved in paper, stocks, bonds, CDs, etc. If a financial earth quake hits, much or all of that wealth will disappear. With gold, silver, or land, the wealth will not be totally gone. I will still have my land. I will still have my silver coins. I may have still have some value in gold mining companies' stock, and may not. I doubt if I will have much value still with my stocks in the DOW. I am not worried about having currency after the first of the year. I have a modest amount of cash, but much more importantly, I have chickens and eggs and milk and butter and grain and flour. I will use those to exchange for salt, cloths, and booze. I hope this answers your question.

-- chicken farmer (chicken-farmer@ y2k.farm), October 07, 1999.

Toilet paper will be worth it's weight in gold. Currency will become toilet paper, therefore, find out how many $1's = a troy ounce of gold and you will have your exchange rate. Makes economic and hygenic sense to me. I am long TP.

-- Bill (y2khippo@yahoo.com), October 07, 1999.

Two more dumb broads asking stupid questions.

-- Gordon (gpconnolly@aol.com), October 07, 1999.

grngrl,

I was planning on getting gold, silver, or platinum coins after I had finished up most of my basic preps. Since I haven't finished with the basic preps, this really isn't an option for us. However, I remain interested in the spot price of gold, silver, and platinum as they might be indicators of people's confidence (or lack of) in paper money and stocks. I imagine (someone please correct me if I am wrong!) that gold, silver, and platinum might provide some clues as to what the big money thinks is going on and what they are anticipating in regard to Y2K problems. I also watch the Stock Market, World Market Indices, etc. In general, that's why I am interested in threads on this subject.

As long as it is less than true TEOTWAWKI and something more than a mild bump in the road (and I have some confidence that it will be less than a 10), gold, silver, or platinum coins (such as the American Eagle) may be a good and portable method of preserving wealth. It seems to me that bullion coins may even be a decent investment within the 6-9 range on the Y2K scale. Will you make a 100% profit? I almost doubt it. Until stores, flea marketeers, or black marketeers accept bullion coins as a form of payment, you may have to generally rely on the local coin dealer to exchange your coins for currency. He/she will take a commission and, likely, and increasingly larger commission in any exchange.

Barterable goods may be a better hedge for most personal transactions whether it is a 7 day storm or anywhere from a 6-10 on a Y2K scale. I think it is difficult to decide what may be generally barterable as different conditions will dictate different needs and wants. If Y2K turns out to be a 5 or less, I seriously doubt that seeds will be worth their weight in gold (but you never know). What sort of things might have higher value across the board is something that I haven't really thought about. I'd like to hear what other people think.

Sincerely, Stan Faryna

-- Stan Faryna (faryna@groupmail.com), October 07, 1999.

Not so dumb and not such stupid questions. Wheez po folks ain't spent much time gettin savvy on the money wheel. Gold posts have increased. An intro to zee basics doesn't hurt anybody. If it's too fundamental for you just click on by ...

Thanks to all who posted info in such a way as to increase understanding of the 'alternative' wealth issue.

-- Ashton & Leska in Cascadia (allaha@earthlink.net), October 07, 1999.

grngrl,

Without laying claim to being a financial whiz kid, let me post a few comments about some of the gold discussions here.

For starters, there is the widely held view that nobody knows just what will be the major effects of potential Y2K problems. I mention "widely held view" because some folks seem to be sure that they do know what will be the major effects of Y2K.

When in doubt, various precautions may seem apropriate, and among the financial precautions that have worked for many people over many years has been converting cash to gold.

However, for most of the many years that this kind of precaution has worked, gold was used as money. People had personal, day to day, experience using gold in ordinary exchanges, buying and selling goods and services in exchange for gold.

Since gold is no longer used in ordinary day to day exchanges for goods and services, the precaution of converting cash to gold may not work as well now and in the near future as well as it had worked over many years; indeed, it may be a major disappointment.

Your questions indicate that you sense this; but it seems that many others do not.

Meanwhile, a non Y2K factor that has been affecting gold recently has been the activities of various gold speculators, including "shorts", in this case advance selling of gold in anticpation of lower future prices of gold.

Since the use of gold as day to day money has ceased, the rationale for central bank gold reserves has, like it or not, become less plausible than in the past. So, some speculators expected gold prices to continually decline, and partook in a variety of investments based on that premise. Recently, several European central banks announced a policy with respect to gold that brought about a "short squeeze". This has led to the recent rapid increases in gold prices and the share prices of several gold mining companies.

These recent rapid price increases have stimulated speculation that gold prices will continue to rise rapidy, and will rise to great heights. Some are very confident in these speculations, others are not. We shall see what we shall see when we see it.

At this time, some participants in this speculation have title to substantial paper profits. Some may take the money and run, some may stay in for the "big gains". I hope that those who are in it get out at a good point in the roller coaster ride.

Jerry

-- Jerry B (skeptic76@erols.com), October 07, 1999.

Gordon,

Consider this a hand-slap for such a stupid statement!

grngrl,

Being a native Californian, I recall the lessons of the gold rush days. The one's who made the money, were the one's, by-and-large, who sold the "picks and shovels."

I would think that if domestic Y2K repercussions go beyond a 5-6 then "FOOD" and pure water could be likened to the modern picks and shovels. (Bater items too, as Stan suggested).

For all those saving their gold and silver (which seems like a good medium of exchange for smaller items--and less "threatening" than gold), they'll need to "exchange" it for basics when/if they run out. You may want to invest in seeds, gardening tools and the way to provide a basic services that other's can purchase with their stores of gold/silver. (Learn how to organize a farmer's market or be a merchant).

Set yourself up to be on the receiving end of the exchange.

Just a thought.

Diane

-- Diane J. Squire (sacredspaces@yahoo.com), October 08, 1999.