Article- Properties of Money

Jerry D Young

Well-Known Member
Trusted Member
Though the article is primarily about precious metals (PMs), it delves into why they are often used as circulating currency or money.

It is, of course, all Just my opinion.

My thoughts on Precious Metals

Precious metals, PMs for short, come up regularly in discussions about prepping. Some consider them an absolute necessity to their prepping, others believe acquiring PMs is the biggest mistake being made in prepping. There will never be total agreement on the subject. Hopefully this article will provide some information to allow a reasonable discussion and evaluation of precious metals and their relative usefulness to preppers.

First, a note about the PM issue. I'm a believer myself, though I cannot afford any at the moment. But thousands of people are obtaining PMs for situations in the future. Not all of them involve a PAW situation as envisioned by some. There will still be regular sources to buy and sell PMs as a financial transaction, not a deal for goods in many scenarios.

Also, if it is the PAW, those people that do have PMs and understand them will do exchanges with others that also understand them. The fact that the majority cannot tell the difference, or trust them in general means they simply will not use them. They will use other methods of doing transactions such as barter and trade, even though they become cumbersome beyond belief without a medium of exchange.

The inability for some to use PMs for whatever reason does not negate their use by others that do know and understand the way of PMs.

Next, a few definitions are probably in order. There can even be some confusion as to what precious metals are. Pretty much everyone that thinks about the subject agrees that gold and silver are precious metals.

But there are some others that include other metals in the category of what might be useful for a prepper. These include platinum, palladium, and rhodium. These three metals are all considered ‘precious’ by nature of the cost to obtain them.

Some consider some of the base metals as precious in terms of usefulness or for their strategic value. Copper, lead, brass, aluminum, and steel.

For this article, only gold and silver will be considered, as they are, by far, the most likely items in acceptable form to play a part in any prepper scenario.

Why even consider PMs as part of a prepper stockpile? You cannot eat them. They will not keep you hydrated. They will not keep you warm when out in the cold. They do not earn you income in the sense of producing some type of return for just being there. These are all reasons that many people think they are the last thing you want to spend your hard earned dollars on.

There are a few reasons to have them, I and many others believe. One is the same reason money was invented in the first place. Money is a medium of exchange. It makes barter between two people possible when the first has something the second wants, but the second does not have anything the first wants. But another person does have something the first wants but the first doesn’t have anything the third wants. The first gives the second what he wants, gets money in exchange, and then gives that money to the third to get the item first wants. And so on. It only works when the participants agree on the medium of exchange.

Some places use cattle as the medium of exchange. Some Native Americans used wampum. Salt has been used. Service (labor) has been used. The list goes on. Gold and silver became commonplace because they were very permanent whereas salt and cattle were not. There will be “money” after a disaster because there are just too many cases where one party will not have what the other party wants in terms of goods or services. Since gold and silver have been used in the past and are relatively rare, and relatively durable, many people will be willing to agree to them as a medium of exchange again.

Many believe that barter and trade will be the initial means to conduct business during and right after a TEOTWAWKI event. But as things settle down, there is a good chance that gold and silver will reappear as the currency of the land.

During the initial stages of a disaster paper money will probably still be the recognized medium, and then it will lose value. Some will then take precious metals, but some will not. There will be a lot of one-on-one barter, but as it becomes commonplace the old problem of not being able to make direct one-to-one barters will crop up and something will be chosen to be the medium of exchange. Money. Some think that medium of exchange (money) could be gasoline. Some think .22LR ammunition. A whole world of other things. It is likely that people will revert to what they know has worked before, and still works to this day in places. Gold and silver coinage.

There will be people that simply will not take PMs, nor have them to give, and others that will value their PM holdings extremely high because of what they paid to get it before the PAW. Gold and silver will have their value restated in some needed commodity as things settle down. The value of things will eventually be stated in ounces of gold or silver, not dollars or other currency.

Although there are people that use precious metals to generate an income, through buying and selling, it is probably better for preppers not to consider PMs an 'investment' in the sense of making money from it. Face it, one ounce of gold is not worth that much more than it was a couple hundred years ago. It will still buy essentially the same set of goods now that it did then. But there are ways to incorporate precious metals in your more traditional investments and retirement financial planning. It is a subject for a different article.

Gold and silver are for the time when only PMs will get you what you want. It will not matter what you paid for it in the past world, only its value at the time of the event will matter. Might be life and death, eating or starving, medical care or home treatment, getting there or not getting there. The list is endless.

So, some say, just make sure you have everything you need beforehand so you will not need to barter or trade or mess with PMs. Well, priorities change. What seems a well-rounded set of supplies may have holes in it that we simply have no way of seeing right now. Comes down to 'Better to have than not have", and 'Situations change".

So, if a person decides they want to have some PMs on hand, what are some good choices, and how does one go about acquiring them?

For silver, there are quite a few options. Pre-1965 circulated 90% silver US dimes, quarters, and halves. 40% silver halves. Silver dollars. US mint one ounce Silver Eagles. Post 1964 commemorative coin sets. A wide variety of other silver rounds and bullion bars.

The choices are a bit more limited for gold, but there are still plenty of options. Circulated legal tender gold coins from several countries, including the US. US Mint Gold Eagle bullion coins in one-tenth ounce, one-quarter ounce, one-half ounce, and one ounce sizes. Several other countries produce these types of bullion coins. There are various gold chips and bars in weights ranging from a gram to the four-hundred ounce Good Delivery Bars that national banks deal with.

For most practical purposes, the circulated US pre-1965 silver dimes, quarters, and one-ounce Silver Eagles, and one-tenth ounce US Gold Eagles would be the way to go, unless and until one can afford to put major money into PMs.

One of the reasons many people that reject the idea of using silver coins, and gold coins especially, is how are you going to get the full value of the coin? They seem to think only in terms of full one-ounce Eagles, or even larger denomination coins, rounds, and bars. But there are ways to make change, even if you do wind up using a one-ounce coin or other larger unit.

For silver Eagles, use quarters and dimes. For gold Eagles use ¼ ounce and 1/10 ounce gold Eagles. This is the reason I recommend that pretty much all initial gold purchases for those in the US be 1/10 ounce gold Eagles. You can give five 1/10 ounce Eagles to someone much more easily, and with better confidence on both sides, than cutting a one ounce Gold Eagle in half.

There are many places where the items can be obtained. On-line sources, such as Kitco, gun shows and coin shows come to town occasionally. And there are local stores including pawn shops and coin shops.

It really pays to shop around. There can be a very wide range of prices for similar items, depending on the mark up the seller has. Most prices are based on one of the advertised Spot Prices listed in financial papers and on-line. But the premium one pays over and above this is where the difference comes in.

Also, be aware that some sellers will take an order that you place when the price is at a given point, but will charge you the price at the time they ship the item. Be very careful to find out the actual price you will be paying. The reputable sellers guarantee the price at the moment of sale, not shipment.

There are some outfits that will take your money and ‘hold’ the precious metals for you for future possession, for safety. Your choice. But if it is not in your hands, is it really your stuff? When it comes to preppers and precious metals, having the actual goods at hand is really what it is all about. Which precludes many of the other ways to include PMs in your portfolio. Mutual funds with precious metals holdings, precious metals mining shares, warehoused PMs, and even PMs in bank safe deposit boxes can leave them totally useless to a prepper when they might be needed the worst. Not to mention, there are many banks that now prohibit storing gold and silver in their safe deposit boxes. A few other things that might be useful for a prepper are also prohibited. Simply not a good place.

And why would gold and silver coins in a person’s bank safe deposit boxes not be available? Banks go belly up from time to time and one cannot access their safe deposit boxes until the situation is resolved.

The Federal Government has imposed ‘Bank Holidays’ before, where access is restricted. And there has been a gold recall before. Some do not believe it could happen again. Make up your own mind. But if you believe that precious metals might be of use in the aftermath of a disaster, you really should consider just how important it is to have them on hand, if they are needed.

Which brings up another point in the acquisition process. Again, there are differing opinions on the need to keep one’s PM purchases a secret. Many preppers keep their food and other preps as much of a secret as they can. That mostly concerns who knows about them locally. There are a few that go to great lengths to mask in some way their purchases.

The same is true for many when it comes to buying PMs. If you purchase on the internet, there will be a record. And in some cases, when you buy locally, there will, as well. If this concerns you, there are often local places where you can walk in, pay cash, with or without a cash ticket, and walk out with the PMs in your pocket and no one the wiser that it is you that have them.

There are already plans in the works where all PM purchases will have to be recorded and turned into the Federal government. Makes one wonder why that might be needed.

When it comes to PMs, unless you are wealthy, start slow. A few silver dimes & quarters at a time. When you feel it is time to get gold coins, stay with the small denominations. And remember that there will be some people that will not trust or want them.

Dimes will be needed desperately for the small stuff. Lots of them. Quarters for slightly larger purchases. And US Mint one ounce Silver Eagles for larger purchases.

As for half dollars, because of the fact that there are 40% silver ones out there, and not everyone will know the difference, there could be some major controversy when trying to use them. It might be best not to plan on using them at all in the PAW. Some will. Just be aware of the facts.

And the same goes for Silver Dollars. Going to be a lot of controversy over their value, as a lot of them are going to be in much better shape than others, and in most cases, very much better shape than dimes and quarters. Even halves. Plus, many of the Silver Dollars are collector items that the owner may have paid much more than what the silver in them is worth. And may want that former cash value back, not the value of the silver. Trouble in store.

There are many people that plan to limit their silver accumulation to dimes, quarters, and Eagles. That is not to say that some will not take the others in trade, but only in certain circumstances where the person with those coins understands and agrees to the value.

Thousands of people are obtaining PMs for situations in the future. Not all of them involve a PAW as envisioned by some. During non-PAW times there will still be regular sources to buy and sell PMs as a financial transaction, not a deal for goods in many scenarios.

Also, if it is the PAW, those people that do have PMs and understand them will do exchanges with others that also understand them. The fact that the majority cannot tell the difference, or trust them in general means they simply will not use them. They will use other methods of doing transactions such as barter and trade, even though they become cumbersome beyond belief without a medium of exchange.

However, I do think people will learn fairly quickly, as others that do understand PMs begin to use them regularly, that they are a useful and acceptable method of holding value and buying and selling things when barter and trade is just not convenient

One likely way to help to get people unsure about US pre-1965 90% silver coins to accept their usefulness is to have a couple of small reference books that list coins, describes them, and lists their metal content. Do the same for old legal tender gold coins, too, in case someone has some old US gold coins, or gold Pesos, or other foreign gold and silver coins. It might not make a difference, but then again, it might. For one thing, you can double check the facts in case you are unsure about taking a coin you are not familiar with for something.

Many people would not accept collector stamps in a transaction for a can of food, since they have no clue about them, but a circulated US silver dime minted before 1965 many people probably would, even though there is a miniscule risk of counterfeit. There is that risk now with 20 dollar and one-hundred dollar bills, yet we still use them.

To protect oneself, and give assurance to others, it would be wise to obtain counterfeit detection tools. They can range from easy and inexpensive, but somewhat limited, to very expensive, and very accurate. Do some research and see what you might be willing to obtain to test the coins, and basic silver and gold bullion and other PM objects, as well.

And since the last paragraph was about counterfeit, I will add my reasons to have certain high-quality counterfeit precious metal coins.

For use as decoys, diversions, red herrings, and similar uses to fool people into leaving without looking further where your PMs really are. When people see what they believe is gold, whether it is or not, they get excited. The gold bug is very powerful. People lose the ability to think clearly, tend to become paranoid, and quite aggressive if they think their gold is at risk. It is highly likely that if they find even a few counterfeit coins, and are not a real gold or silver knowledgeable person, they will grab them and run, without bothering to look for more, unless they suspect there are more. And then they will tear the place apart. So, make it appear that the coins they find are the only ones they can find.

The second is as references for comparison testing with coins you are considering. It is much easier to do a ping comparison test when you have a real coin and a counterfeit coin to compare how each sounds when pinged.

There are other tests that take advantage of have a good quality counterfeit coin. Attempting to pass them off as the real thing will most likely get you dead in a hurry. Even doing a trade and run will not probably help, because people take gold seriously. Cheat them and they will not just accept the loss. At some point, probably soon, they will be after you. And they will spread the word. So use the counterfeits if you have them, for only the reasons stated. Using them to cheat people out to do an honest trade is not only just a terrible thing to do, it will, at some point, get you killed.

The refusal for some to use PMs for whatever reason does not negate their use by others that do know and understand the way of PMs.

As stated previously, there is a good chance that PMs will not have much use, except among hard core believers, in the initial stages of a PAW creating event. Later on, as things stabilize, and the dollar is no long being accepted, PMs will probably begin being used as money. Local groups of people will set the value of labor and commodities by trial and error at first, but will eventually reach agreements with other groups as to what value each of the metals has.

Some justifications as to why gold and silver will be used as currency in the future, as it has in the past:

It is generally accepted that money, as a medium of exchange, should be:

1. Available in many levels of value in order to be able to make small transactions all the way up to very large transactions, without being cumbersome, or too small to keep up with.

2. Transportable by various means from pocket carry to mail carry to package transport in a wide range of values.

3. Durable and storable without extreme measures needing to be taken to keep it in its useable form when stored or when in circulation.

4. Easily recognized for each value so there will not be any confusion on what each value item is.

5. Something that reasonable people can agree on as to the value of the
various forms, with very little chance of substitution or counterfeit, so it is trusted implicitly by those using it.

Not that many things meet these criteria. Gold and silver do.

Barter and trade will occur during and for a while after a major event. A more or less standard currency will come about, as I have indicated before. Because once things have stabilized and people begin wanting things that are very difficult to arrange a barter or trade for, or long distances are involved, or relatively large values are involved, or someone needs some type of portable wealth with which to go somewhere else and start over.

Another thing about currency or money, is that it really does not have to have intrinsic value. As long as the overwhelming majority of those involved agree on it, then it will be acceptable.

Of many of the items people think will become a PAW currency, especially our current paper currency, I believe the main reason that they will not be used, in my opinion, is that people simply will not trust them, and will not accept them for their goods. Of course, the why they will not trust it is probably the crux of the matter..

I believe the reasons include the fact that many people have lots of currency on hand. And others will have large quantities of the specific good they want to be currency. They will be willing to part with large quantities of it to get the things they need to survive when the infrastructure is gone.

So someone with food might get $1,000 for each can of food. But, what if the person gets the $1,000 and goes to try and buy a packet of seeds, and that person wants $10,000 per packet because everyone seems to have plenty of cash, and he/she is afraid someone will want $100,000 dollars for the 2-pack of aspirin he needs. The same goes for .22 rim fire ammunition, alcohol, and so on.

People, in general, are trusting, but we are talking a major disaster, where people have come to realize that there are no guaranties that products will be available at all, and if they are, there is no telling what the 'cost' will be, once barter and trade begins to wane, and a currency is beginning to be used. They tend to want something that they have learned, and perceived, is, in whatever way, worth something to other people. Gold and silver, in our society, are perceived to be valuable.

That will carry over into the PAW, whereas paper currency probably will not, just as it pretty much never has in the past. Enough people have learned enough history for that to be considered, even if it is an unconscious consideration, which is often the case in all types of fears. So, the propensity to tend to favor gold and silver is already in most people.

I think in the very earliest days, before gold and silver became a currency, the values that makes them suitable for use as an essentially universally accepted currency, were developed by people in general.

One of the basic facts of human psyche is that people want what other people have. Rather desperately in many cases. Something very rare or difficult to obtain, that someone has for themselves, others will want to get some for themselves. So there is great competition for that limited supply. Want equals value. Since there were not many uses for gold and silver early on, but were pretty and relatively durable, and people want to show off things they have that are rare, to show their 'wealth', more and more people decided they wanted those things too. And the more humans learned that gold and silver were rather difficult to obtain, the value of those metals became entrenched in civilizations and societies.

Also, the fact that gold and silver are both elemental, and do not have to have very much in the way of processing involved to make them useable for decoration and coins, played a huge part. It seems that anything that can be 'made' as opposed to found, does not inspire confidence in its future value. Hey, if it can be made, who is to say that what I have now, that I can buy 100 eggs with, will turn out not nearly enough to get those 100 eggs because someone else just made a bunch more of it and can give twice what I have for those 100 eggs. And I cannot make any, because I do not know how.

Aluminum, stainless steel, zinc, and pretty much all other elementals and alloys, or materials that take a bunch of processing to make the material useful as a coin, will not be trusted by most, because pretty much anyone can make as much as they want at any time. Gold and silver are perceived to have a rather finite amount available. Not too many other things do, that have the other requirements to be coins in circulation. For right now, gold and silver are two of the very few items that have those requirements, and already have a history as being valuable on their own for other reasons. It does not matter too much that those reasons include pride, exclusivity, and greed.

And, I believe the trust in gold and silver is not as much as a tradition, which are usually followed just because it has always been that way, with no knowledge of why it was in the first place, and no one has had cause to question it, than it is practical experience.

With gold and silver, I believe that pretty much every day people are exposed to what made them valuable in the distant past, and continue to make them valuable. Pride of ownership due to scarcity, the related factor of exclusivity, and the greed that people have for the things they do not have, but others do and like to show it off.

I believe these factors are what gives gold and silver ‘intrinsic’ value.

Until the community sets values on the various coins, I plan to start using them at some point with the following provisos:

Based on my research on pre-1965 circulated 90% silver US coins.

(To get round numbers I used 720 ounces per $1,000 face value of halves, quarters, and dimes. 715 ounces is more accepted, but make calculations much harder, and in the real world, until melting them back into bullion picks up again, I think the microscopic difference per coin won’t be a difference.)

Personally I’m figuring (hoping) on using the ratio of thirty-six ounces of silver to one ounce of gold, just to keep it simple. One hundred pre-1965 half dollars per ounce of gold, two hundred pre-1965 quarters per ounce of gold, or five hundred pre-1965 dimes. And, of course, 36 1-oz Silver Eagles per ounce of gold. That is ten halves for a tenth ounce gold coin, twenty quarters, or fifty dimes.

With the following the base rates of exchange:
1 90% silver dime good for a decent meal (0.0020 oz gold)
1 90% silver quarter for a hour of medium labor such as gardening (0.0050 oz gold)
1 90% silver quarter for one days worth of decent food
1 90% silver quarter for one gallon of fuel
as bench marks. Everything else will be similarly calculated, including large purchases with gold, some of which will simply be whatever the market will bear, as decided by the two parties of the transaction. If they are both happy, it is a good deal.

Based on:
0.0720 oz silver per 90% silver dime
0.1800 oz silver per 90% silver quarter
0.3600 oz silver per 90% silver half

Where a $1,000 face value bag of uncirculated US pre-1965 silve dimes, quarters, and halves contains 723.4 oz of silver. The going rate of circulated coins is 715 oz of silver per bag, but splitting the difference at 720 oz per $1,000 face has the numbers above, making calculations very easy. This is a miniscule difference unless dealing with whole bags, with the intention of melting them down. For day to day use in the PAW, when the time is right, I think the numbers based on 720 oz per $1,000 face value will work better with no disadvantage to the individual customer.

With that disclaimer:
Dimes have 0.0720 ounces of silver or 13.8889 dimes for1 ounce of silver
Quarters have 0.1800 ounces of silver or 5.5556 quarters for1 ounce of silver
Halves have 0.3600 ounces of silver or 2.7778 halves for1 ounce of silver
Dollars have 0.7734 ounces of silver or 1.2930 dollars for1 ounce of silver
Silver Eagles have 1.0000 ounces of silver or 1.0000 Eagle for1 ounce of silver

Using a direct conversion, with silver at $20.00 spot:
A dime is worth $1.44
A quarter is worth $3.60
A half is worth $7.20
A dollar is worth $15.47
(Similar numbers are available using 715 ounces of silver per $1,000 face value in the spreadsheet in the Files section under More.)

With these numbers in mind, and the fact that the conversion ratio of silver to goods will be widely variable at first, before stabilizing, I think dimes will be needed desperately for the small stuff. And halves, because of the fact that there are 40% silver ones out there, and not everyone will know the difference, I don’t plan on using them at all in the PAW. Others that want to, can. Just too much hassle for me. And the same goes for Silver Dollars. Going to be a lot of controversy over their value, as a lot of them are going to be in much better shape than others, and in most cases, very much better shape than dimes and quarters. Even halves.

So I plan to limit my accumulation to dimes, quarters, and Eagles. That is not to say I would not take the others in trade, but only in certain circumstances where the person with those coins understands and agrees to the value.

For up to $500 FRNs in silver, I would do:
50% in dimes
25% in quarters
25% in Eagles

Over $500 up to $2,000 I would do:
40% in dimes
30% in quarters
30% in Eagles

Over $2,000 I would do
25% in dimes
25% in quarters
50% in Eagles

Over $5,000 for PM’s I’d start adding gold with similar ratios to 1/10 ounce, ¼ ounce, and 1 ounce Gold Eagles as used for the silver dimes, quarters and Silver Eagles, keeping the gold/silver ratio at 80% silver / 20% gold up to $10,000, then 50%/50%, and ultimately 25% silver to 75% gold when you get into the big money.

When using PMs on a regular basis, having an agreement for any given barter/trade day on what specific PM coins are worth in terms of other commodities, and posting it might be advantageous. Of course any two people making a barter/trade that includes PMs will apply their own value to the coins, but having a standard value as a reference point for those not familiar with PMs might make it much easier for them.

Posting the particulars of various PM coins would probably also help. Once I can get to it, I plan to scan in from some of the reference books I have the pages that show various PM coins and their composition, laminate them, and store them away for the future.

A factor that I have pretty much always simply dismissed as not only not a consideration, but a bad idea in general. I have come to the conclusion recently that I might have been lax in dismissing the possibility.

That is the possible use of numismatics in a prepper’s PM holdings. From the time that it became legal for US citizens to buy, own, and sell non-numismatic precious metal coins (as well as bullion items), I pretty much just ignored numismatic PM coins as not worth consideration due to their often very high premiums over non-numismatic PM coins. Recently I came to realize the following:

There are places now, and could be times in the future, as there were in the past, that precious metals bullion coins and other products were not, are not, and might not be available to people. In this case, if numismatics are available, even with significant premiums, I would, if at possible, acquire some.

These include, but are not the only numismatics, you might run into. The classic US Silver dollar. Some dates and mint marks fall into the numismatic class. Pretty much all pre-1931 US gold and silver coins, do, as well. Some specific date and mint mark circulated US silver coins are numismatics, worth far more than their silver value at the moment.

In addition, though US coins intended for circulation no longer had silver in them after 1964, except for a few 40% silver Kennedy half dollars, the US mint has occasionally minted numismatic collector sets consisting of Proof versions of a penny, a nickel, a dime, a quarter, and a half dollar for a given year, with the dime, quarter, and half dollar in 90% silver. And there are many other items the mint did strictly for collectors.

So, there are some US coins minted after 1964 that had varying amounts of silver in them. But what people had to pay for them, and the knowledge that they are scarce, it is likely the owners will want numismatic value for them. And I, for one, will only consider the silver content. I think most will do the same thing.

One reason to have some of the lesser value numismatics, is that if I have other, illegal, PMs, I would want something I could show to the authorities that a suspect purchase or exchange was conducted with legal items, since 'see, I have some', could be used to explain it.

Another is, when it comes down to it, as I do point out in the article, that I do not care what I might have paid for any given PM item (and other things too, sometimes) to acquire it. The only thing that matters is what that PM item can do for me when it really counts in the future.

And, if you stop to think about it, there have been times in the past, and quite likely will be in the future, where a numismatic coin with a specific amount of gold content has been purchased for an FRN amount, that not to much later on, a bullion coin with the same amount of gold content would cost the same amount of FRNs, simply due to the swings in the price of the PM.

So, to me, gold and silver prices right now do not mean all that much to me. If I have the money, and the PMs are available, I will pay the price, be it bullion or numismatic, if I believe that having more PMs than I might have at the time is important. Because I know, as surely as I can, that having them at some point in the future, is going to be important.

So, though I still much prefer the bullion coin choices stated before this short addition about numismatic PM coins, I now do consider numismatics when I do financial planning that includes PMs.

Just my opinion.
Day To Day Preppers