Those who choose to purchase gold & silver coins do so for a variety of reasons. Those reasons may include investment purposes, a hedge against inflation and/or for protection against financial and economic crises. However, one of their primary reasons for doing so is to protect against a potential (and likely) dollar collapse.
Especially considering central banks around the world have pursued loose monetary policies since the pandemic in hopes of stimulating economic growth, there’s a real possibility their citizens will lose faith in their own currency.
There are countless examples of this occurring. Most recently, we’ve seen this happening in Turkey, Venezuela, Argentina, and Zimbabwe, where they are experiencing mass or hyperinflation.
In fact, at the time of this writing, most of the world is experiencing nearly double-digit inflation, which has taken a toll on the spending power of their citizens.
Current Situation as of Q3 2022
The U.S. dollar, which is still the world’s reserve currency, has often been viewed as a safe haven. In fact, by the third quarter of 2022, the dollar is at a 20 year high versus the Euro and a 24 year high versus the Japanese Yen. This isn’t because our monetary system is on sound footing. That’s far from the case since much of it can be attributed to world events. The best way to view it is that the dollar is the least dirty shirt in the laundry.
However, with a monetary base of $9 trillion, a national debt of over $30 trillion, annual deficits north of $1 trillion and the fact we are officially now in a recession, there’s reason to believe the dollar will weaken in time.
This is especially the case when the Federal Reserve changes their monetary policy at the end of this year or the beginning of next and begins another round of quantitative easing.
In other words, meaning the government will institute a monetary policy in which the central bank will pump more money into the financial system by purchasing bonds, which in turn will artificially reduce interest rates and in theory help stimulate growth.
The current fiscal and monetary state of the United States is one reason why many individuals purchase government minted gold and silver coins such as American Eagles or Canadian Maples.
Yet, from a practical standpoint, do you know how they should be used if we experience a monetary or currency collapse?
Here we outline five ways we predict how gold and silver coins may be used as barter or to conduct commerce. But, before we discuss how to use precious metals as a form of barter or commerce, you must first understand the legal tender laws currently in place.
Gold & Silver Legal Tender Laws
Since our original article a few years ago, a handful of states had already passed legal tender laws, making gold and silver legal tender, or more simply put, an acceptable form of currency.
Now, several years later, the number of states has nearly doubled. Who knows? Maybe by the time you read this article that number will have increased even further.
Legal tender laws have been positive for precious metals. They have eliminated state income tax on the sale of gold and silver coins, which is a great first step. In some states, it’s limited strictly to U.S. coins, while it’s broader in others.
As a side note, in our home state of Georgia, there is no sales tax on the sale of coins and currency, but unfortunately, we have yet to pass legal tender laws. Legal tender laws would eliminate any state income taxes on gains that you realize when selling coins for more than your purchase price.
Federal income taxes are still owed on profits realized from the sale of gold and silver, even in states that have passed legal tender laws, but hopefully, at some point, we’ll see the federal government also pass nationwide legal tender laws. After all, when the price of gold and silver rises, it’s not so much that these metals have increased in value, but rather that the value of the dollar has declined. We’re seeing this today with reported inflation rates of over 9%.
Again, the hope is that we will see sweeping changes to the way gold and silver are viewed by our federal and state governments.
After all, in our constitution, the only acceptable forms of payment were gold and silver specie or coinage. If that’s the case, then there should be wide use of gold and silver as a medium of exchange. Obviously, if these laws are passed prior to a dollar collapse, gold and silver coins will be widely used and traded.
Businesses That May Accept Gold & Silver
Even if we don’t see widespread federal and state legal tender laws enacted, many companies, and possibly most, may be willing to accept gold and silver coins in the midst of, or following, a monetary collapse. In fact, you might be surprised at the number of small businesses today that are willing to accept payment in the form of gold and silver coins.
Granted, your big box warehouses and Wal-Mart’s of the world aren’t likely to do so, but many individually owned companies likely will.
In fact, we regularly purchase gold and silver coins from individuals that were paid in the form of gold and silver coins. Some fields or industries that we’ve seen accept precious metals in the past and are likely to continue to do so in the future are contractors, attorneys, mechanics, doctors, dentists, and farmers. These are the type of professionals that you may need access to in any environment, but especially if there’s an economic or monetary collapse.
If you’re interested to know if any of these professionals are willing to accept gold and silver, we recommend that you inquire now so that you’ll know if this a future possibility.
It likely wouldn’t be a hard sell, as many of these individuals and companies would be better off accepting gold and silver, especially if they can do so at the current spot price of gold and silver. Plus, it is similar to paying in cash and avoids expensive credit card processing fees.
In fact, some small businesses may be willing to offer a discount when paying with precious metals. Again, you won’t know until you ask.
Gold & Silver Exchange
In an ideal world, we would see widespread passage of state and federal legal tender laws and most, if not all, companies that provide necessary goods and services would accept gold and silver. However, if that’s not the case and dollars, or some other medium of exchange are still being used and widely accepted, how will you be able to convert your precious metals into these acceptable currencies?
Fortunately, there are several potential businesses that are able and willing to exchange your gold and silver into cash, or whatever at that time is being widely accepted as currency. Possible gold and silver exchange facilities include coin dealers, pawn shops, jewelry stores and “we buy gold” stores. You may also be able to obtain direct access to a refinery.
Brokers that previously only dealt in gold and silver ETFs or mutual funds, may also expand their business to trade in physical gold and silver out of need. Additionally, other gold and silver exchanges may open to meet demand.
It’s important to remember that gold and silver hold their value under a collapsing currency, so it’s best to keep your holdings in precious metals until the need arises. This is especially important in a hyperinflationary environment, where the value of the currency is literally depreciating by the hour.
In other words, when a need arises that requires the liquidation of gold and silver, it’s best to have the purchase of the good or service that you need already lined up and a price pre-negotiated.
I don’t always barter, but when I do…
In a situation where an economy is experiencing hyperinflation and people are no longer willing to accept the government-issued currency, a barter economy may develop, at least until there is a currency reset.
While we don’t know for certain what types of items would be used for bartering following a currency collapse, it’s safe to say that gold and silver coins, which have been used as money for thousands of years, are one of the most likely candidates. Short of experiencing an EMP attack, which would wipe out the electrical grid, we would expect the market value of gold and silver to be readily available to the public.
Having access to this information will be helpful in determining how many coins, ounces or fractions of an ounce are needed for a particular good or service. If goods and services are priced in precious metals, we would expect that the prices will be relatively stable versus using a plummeting currency, which is like trying to catch a falling knife.
Many of our customers purchase gold and silver coins with the idea that they may use them for bartering at some point in the future. Individuals that purchase gold and silver coins with this in mind tend to preferjunk silver, or pre-1965 90% silver dimes, quarters and half dollars.
Two benefits are that they’re U.S. currency and are available in smaller denominations, which makes them easier to trade.
Since 90% silver coins are fractional coins, it may be a bit difficult to know how many coins are equal to an ounce of pure silver. A good rule of thumb is one ounce of silver is equal to 14 silver dimes, 5 ½ silver quarters or 2 ¾ half dollars. Or, if you use 6 quarters or 3 halves, you won’t be too far off, so these may be good figures to remember.
If you’d like to view certain coins by their weight, check out an article we did on this very topic!
Let’s say that you or the person that you’re trading with doesn’t have exactly 14 dimes, 6 quarters or 3 half dollars? How do you then determine how many coins should be used in a transaction? In this case, we recommend keeping a pocket scale with you and weighing the coins. 34.56 grams of 90% silver coins is equal to a troy ounce of pure silver
Much like our example above, if you can remember the number 35, then you should be fine.
As an example, if you’re selling an item for three ounces of silver and the buyer has a hodgepodge of different denomination 90% silver coins, continue to add coins to the scale until they weigh out at +/- 105 grams.
Additional coins and bullion that our clients typically purchase with bartering in mind include American gold and/or silver eagles, most government issued coins, such as Canadian silver maple leaf coins and Austrian silver philharmonics, as well as silver rounds and bars from recognized manufacturers, such as Engelhard, Johnson Matthey and Royal Canadian Mint.
We recommend staying away from obscure gold and silver coins as well as unmarked silver bars and rounds, as they likely would be less recognizable and liquid than the previously mentioned items. Also keep in mind the size of the items that you’re purchasing.
Investing and storing large size coins and bullion is a store of value, a wealth preservation strategy and a way to maintain your purchasing power but are less likely to be good options for bartering.
Underground Market Shopping
It’s safe to say that gold and silver coins will be in demand in some form or fashion following a monetary collapse. If they’re not used for general commerce, can’t be traded out at a gold and silver exchange facility, for some reason aren’t accepted as a medium of exchange for bartering purposes or are banned from use, such as China recently did with cryptocurrencies, they would likely be used in underground or black markets.
Let’s take a quick look back in history. Even though FDR signed Executive Order 6102 in 1933 making it illegal for U.S citizens to own gold coins, many individuals failed to comply, as is evidenced by the number of these coins still available today.
While it technically was illegal to use these coins as currency, we can presume they were traded from 1933 until 1975 when it once again became legal to own gold coins. Due to the executive order, it would not come as a surprise if some of these coins were traded in an underground or black market. Of course, it’s not quite as sinister as it may sound on the surface.
Black markets tend to develop in countries and situations where the currency is no longer trusted or accepted by the general population and widespread shortages develop.
And most shortages develop because governments implement price controls. As of this very moment, Panama is currently implementing price controls on a list of 72 items in an effort to stem the ravaging effects of inflation and to stem violent protests.
Unfortunately, price controls will only make matters worse. The reason for this is two-fold. First, if the government is importing many of the essential items consumed by their citizens, they’ll add to their national debt, which will cause the country to be less financially stable.
Secondly, local producers of goods will no longer be incentivized to produce or manufacture a product if they can’t sell their items at a profit, thus creating shortages.
Venezuela provides a good example of what happens when there is runaway inflation and mass shortages. In fact, their citizens are running out of the most basic of essentials,such as toilet paper. However, most Venezuelans are likely aware of an underground market where they can purchase these items at a premium. It’s likely that these underground markets won’t accept the Venezuelan bolivar, which has been collapsing for years, making gold and silver coins a likely option for these types of transactions.
Summary
In conclusion, we’re not predicting an imminent collapse of the dollar; however, historically speaking, all fiat (non-commodity backed) currencies have failed. This has been the case throughout time, and there’s no reason to believe that the dollar isn’t an exception to the same fate.
We’ve discussed five possible scenarios where gold and silver coins may be used following a substantial devaluation or collapse of the dollar. As a result, it’s possible that gold and silver will be used as legal tender for their actual market value.
Secondly, many different types of businesses or professions would likely be willing to accept precious metals as a form of payment.
If gold and silver coins aren’t used in daily commerce, we would expect for existing gold and silver exchanges to provide a necessary way to exchange your precious metals into the accepted form of currency at that time. Another possibility is that gold and silver coins will be used for bartering purposes. This is one scenario that many of our customers are preparing for.
Lastly, it’s possible that underground or black markets will develop if there are nationwide shortages of goods and services, with gold and silver coins being likely candidates to purchase these hard-to-find essential items.
Keep in mind that this is all merely speculation on our part, and we don’t have a crystal ball or inside knowledge of how the economy would operate following a dollar collapse.
However, we have taken into consideration historical precedence and how situations have played out in other countries to arrive at what we believe to be reasonable assumptions.
If we’ve convinced you that gold and silver coins are a good way to insulate yourself against potential currency issues, we welcome you to .
Not only do we offer industry-leading customer service but have the knowledge and experience to answer any precious metal-related questions that you might have.
Give us a call today at 678-515-5763!
Happy Treasure Hunting!
As a seasoned expert in precious metals and their role in economic scenarios, I find the information presented in the article aligning well with the current global economic landscape. The evidence provided, such as the recent examples of hyperinflation in countries like Turkey, Venezuela, Argentina, and Zimbabwe, underscores the vulnerability of fiat currencies and the increasing interest in gold and silver as a hedge against economic uncertainties.
The article rightly points out that the primary motivation for individuals purchasing gold and silver coins is often to protect against the potential collapse of their national currency, especially considering the loose monetary policies adopted by central banks globally post-pandemic. The discussion on the fiscal and monetary state of the United States, with a monetary base of $9 trillion and a national debt exceeding $30 trillion, adds weight to the argument that the U.S. dollar may weaken over time.
The author correctly highlights the significance of legal tender laws in various states, emphasizing their positive impact on precious metals by eliminating state income taxes on the sale of gold and silver coins. The call for potential changes at the federal level, aligning with constitutional principles that recognize gold and silver as acceptable forms of payment, adds depth to the discussion.
The breakdown of potential businesses that may accept gold and silver coins, including contractors, attorneys, mechanics, doctors, dentists, and farmers, is practical and aligns with the historical use of precious metals in trade. The emphasis on inquiring now about the willingness of these professionals to accept precious metals is a proactive approach.
The article also covers the role of gold and silver exchanges, providing information on potential facilities for converting precious metals into widely accepted currencies. The mention of coin dealers, pawn shops, jewelry stores, and even brokers expanding their businesses to trade in physical gold and silver demonstrates a comprehensive understanding of the potential avenues for liquidity.
The section on bartering in a hyperinflationary environment is insightful, particularly the preference for junk silver due to its smaller denominations and ease of trade. The practical advice on keeping a pocket scale for weighing coins in transactions is a valuable tip for individuals considering the practical aspects of using precious metals in daily commerce.
Finally, the exploration of underground markets and the role of gold and silver coins in such scenarios adds a layer of realism to the discussion. Drawing on historical examples, like the use of gold coins during the period of FDR's Executive Order 6102, strengthens the argument that precious metals may find utility in situations where traditional currencies face severe trust issues.
In summary, the article provides a comprehensive and well-informed analysis of the role of gold and silver coins in a variety of economic scenarios, backed by evidence from historical and contemporary events. It serves as a valuable resource for individuals seeking to understand the practical aspects of using precious metals as a safeguard against potential currency challenges.
