Individuals choose to purchase gold & silver coins for a variety of reasons, including as an investment, a hedge against inflation and for protection againstfinancial and economic crises. However, one of the primary concerns is to protect against a potential collapse of the dollar. Considering that most major currencies are constantly being devalued by central banks to help inflate away debt or to stimulate economic growth, there’s the possibility that at some point in time individuals will lose faith in their currencies. In fact, this has been the case historically with countries such as Germany and Zimbabwe. Current examples include Venezuela, Argentina and Turkey.
The dollar, which is still the world’s reserve currency (at least as of this writing), has often been seen as a safe haven. This is especially the case when citizens from other countries are fleeing their local currencies in search of a currency, they deem to be stable. However, if at some point in time the dollar collapses, there may be few, if any, currencies to turn to that are perceived as being safe. This is one reason why individuals purchase gold and silver coins, but from a practical standpoint, how will they be used following a currency collapse?
In this article, we’ll discuss four ways in which gold and silver coins may be used to barter or conduct commerce.
Gold & Silver Legal Tender Laws
At present, a total of 23 states have passed gold and silver legal tender laws, with Arkansas being the most recent in April of 2023. These laws have eliminated the sales tax on the sale of gold and silver coins, which is a great first step. In many cases, the sale of coins and bullion is also exempt from state income tax, if sold at a profit. However, please consult with a tax accountant to confirm that this is the case in your state.
At some point in time, we may see gold and silver trade as money for their full value without tax implications. After all, technically, gold and silver aren’t increasing in value. Rather, the dollar is losing value. Even if we don’t see federal laws passed, this doesn’t mean that gold and silver are obsolete. In fact, some businesses already accept gold and silver coins as payment for various goods and services, so it’s certainly possible that other businesses will consider doing the same in the future. The adoption of gold and silver will likely increase as the dollar continues to lose its prominence as the world’s reserve currency and in global trade.
For those of you who don’t believe that it’s conceivable that you’ll be able to use your coins as money, you may be interested to know that the Bank of Mexico, including other Mexican banks, will exchange Mexican silver libertads for the full spot price of silver. Additionally, the South African Reserve Bank will buy South African gold krugerrands, among other South African gold coins, at the full gold value every Wednesday at the bank.
Gold & Silver Exchanges
Some of our customers are concerned about the ability to exchange their gold and silver for currency in the future, if needed. One thing to remember is that historically, currencies haven’t collapsed overnight and will likely be used for a period. This means that you shouldn’t have a problem exchanging your gold and silver for dollars, at least for a time. However, we regularly tell folks that if we experience a currency collapse or hyperinflation, very few individuals or businesses will be willing to accept dollars. Rather, they will likely prefer gold and silver or possibly another currency that is deemed to be stable.
That being said, folks are still interested in knowing what their options are if they need to redeem their gold and silver coins or bullion. There are a variety of different options, including local coin dealers, online coin dealers, pawn shops, jewelry stores, “we buy gold” stores and any other businesses that have ties to the precious metals market. Furthermore, if we see a significant increase in gold and silver prices from current levels, we expect many new businesses to open to cater to the increased demand.
One last comment regarding exchanges. They’re not as likely to be a viable option under an extreme hyperinflation scenario, as everyone will look to purge themselves of dollars. In this case, you’ll be glad that you chose to hold on to your precious metals as opposed to exchanging them for pieces of paper with dead president’s faces on them. In this scenario, you may find yourself using gold and silver for bartering.
Barter
While we don’t know for certain what will be widely accepted for bartering purposes if we experience a dollar 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 an EMP attack or the downing of our electrical grid, daily market values for gold and silver will still be available to the public. This will make it easy to determine the value of your gold and silver coins at any point in time.
However, published prices may not be necessary, as exchange rates will develop through the free market even if updated figures aren’t widely available. Individuals that purchase gold and silver coins for the purposes of bartering tend to preferjunk silver, or pre-1965 90% silver dimes, quarters and half dollars. Three reasons why these coins are preferred is that they’re U.S. legal tender, are recognizable by the general public, and are available in smaller sizes or denominations, which makes them easier to trade.
Other coins that our customers purchase with the thought that they may one day need them for bartering purposes are American gold and silver eagles, most 1 oz government issued coins, as well as silver rounds and bars from recognized manufacturers. We recommend staying away from more obscure gold and silver coins as well as unmarked silver bars and rounds. The reason being is that gold and silver will be new to much of the public, so folks will be more comfortable accepting items that they recognize.
Underground Market
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 gold and silver exchange facilities or for some reason aren’t widely accepted as the medium of exchange for bartering purposes, they would likely be used in underground or black markets. These types of markets tend to develop when there are widespread shortages of essential items. More recently, parallel economies have been developed as individuals attempt to extract themselves from overreaching governments and their monopoly on the issuance of currency.
In many parts of the world, it’s a sad state of affairs. Venezuela, which has been experiencing hyperinflation for years, is suffering from supply shortages. In fact, most stores in Venezuela are out of essentials,such as toilet paper. However, we have recently read that gold and silver, including cryptocurrencies, are accepted in underground markets where these items can be acquired. While they’re likely more expensive than in the past, at least they’re available to individuals that have diversified out of the Venezuela Bolivar. Unfortunately, those individuals that didn’t see the writing on the wall are subject to waiting in long lines for their weekly rations, which in many cases aren’t sufficient to sustain a family.
Summary
In conclusion, we’re not predicting an imminent collapse of the dollar; however, historically, all fiat currencies have failed. This has been the case throughout history, and there’s no reason to believe that the dollar is exempt. In fact, when you look at the dollar’s rein as the world’s reserve currency, it’s held much longer to this status than most other currencies throughout history.
To recap, we discussed four possible scenarios with respect to the use of gold and silver coins following a monetary collapse. It’s possible that gold and silver will be used as legal tender for their actual market value, as opposed to their face value, which would be the most ideal situation. Secondly, if gold and silver coins aren’t used in day-to-day transactions, there are many potential outlets to exchange your metals. Assuming a substantial increase in gold and silver prices, we expect that additional gold and silver exchange facilities will open to meet this demand.
Another possibility is that gold and silver coins will be one of the only recognized forms of money 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. Parallel economies are already in the process of being established, so it’s not a stretch to assume that gold and silver coins and bullion will likely be the preferred forms of currency.
