Bartering goods: Precious metals or other products?

[Gazrok]

I still think the best economic (and safety) hedge is going to be to become a producer of a wanted good or service that takes skill and knowledge to do. Whether it's growing food, medicine, or fixing things, etc., those folks will have a pretty good meal ticket...and be undesirable to kill as their skills are much more useful with them alive....

 

[Brent S]

I agree that the US dollar isn't likely to have any value, but I think some jewelry will still be valuable as people will still desire it. Gold has been sought after since the beginning of time, and even though you can't eat it, I believe it will still have value. I like what gazrok said about skills, I think being able to produce a tangible product will be valuable. I can't predict exactly how the world will change, as no one can, so I'm trying to cover as many bases as I can. I have a fair amount of ammo saved, am learning not just to produce food but to preserve it also, I have a little bit of silver and jewelry, am producing wine, have gathered lots of tools, have some medical skills, etc. I don't specialize in any one thing, and don't claim to be an expert in anything, but I'm working on a well balanced and varied set of supplies and skills. My gut feeling is that we are going to have a collapse, and some sort of military take over. The problem is how long before there is a takeover, and how bad will it get for the six months or so before some order is restored. Eating, drinking, and security are all going to be difficult, I suggest we all try to cover as many bases as we can. Good luck to us all!

 

[Myrrph]

i agree with the idea of having skills and resources to do something. The ability to build and develop has always been us human being's greatest asset, next to our opposable thumbs that is.

I don't think I said to keep gold. I meant to build a supply dump to collect them, because eventually with stabilization comes the need for currency.

 

[jimLE]

i admit,the economy might/will stabilize after a complete and total economic collapse.(BUT) what if that day don't ever come in our life time?what you gonna do with the metals that are considered worthless.? i believe one jar for home canned food will be worth more then 200 pounds of gold or silver 100/200 years after a economic collapse.those metals wont build me a home,or plant and grow me a garden.they wont nurse me back to good health when im sick.they wont make any repairs.they wont attend to life stock.one can of store bought vegetables will be worth more to me then those metals.only metals i see having value is lead on account it can be melted for bullets for ammo and sinkers for fishing.and cooper for wind mill and other uses it has value in..

 

[Mountain trapper]

i admit,the economy might/will stabilize after a complete and total economic collapse.(BUT) what if that day don't ever come in our life time?what you gonna do with the metals that are considered worthless.? i believe one jar for home canned food will be worth more then 200 pounds of gold or silver 100/200 years after a economic collapse.those metals wont build me a home,or plant and grow me a garden.they wont nurse me back to good health when im sick.they wont make any repairs.they wont attend to life stock.one can of store bought vegetables will be worth more to me then those metals.only metals i see having value is lead on account it can be melted for bullets for ammo and sinkers for fishing.and cooper for wind mill and other uses it has value in..

I agree that saving (hording) tools, seeds, lead, ammo, etc. and learning the skills needed to be self-sufficient will be critical during a total economic collapse. And they will be the more valuable than precious metals in the short term. However, I do believe that its a little arrogant to think that the only true form of money (gold & silver) that has been accepted since the beginning of time, will become worthless. I think the wise thing to do is an all of the above approach. While I do recommend keeping some gold and silver on hand, it is at the bottom of my list after land, food, water, shelter, protection, etc.

 

[jimLE]

good point,and true.im not saying it'll be totally worthless no matter what.it'll be worthless enough to me where i wont stock up on it.now lets say a complete economic collapse happens.and each of us here survive it.now lets say things settle down where hords of ppl stop comeing by for what ever reason(s).now if things are looking good 10/15 years later.chances are,i might trade/sell you some food clothes or what ever for some gold and/or silver.but not untill then.like you pointed out. a home/land/food/weapons and ammo/skills/seeds and other things come first.and thats my goal.im going with what will not only help survive and live.but stocking up on extra items of need will help 10/20 years from now..

 

[DrHenley]

This subject has been studied at length many times by "experts." Well, we all know about "experts" but let's not "throw out the baby with the bathwater." Some of what they say contains valuable information, even if they come to the wrong conclusions.

Ancient Lydia hit upon an idea somewhere around 700 B.C. that was so good, it has been copied by every civilization since. We'll look at why when I get back from the holidays and hopefully we can all learn something.

 

[Brent S]

I just saw a show about the US dollar today.(kind of depressing for cmass day.). It was pretty serious about our dollar, which has been the world standard for so long, is quickly slipping. There were multiple 'experts' talking about gold and silver, and every one of them were pro for it. The part I was most interested in was when countries currency tanked in the past, it usually happened really quickly. They had several examples, and in the early stages of it, people lined up to buy tangible supplies and goods, but it ran out immediately. I'm happy to be with a group that is wise enough to think about these things beforehand.

 

[Myrrph]

i am now packing trading stuff. I will NOT trade food though.

Spare matches, Hotel Soap, Shampoo etc ... what else is good?

 

[Gazrok]

what else is good

Cigarettes! Small, light, easily divisible, and will give you a huge return on your purchasing power come SHTF.

 

[Myrrph]

MANNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN.

You have no idea how much a pack of smokes costs here. lol. Here in SG we have a sin tax on Alcohol and Cigarettes. A pack of 20 ciggs cost about 14 to 20 bucks SGD. Thats about erm.. 10 to 16 USD a pack.

Don't even get me started on Alcohol ... like whiskey, tequila and vodka.

 

[Gazrok]

Yikes! I thought it was bad here at about $5 a pack... Yeah, probably wouldn't be a good investment in your neck of the woods. Geez, how does anyone afford to smoke? I'm not even a smoker (never could see throwing all that money away), but I know how much someone jonesing for one will do to get one.

 

[Myrrph]

lol. its a sin tax. people try to smuggle from Malaysia over here. If they get caught, the fine is 10x the tax of the cigarettes. I had a friend who got jailed for 6 months for selling illegal ciggies.

Guess how much is a can of beer? 330 ml

 

[jimLE]

i been buying packs of the cheap filtered cigars for some time now.i just bought 2 cartons of them for $29.23..and that comes out to $1.46 a pack..now lets say i have 100 cartons of them.one pack will get me what i need in the way of food and other things of need

 

[DrHenley]

You can roll your own a lot cheaper than buying them in the pack. I am allergic to cigarette smoke, but not pipe tobacco smoke. I think it is the additives that keep the tobacco burning when you aren't puffing on it. If I were to smoke cigarettes, I'd have to roll my own from pipe tobacco.
Virginia Red Cake (McClelland Bulk No.5100) is what I would use. You'll need to let it air dry first.

 

[Gazrok]

Come SHTF, I'd likely be growing/processing tobacco just for that purpose.

 

[Brent S]

Cigarettes! Small, light, easily divisible, and will give you a huge return on your purchasing power come SHTF.

Yeah, vices will always be valuable. I learned to make wine from cans of fruit, welches grape juice concentrate, or fresh fruit. I even read receipies for beet, rutebega, and asparagus wine. , which sounded pretty gross but I guess you have to work with what's available.

 

[Brent S]

You can roll your own a lot cheaper than buying them in the pack. I am allergic to cigarette smoke, but not pipe tobacco smoke. I think it is the additives that keep the tobacco burning when you aren't puffing on it. If I were to smoke cigarettes, I'd have to roll my own from pipe tobacco.
Virginia Red Cake (McClelland Bulk No.5100) is what I would use. You'll need to let it air dry first.

Man, that brings back fond memories! I used to love a cherry/walnut flavored pipe tobacco, but when I quit cigarettes long ago I figured I better stay away from it all.

 

[Brent S]

This subject has been studied at length many times by "experts." Well, we all know about "experts" but let's not "throw out the baby with the bathwater." Some of what they say contains valuable information, even if they come to the wrong conclusions.

Ancient Lydia hit upon an idea somewhere around 700 B.C. that was so good, it has been copied by every civilization since. We'll look at why when I get back from the holidays and hopefully we can all learn something.

I'd be interested to hear what your getting at here.

 

[DrHenley]

I'd be interested to hear what your getting at here.

I haven't gotten caught up from the holidays yet. Just saw my daughter off to school this morning, so maybe this week things will settle down a little.

Oh, I might as well start the ball rolling though...

Barter, of course, is the natural means of commerce. You have something I want, I have something you want, and we trade. In primitive barter, there are no middle men, no "robber barons," no government issued currency, no Amazon.com, Big Box stores, or distribution networks, profit margins, etc.

You had Y, I had Z. Now I have Y you have Z. It's easy to understand the allure.

In primitive barter, it is easier to understand wealth creation than in the modern monetary system. I plant some seeds, harvest crops and have food to trade. I can trade the food for far more goods than I could have traded just the seeds. I have created "wealth." It's not a zero sum game. I'm not stealing anything from the poor to create that wealth. There is now food where there was only seeds.

New let's look at problems that arise:

I have a cow I want to trade. You have two chickens you want to trade. I want chickens and you want a cow. We have the first condition necessary: "The Coincidence of Wants"

But I am not about to give up my cow for two chickens! I reckon my cow is worth 50 chickens, but even if you had 50 chickens, I only want two.

If I could give you 1/25 of my cow, that would be an equitable trade, but that leaves me with 24/25ths of a cow that will rapidly deteriorate once I chop off 1/25th of it.

My cow is not divisible...not as a cow anyhow. As beef it is divisible, but I need a lot more people who want beef. I'll need to find a lot of people who want beef, and they will all have to have something I want.

But you don't want beef anyhow...you want a cow...a whole cow.

What we need is a "Unit of Account." We had something like that when I said that my cow is worth 50 chickens. We could put a value on everything by how many chickens it is worth. Except what if you want one egg? How many chickens is one egg worth? For large items like cows, chickens work as a unit of account, but for smaller items, it doesn't work.

OK, then let's use eggs as a unit of account. Put a value on everything by how many eggs it is worth. I actually did some computer work for a friend and charged her eggs!

Now that we have something we can use as a small unit of account, let's see if there are any problems in using that as a store of wealth. Let's say I am a wealthy man with 10,000 eggs. I've been accumulating those eggs for several years...

 

[DrHenley]

Eggs have a problem. They don't retain their value over a long period of time. A rotten egg is not worth anything.

Another problem with eggs is that people usually eat them. They have more worth if eaten than if saved. Even if we pick something that has a longer shelf life...let's say pecans, we still have the problem that they get eaten.

What our ancestors tens of thousands of years ago did was to use something that didn't get eaten as a medium of exchange - sea shells. There is a particular type of sea shell, a cowry shell, that was used as a medium of exchange on three continents. It is sometimes called a "money cowry." And the primitive type of money is known as "shell money."

Cowry shells had no intrinsic value other that as ornamentation. YOU CAN'T EAT THEM! (where have I heard that before...)

Tens of thousands of years ago, there was no way to manufacture artificial cowry shells, so the supply was limited to what people found on the seashore. It took work to harvest them, and they were only found in certain places. This provided a natural limit to their quantity.

Cowry shells had a very long shelf life. Each shell was only worth a small amount. They were all about the same size, so they were all worth approximately the same. This gives them a few important properties necessary for them to act as money.

They were a convenient unit of account.
They were a store of wealth since they were durable.
They were fungible (your cowry shell is worth the same as my cowry shell)
They had a limited supply, but in sufficient quantities to use in trade.
They could not be counterfeited.
They were not consumable. If you had a cowry shell, you either kept it intact or traded it. YOU DIDN'T EAT IT, PLANT IT, SMOKE IT, or do anything else with it that destroyed its value as a medium of exchange. You might put some holes in it to make it into a bead, but it still kept its value.

Here is a painting of an Arab trader with a bag of shell money circa 1865:

 

[DrHenley]

Even though shell money was practically the global currency at one time, it still lacked two essential properties of money. For one, if you stepped on a shell, it was no longer a shell. It broke into a hundred pieces that were practically worthless. It lacked divisibility, and it was not durable mechanically.

Enter precious metals...

Man first found gold attractive around 40,000 B.C. We've found pieces of gold in a cave from the Paleolithic Era. Gold was used as ornamentation, just like cowry shells, but gold did not naturally possess one of the essential properties of money that cowry shells had - it was not, in of itself, a unit of account. Gold came in random bits and chunks, none of which were the same. My lump of gold was not worth the same as your lump of gold.

But it possessed two properties that were important. It was indestructible for one. It was chemically inert. So a lump of gold left in a cave 40,000 years ago is still the exact same lump of gold today - unchanged in 40,000 years. And since it is inert, it is completely non-toxic. And it was easily divisible. One of the reasons gold was valued over other shiny metals such as iron pyrite ("fool's gold") is that it is easy to shape it. It can be melted, poured, beaten, stamped and worked endlessly without cracking or crumbling. And it stays shiny throughout.

The Egyptians fashioned ceremonial jewelry from gold around 3,000 B.C. Yet their medium of exchange was not gold but barley. They had bars of gold, but that is what we call "bullion" not "money." Bars were, however, a step towards standardizing the weight of quantities of gold.

Gold and silver were both used as mediums of exchange several thousand years ago, but until there were standardized weights and measures, there was no convenient unit of account. The first recorded unit of account of gold and silver, around 3,000 B.C. was the shekel, which was originally a measure of a quantity of barley. 180 grains of barley to be exact. One grain was literally one kernel of barley. The grain, the weight of one grain of barley, has survived as a unit of measure over 5,000 years and is still used in the United States today! We still use the "grain" as a unit of weight in reloading ammunition. A 30 caliber, 180 grain bullet weighs a shekel!

 

[Brent S]

Very interesting read, money really was probably one of the most important things that man ever came up with.

 

[DrHenley]

There is a debate over whether shell money is truly money. There is a similar debate over whether money is something created by governments, or something man came up with independent of government.

And as you might imagine, those that think money is something that was created by governments don't think shell money was really money. They also probably believe that the current U.S. Dollar is "real" money.

If you believe that shell money was really money, you have a problem explaining how it is that money was a creation of governments. Shell money was not issued by a central bank. It was not certified by any government. It was simply picked up off the seashore. Yet it served the role of money for thousands of years...up until the 19th century in some parts of Africa.

So why do people think money is something a government has to issue? We know from our own history in the U.S. that various banknotes were issued at times independent of the government.

Around 1100 B.C. the Chinese actually made bronze cowry shells to use as substitutes for actual shells. Then around 1000 B.C. they began making bronze knives that were used as money. Various other shaped metallic objects were used in different countries, some bronze, some iron, some silver.

Somewhere around 700 B.C., lumps of electrum, which is a naturally occurring alloy of gold and silver, were shaped into small uniform pieces and stamped with a design by private individuals. Then the King of Lydia got into the act and issued the first money that satisfied every definition of money - the stater - an electrum coin. Since the stater was issued by the government, the weight and purity were consistent.

What made the stater different than cowry shells or bronze coins was that the value of a stater was the value of the gold used to make it. The stater was simply a standard quantity of gold, worth no more than a lump of gold of the same weight, but because they were consistent, people did not have to weigh them to determine their value.

The Stater was the first money that satisfies the following properties of money:

• Medium of exchange
• Unit of account
• Portable
• Durable
• Divisible
• Fungible
• Store of Value

The U.S. Dollar satisfies all but the last. It is not a store of value over a long period of time. It's value gradually decreases over time. It is "currency."

Yet the U.S., and most major countries in the world today actually do issue "real money."

United States

Great Britain

Russia

China

Canada

Australia

France

 

[DrHenley]

Let's look at the reasons barter always ends up being conducted through a medium of exchange. Let's say we have a spinach farmer and a tomato farmer. The spinach farmer needs tomatoes and the tomato farmer needs spinach. We have the "coincidence of wants" but there is a problem. When the spinach is harvested in late fall, there are no tomatoes. And when the tomatoes are harvested in summer, there is no spinach. Neither will keep long enough to conduct a direct trade. So even though the spinach farmer has something to trade with the tomato farmer, he can't conduct a direct trade.

The tomato farmer could just give the spinach farmer some tomatoes when they are ripe, and get an IOU from the spinach farmer. But what if the spinach crop fails? Or the spinach farmer dies? These IOUs are a form of "fiat money" - just like the dollar is today. Their worth is based on future production. The United States' first experiment with fiat money was the Continental. How did that experiment turn out? Well there was an expression: "Not worth a Continental." The Continental became synonymous with something that was worthless.

Another option would be to trade indirectly though a medium of exchange - something that doesn't rot quickly. Grains have historically been used for that by numerous civilizations since they have a much longer shelf life than tomatoes or spinach, and they are finely divisible. This is called "commodity money." Other forms of commodity money that have been used are cattle, salt, oil, coal, silver, gold, cigarettes, ammunition, and sea shells.

Let's go back to the early monetary history of the United States. Even though the United States wasn't able to issue a stable currency in sufficient quantities at the time, another country, Spain, was. And because the Spanish Peso, also known as the "Piece of Eight," or the "Milled Spanish Dollar" was abundant thanks to piracy in the Caribbean, and was the most trusted silver coin in the world at the time, the United States recognized the Spanish Milled Dollar as legal tender in the Coinage Act of 1792.

The importance of the Spanish Milled Dollar in the history of U.S. money is significant. The American Silver Dollar is based on the Spanish Milled Dollar. But since the Spanish coins in circulation had been around for a long time, they were worn. So what Alexander Hamilton did was to take a large sample of Spanish Milled Dollars, weigh them and measure them and take the average size and weight of a Spanish Milled Dollar in circulation, and set that as the size and weight of an American Silver Dollar. The U.S. Silver Dollar still has approximately the same size, weight and purity today:
Composition: Silver
Fineness: 0.9000
Weight: 26.7300g
ASW: 0.7734oz
Diameter: 38.1mm

 

[Gazrok]

Excellent history lesson. The "unit of account" idea is perhaps the core idea. I have no doubt that post SHTF, some kind of unit of account would be established. But, I doubt it would be precious metals again, or at least if so, then a) your pre SHTF metal would have WAY less buying power than before the SHTF, and b) it won't be for quite some time after the event.

Really interesting note on the unit of account not being consumable. That's a key factor I haven't really thought of before. Thanks. I think the first unit of account is probably going to be tiered....
Tier 1 - Matches (sticks) "How many sticks for that can of food?"
Tier 2 - Cigarettes (cigs) "How many cigs for that clip of bullets?"

 

[DrHenley]

Let me expound a bit on the significance of the Spanish Milled Dollar.

Spain had silver mines and mints in nearly all of their Central American and South American colonies. Spanish Galleons sailed from both the East coast and the West coast laden with silver. On the East coast, the ships were bound primarily for Spain, where the silver was then melted down, debased and re-coined.` The Spainsh Milled Dollar was a unit of account for the silver, a way of counting silver. So they primarily coined whole Dollars and not much change. The Caribbean was between the East Coast and Spain, and provided a base of operations for pirates that preyed on Spanish galleons.

The Spaniards called them "Pesos." Pirates called them "Pieces of Eight." A Spanish Dollar was worth 8 Reals. There were smaller denomination coins, but the mints in the New World primarily minted whole dollars. This caused a shortage of smaller coins. Since the value of a Spanish Dollar was based on the silver content, you could chop a dollar in half and have two half dollars. You could then chop the halves in half, and have quarter dollars.

Here is a whole Spanish Milled Dollar:

Notice two things:

The 8R stands for 8 Reals. Notice the column with the "S" shaped scroll. This coin was the original silver dollar of America. And the symbol for a dollar is an "S" with a vertical line through it: $. Now you know where it came from! During the Colonial period, paper money was either redeemable in shillings or Spanish Milled Dollars.

Because of the shortage of smaller denomination coins, silver dollars were simply cut to make change. For the Spanish, this was convenient since a Spanish dollar was worth 8 Reals. A half dollar worth 4 Reals, a quarter dollar worth 2 Reals, and an eighth dollar worth 1 Real. To make change, you chop a dollar in half, chop the halves in half, and then chop the quarters in half.

This is what a quarter would have looked like:

Now as most of you know, a quarter is sometimes referred to as "two bits" but most of you probably do not know why. One "bit" was an eighth of a dollar - one Real.

Here are two bits:

Now you also know why the pirates called Spanish dollars "Pieces of Eight."

If you had some change made of chopped up Spanish Dollars in your pocket, you had a pocket full of "bits and pieces."

America settled on a decimal monetary system. And in that decimal monetary system, one bit was worth 12 1/2 cents, an awkward amount. The closest coin to a bit was a disme (that's how it was originally spelled), 10 cents.

We have this account from Robert Louis Stevenson in his book Across The Plains, about the complications of using bits in a decimal monetary system:

In the Pacific States they have made a bolder push for complexity, and settle their affairs by a coin that no longer exists – the BIT, or old Mexican real. The supposed value of the bit is twelve and a half cents, eight to the dollar. When it comes to two bits, the quarter-dollar stands for the required amount. But how about an odd bit? The nearest coin to it is a dime, which is, short by a fifth. That, then, is called a SHORT bit. If you have one, you lay it triumphantly down, and save two and a half cents. But if you have not, and lay down a quarter, the bar-keeper or shopman calmly tenders you a dime by way of change; and thus you have paid what is called a LONG BIT, and lost two and a half cents, or even, by comparison with a short bit, five cents.

 

[Myrrph]

gosh. EXCELLENT lesson.

 

[DrHenley]

Is this a dollar?

Here is the definition of a Dollar set forth in the Coinage Act of 1792:

DOLLARS OR UNITS--each to be of the value of a Spanish milled dollar as the same is now current, and to contain three hundred and seventy-one grains and four sixteenth parts of a grain of pure, or four hundred and sixteen grains of standard silver.

By the definition in the Coinage Act of 1792, this is a Dollar:

And this is a Dollar:

And this is a Dollar:

And this is a Dollar:

To this very day, the United States Mint produces Dollars according to the specification set out in the Coinage Act of 1792.

This Continental $20 note was not actually fiat money:

In fact, it wasn't money at all. It was simply an IOU for 20 Spanish Milled Dollars. But the Continental Congress decided not to honor the original terms of the promissory note and that's when it's value began to plummet.

In 1778, the Continental was worth 1/5th of its face value. By 1780 it was only worth 1/40th of its face value.

So ask yourself this: If a $20 Continental note that says it is worth 20 Spanish Milled Dollars, but in actuality is only worth 1/2 of a Spanish Milled Dollar, then is it really a $20 bill?

A dollar bill started out as an IOU for a silver dollar. They tinkered with it some, but United States dollar bills were worth exactly the same as Silver Dollars all the way up until 1965. In other words, the IOUs were good. In 1965, the United States decided to completely debase the coinage (and stopped making dollar coins altogether for a few years). They no longer honored the IOUs.

From that point on, the paper dollar's value began to fall. Right now, the dollar bill is worth 1/15th of a Dollar. In other words, the silver in a silver dollar is worth 15 paper "dollars."

So is this a Dollar?

Or is this?

 

[DrHenley]

So what does it all mean? In the American experience, when faced with a complete monetary collapse, the people quickly reverted to a foreign currency. But that currency had been around for a couple hundred years and was familiar. Would anything similar happen today if the dollar completely collapsed? Now instead of a couple hundred years of a foreign currency, we've had more than a couple hundred years of dollars. They were honest dollars until 1965. People have been conditioned to look at the Federal Reserve Note as good money - even though it has been eroding right before their eyes for 50 years.

The world has had global currency crises a number of times. But are the conditions today similar enough to past situations that we can make predictions based on history. Our almost total reliance on digital money is something new. Monetizing the debt is not new. In fact, Benjamin Franklin wrote that the inflation of the Continental was in effect a tax that payed the war debt. There is the little dirty secret that you never hear discussed in the media. Governments learned long ago that they can quietly tax their citizens though inflation. As long as the inflation is low enough, people get accustomed to it.

So in some senses we've been here before, but in other ways we are in uncharted waters.

If the dollar were to be worthless tomorrow what would happen to the economy? For one thing, people would be reluctant to sell items they perceived to be of value, like food, clothing, ammunition, etc.

What they don't tell you in the history books is that this was one of the big contributing factors to the miserable winter Washington spent in Valley Forge with the Continental Army. As the Continental depreciated, people simply refused to accept it. The Continental Congress stepped in in January of 1776 to pass a law requiring people to accept the Continental: ""whoever should refuse to receive in payment Continental bills, should be declared and treated as an enemy of his country and be excluded from inter-course with its inhabitants".

When required to accept the Continental, people just refused to sell things. At one point Washington lamented: "A wagon load of money will scarcely purchase a wagon load of provisions".

You hear the same sentiment here on this board. People have declared that they will not sell their food or ammunition in an economic collapse.