What Survives the Collapse of a Government’s Currency?

I know a lot of goldbugs hate my guts because I do not constantly only say BUY and I point out that NOT only gold and silver survive the collapse of a currency.

I once had a German client who was a multimillionaire back in the 1970s. When the German government collapsed, he was buying all the old coins that were base metals for scrap. They were nickel and copper and some aluminum.  It was presumed that they were all then worthless.

The new government could issue the paper money, but they lacked the metal to strike a whole new coinage. They then announced that the old coinage would retain a value as fractions of the new currency. He became a multimillionaire overnight. I use to enjoy his stories of the transition since he lived through it there in Germany.

His stories of living through such monetary reforms helped me understand the mechanism behind such events. As I have explained, even in times of geopolitical stress, that is the period when we find the greatest number of hoards of even ancient coins.

Just like the stock market, gold has risen and fallen in value. The propaganda about Bitcoin was the same nonsense – the hedge against central banks and a “store of value” when it is simply no different from anything else that trades – it moves up and down. There is NO STORE OF VALUE in human history. Everything rises and falls. That was what Karl Marx was trying to stop – the Business Cycle of booms and busts.

Sorry, I am not a Marxist. There is a cycle to everything and that means that there is a TIME to BUY and a TIME to SELL. The stock brokers in the Great Depression told people to hold. The market always comes back. Others told them to average in. It took 25 years for the stock market to reach the old 1929 high (it exceed the 1929 high in 1954 on the Dow).

I buy gold but in coin form. The one consistent form of value historically has is generally been food if you go that far down the rabbit hole. However, a loaf of bread from 1930 will not do you much good today despite the fact it was just 12 cents back then. Now that was an investment if it would survive 100 years.

Precious Metals will do well, but I would prefer them in coin form. You may know what they are, but it is the other person who has to know before it has any value. That average person must be able to identify that it is real. That will be your problem. You won’t get change for a cup of coffee with a kilo bar of gold.

 

I have suggested the pre-1965 silver coins for small transactions. But real estate, art, ancient coins, antique cars, rare coins, and the stock market will all have some value being redenominated into whatever new currency emerges and that will depend on the government. The German stock market rose with hyperinflation and was re-denominated in the new currency in 1925. Like most other markets, it rallied and peaked going into 1929. So I’m sorry if the truth hurts. But the stock market will NOT go to ZERO and only gold will rise if the dollar crashes. There is no such period in history that hints at such nonsense. This is propaganda made up by those trying to sell gold and will say anything just like a used car salesman.

No matter what the tangible object might be,

it will rise and fall with the business cycle. It always has, and it always will.

 

 

The post What Survives the Collapse of a Government’s Currency? first appeared on Armstrong Economics.

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