BARTER ECONOMICS 101- Part 2
The Practical Application of Gold and Silver in the Coming Barter Economy
by Michael Trudeau, Economic Advisor
and Monetary Specialist – ColonialResources.Com
…..continued from September, 2009 –
For my family’s barter material, I have several basic but very important criteria that I meet before I add gold or silver to the coffers.
First, I try to own only metals that do not have dealer reporting requirements. Dealers are required to report the sale of most bullion type items. A bullion item is an item that’s only value is the intrinsic value or value of the metal itself.
Second, is it a product that would be protected against government confiscation? The government seized all privately held gold in 1933 when President Franklin Roosevelt signed Executive Order 6102 outlawing the hoarding of gold and gold coins. In the Executive Order several exemptions were noted for such amounts of gold as required for industry, profession or art. For example, jewelers were allowed to own enough gold for jewelry purposes. Dentists were allowed to have gold on hand for their practice and collectors were allowed rare or unusual coins having a recognized special value to collectors. Collector coins or “numismatics” are coins that have a value or premium above its intrinsic or metal value.
Third, I must (and you should) own a product that is readily recognizable by most everybody in the land. This criterion is very important. For a moment imagine a world where the grocery stores have all been emptied and no one will accept a paper dollar in exchange for goods or services. I imagine by this point, we’ll be seeing armed home invasions by roving gangs stealing food as well as people trying to swindle or cheat others out of their food. We may find ourselves under martial law, but no matter the scenario, you are better off having a product recognized by the average citizen to use for barter.
Plenty of people have told me that they have purchased South African Krugerrands, the Canadian Maple Leafs, or American Eagle gold coins for the purpose of barter. Although they all have their good points, i.e., more gold for the dollar, a higher level of purity, or they’re just “darn pretty.” None of these coins would be readily recognized by the average person. How many people do you suppose have ever held a South African Krugerrand? The Krugerrand is probably one of the most popular gold coins in the world, but again, how many of your neighbors do you think have ever held one? The same problem exists with the Maple Leaf or American Eagle.
Fourth, I want a product that can be exchanged for goods and services without creating the problem of “making change.” Again, this would prove problematic for the Kruggerand, Maple Leaf and American Eagle in making change after a purchase. Take for example; you’d like to trade some gold for a few chickens with an area farmer. How could he make change? As I write this, gold is trading around $850 per ounce. I along with many of my contemporaries feel that a collapse such as we’ve described here could easily push gold over $4000 an ounce. That could be like going to the hotdog stand today with a thousand dollar bill and expecting them to readily make change.
Lastly, after I’ve met the first four criteria, I simply want to get the most metal for my money! Having said that, there are two products that I recommend above all others for use in a barter economy.
First, for day-to-day transactions, I recommend the old U.S. silver dollars. Almost everyone has seen an old silver dollar at one time or another, so having people recognize them will not be an issue.
The US minted two varieties of silver dollars: (1) the Morgan dollar, minted from 1878 through 1921, and (2) the Peace dollar minted from 1921 through 1935. I recommend them in a circulated condition where the premium above the silver content is minimal. Either one would be recognized by most any farmer in the land (most of them used to spend them) and with a relatively low value (at this time approximately $20 or so each), making change is no longer an issue. Since they are classified as collectables, they trade without any form of dealer reporting requirement, so the transaction is completely private, which is not so with bullion products like the Kruggerand or Maple Leaf.
My second recommendation for use in a barter economy is the gold Modern Commemoratives put out by the US Mint. Started as a series of “collectable” coins, several of the coins in the series now trade just above their melt value so they offer a tremendous amount of gold in a coin that has been defined by the treasury as “collectable.” They trade privately, and would be exempted if the government calls in the bullion again like they did 1933. The Modern Commemoratives come in either a half-ounce piece or several varieties of quarter-ounce pieces. Gold should be used more as a store of wealth, or as a medium of exchange for larger purchases as opposed to day-to-day barter. Many of our clients have traded in their bullion products for products that have a more practical application in an economy as described here.
A few words on gold confiscation. The U.S. government confiscated gold from the citizens in 1933 as noted above. The premise for such a confiscation of the people’s wealth is actually covered by the “Eminent Domain” clause in the Fifth Amendment of the U.S. Constitution. It basically states that the government can take anything they want from us after they meet two specific rules. First, they must demonstrate that it is for the good of the country and they must give “fair market value” before they can seize our possessions.
How does the government benefit from calling in the gold if they must compensate us for it at fair market value? Here comes an interesting, if not alarming bit of information.
The governments “official” price for gold is $42.22 per ounce. You read the price correctly, just $42.22 per ounce! This price has been upheld by a Supreme Court decision as recent as 1984 in the case of TWA vs. Franklin Mint, and the official gold price listed on the U.S. Treasury’s website is $42.22 per ounce.
This is no throwback from some bygone era, these guys mean business!
The government need only state that the gold is needed to “shore up the weak dollar” meeting rule number one, (that it is for the good of the country), and to give us a check in the amount of $42.22 for each ounce of gold confiscated meeting rule number two (fair market value). This, however, is exactly what protects the “collectable” coins from being confiscated. If the government uses eminent domain to legally take bullion at $42.22 per ounce, they cannot then use the same law to take the collectable coins because each collectable coin trades at a different value and would need to be independently evaluated. Therefore, the fair market value would be different for each and every coin.
Many of our clients have traded their bullion for products that have a more practical application in an economy as we discussed here. Colonial Resources Inc. is a very aggressive buyer on the type of products that we see as being used in a barter type economy. As such, we can offer a good product at a great value to our clients. I can’t stress enough that the time to prepare and protect ourselves and our families from the threats discussed in this article, is now. Silver dollars are finite in supply. They are definitely becoming harder to find in quantity as the state of the economy continues to deteriorate.
If you have interest in learning how to privately acquire gold and silver coins,
or you simply want more information, please contact us at
Colonial Resources at 1-763-219-8895 and ask for Terry Sachetti or Email Us Here
and TELL US YOU READ THIS ON the MastersConnection!
