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PeakOil is You

PeakOil is You

THE Silver & Gold Thread (merged)

Discussions about the economic and financial ramifications of PEAK OIL

Re: When will you sell your Silver/Gold?

Unread postby mattduke » Sat 16 Apr 2011, 08:30:55

When the wars are over, the budget is balanced, and there is no longer a trade deficit.
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Re: When will you sell your Silver/Gold?

Unread postby Outcast_Searcher » Sat 16 Apr 2011, 11:48:19

There are really two basic issues here.

1). When will you sell your TRADING position, which may be in a metals ETF, for example, for convenience and efficiency?

For me, I'll gradually sell those, depending on price vs. news. IF they actually show meaningful, sustainable progress cutting about 80% of the deficits during this administration, I'd unload my trading long position in a heartbeat. I don't expect that is much more likely than that they'll come up with a meaningful strategic energy policy.

2). When will you sell your CORE position, which is a financial survival hedge against the fact that all paper currencies are FIAT?

For me, that's never. Junk silver coins, which should be tradable for small value items are my favorite holding there. The core holding in gold is nice, but I don't see trading a 1 oz. gold maple leaf for, say, a can of soup.
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What to do with all this gold and silver?

Unread postby some_math_guy » Sat 02 Jun 2012, 07:37:04

Hi everybody, it's been some years since I posted on peakoil.com, but I was a regular poster from 2005-2009, and what I learned here formed the basis of my personal investing strategy over the past 7 years.

I am 34 now and work as a statistician, and since 2005 have been investing approximately 15% of my annual income in physical precious metals (gold and silver), based on my understanding that peak oil would soon be upon us (2006 appears to have been the global peak of conventional oil production), which would be the end of the age of cheap oil (oil hit 150$/barrel in 2008 and has averaged 110$/barrel since the end of 2010), which would cause recurring, deepening recessions in which the price of oil would fall dramatically (30$ in 2009), but then shoot right back up again once economic growth started up again (120$ in 2011), causing another recession with falling oil prices and slowing economic growth (2012), etc. Eventually, as we get further down the depletion curve, these recessions will become economic depressions, one the world will never get out of until we transition to a steady-state (no net growth) economy with sustainable energy and food systems.

Over the past 7 years, everything has played out pretty much as one would have expected, given that peak oil is now in the rear-view mirror.

I am fortunate to have my life savings entirely in physical gold and silver, held outside the backing system in a private depository where I can access it at any time. But, looking to my future, I realize that I am totally at a loss as to how to withdraw from the workforce sometime over the next 50 years (ie. retire).

For generations, the conventional retirement strategy has been to accumulate capital (savings), invest it in growth enterprises which would increase the amount of capital by roughly 8% per year (or lend it to banks at interest, who would finance the growth enterprises), and then finally sell those assets to buy income-producing assets like bonds, LLIF, or just a bank deposit, in order to retire and live off the income (without touching the principal).

It would appear that without economic growth, this strategy has no possibility of working in a peak oil future with economic contraction instead of growth. Gold and silver are really not an 'investment', but rather savings. To use a simple example, if you saved 15% of your income for 30 years in gold and silver, then you would have (income x 0.15 x 30 years=) only 4.5 years worth of your annual income saved for retirement (assuming that the purchasing power of gold and silver remains constant, which it was decades ago before fiat paper money was adopted globally and gold standards abolished).

You can see the problem here...almost nobody saves 15% of their income, and even that would provide only 4.5 years of your annual income in retirement! That means saving 5% of your income would only give you 18 months of income in retirement!

You can see why economic growth has been pursued so aggressively as a policy, because it is the only thing that makes retirement mathematically possible for the masses.

My question for the forum is, what are your long-term investment strategies to create something like a 'retirement' for yourself, even in the face of economic contraction caused by peak oil? Is that even possible?
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Re: What to do with all this gold and silver?

Unread postby diemos » Sat 02 Jun 2012, 09:02:51

Maslow's hierarchy of needs:

1. Air
2. Water
3. Food
4. Shelter
5. Social Status

You've correctly identified that in an era of economic contraction "investments" won't return much. Having savings is good but any store of wealth is just a target for confiscation. Air is free (for now anyway). The one thing that you can buy now that will provide a modicum of 2,3 and 4 indefinitely is a house in a good location. Have that, have some savings and be ready to roll with the punches.

For the majority of the masses "retirement" will be whatever social security can support. Even in a time of economic contraction there will always be workers. Their earnings can always be taxed and given to retirees. Maybe not as much as is currently promised but as I always say, "Something is infinitely more than nothing."
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Re: What to do with all this gold and silver?

Unread postby AgentR11 » Sat 02 Jun 2012, 09:35:34

There is no retirement. We work till we drop. As a 30-something mathematician, you already know this in your bones. You'll be able to emotionally accept it in your forties.

Myself (late 40s), I focus completely on things that will matter as I age. Paid off house, land, kid through college without loans. I accept as a first principle, that I will not stop working for my subsistence until I am unable, and then I'll find a reasonably isolated place to go and die with no pesky leaches (doctors and nurses) around to steal that which should belong to my child.

Train your body as hard as you trained your mind, be harder, faster, stronger than you ever have been by the age of fifty, and then maintain it till failure due to age.

The goal is no longer to recline in luxury as the grey hairs fall out of your head. The goal is to not starve and preserve some measure of freedom of choice and action till death. The luxurious retirement model is an anomaly; it didn't exist before cheap sweet oil, and it won't exist after cheap sweet oil, but of course, we are passing out of cheap sweet oil, right now. Its gone. And so is its dependent anomaly.

As to gold and silver, sit on it. When its time to be used, it will be spectacularly obvious that it is time. We aren't close yet here in the US.
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Re: What to do with all this gold and silver?

Unread postby PeggyOCO » Sat 02 Jun 2012, 11:17:28

Well said, @AgentR11. I see you are in East Texas -- my old stomping grounds.
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Re: What to do with all this gold and silver?

Unread postby pstarr » Sat 02 Jun 2012, 11:53:25

diemos nailed it. Power and wealth convey the essentials to those lucky enough to have their hands out in the right direction. The right piece of land outside a small healthy agriculture community will be very attractive. Must have year round water, relative isolation from big cities, good soil. Own tools of all kinds. Learn to build and repair with them.

I completely disagree with Agent on future work. You will be unemployed. We will all be unemployed. With cheap energy a thing of the past, this industrial system will break down. Roads, power and pipe lines, bridges, services will deteriorate for lack of taxes and jobs. The luxury to buy stuff from China, maintain our retail Disneyland, heat our office buildings and malls will end. You will mope into a gray boring future. Just like the Great Depression. Occupations we call 'jobs' today (such as talking on the phone, clicking on a keyboard, driving around town to see clients, selling stuff at retail, packing boxes) will disappear never to come back.

But essential work will continue. We will be fed because TPTB do not want you hungry and angry. There is still plenty of food and oil left to grow food by machine, timber trees by machine, run mills and mines by computer, maintain and power the grid, and especially keep the 'peace'. Much of this work is done outside the modern suburbs in rural areas. That is where the jobs of the future will be. There will be migrations out of the city but little work. Land will not be redistributed without revolution. The army will maintain order in the country.

There will be the corrupt, powerful and wealthy. The lucky ones will live in NYC, SF, Chicago, Beverly Hills. The rest behind gates. There will be work at the intersection of these different classes of citizen, especially in the city. Courier, maid, handy man, cop, doctor, lawyer. But there will be few toys, no consumer industry.

The question remains; will the center hold? Where will gold fit into this world? Does the US government continue? In its present state? Will there be fiat currency traded by all? Regional currencies? Trade among regions? I like gold 1/10 oz. coins. I don't trust the financial system or legal tender much. Even gold is questionable. That is why I say land, tools, some guns, and knowledge
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Re: What to do with all this gold and silver?

Unread postby evilgenius » Sat 02 Jun 2012, 11:58:19

All in gold and silver? If you have everything in gold and silver then go to EBay and sell 80% of it. EBay is where you will get the best price. Then take your money and diversify into many different assets. You have got to get into instruments which bring a return. 20% in gold and silver is good, even for a gold bug. Okay, if you are a gold bug extraordinaire then keep 30%. In terms of other assets buy at least 10% worth of US Treasuries. The rest I can't begin to say because you and I both know this is where too much randomness creeps in. Perhaps using some of the money to gain expertise in something useful in a community, like small scale beer brewing, would be good. Basically, think in terms of putting it where it will bring a return.
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Re: What to do with all this gold and silver?

Unread postby pstarr » Sat 02 Jun 2012, 12:42:26

evilgenius wrote:All in gold and silver? If you have everything in gold and silver then go to EBay and sell 80% of it. EBay is where you will get the best price. Then take your money and diversify into many different assets. You have got to get into instruments which bring a return. 20% in gold and silver is good, even for a gold bug. Okay, if you are a gold bug extraordinaire then keep 30%. In terms of other assets buy at least 10% worth of US Treasuries. The rest I can't begin to say because you and I both know this is where too much randomness creeps in. Perhaps using some of the money to gain expertise in something useful in a community, like small scale beer brewing, would be good. Basically, think in terms of putting it where it will bring a return.
Diversification is the prudent strategy now but collapse might be sudden. Timing is everything.

The trend in microbreweries, regional wines, local agriculture is not merely 'greenwashing' or coincidental. Smart folks may not understand the technicalities of peak oil, but they see decline all around. On the industrial side, the 3R's (reduce, reuse, recycle) is not only good for the environment, but is the resource chain of the future. However one would go broke investing now in that scheme. Timing the bubble pop is paramount. Keep alert.
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Re: What to do with all this gold and silver?

Unread postby Outcast_Searcher » Sat 02 Jun 2012, 13:05:26

diemos wrote:Maslow's hierarchy of needs:
1. Air
2. Water
3. Food
4. Shelter
5. Social Status
"

Um, there is this thing on the internet called a search capability. If you're going to state something like Abraham Maslow's needs heirarchy, why not at least roughly approximate it?

OTOH if you just want to say only the above 5 things matter, fine, but why bring Maslow into it? It's this kind of nonsense that makes so many internet fora mostly wasted space.

Per Wikipedia and other easily Googled references, Maslowe's heirarchy (whether correct or not) is roughly, from lowest to highest:

1). Physiological (your first 3 items)
2). Safety (includes your 4th item, but security like a job fits there too)
3). Love and belonging (family, friends, etc).
4). Esteem (Your 5th item, but self esteem and respect fit in there)
5). Self Actualizaton (Morality, etc. Ironically, ACCEPTANCE OF FACTS is listed in here, which is interesting, given much of the content on this site, and for that matter the internet and political circles in general).
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Re: What to do with all this gold and silver?

Unread postby Outcast_Searcher » Sat 02 Jun 2012, 13:33:15

Math guy:

Wow. 100% physical gold and silver. And I thought I was extreme for having about 25% in physical PM's as well as commodity / basic materials (adding more on big dips like now), and keeping a good 30% in non-dollar stuff (like diversified foreign stock funds).

A few ideas -- I've been investing pretty seriously for over 30 years.

1). The folks who say to diversify are right. In 20 years, HINDSIGHT might let you say "I should have done 'X', but predicting economics is so difficult that the field is called "the dismal science". Hint: that label is not an accident -- despite the bazillion talking heads who make a living touting things since apparently they can't live on their magnificent personal investment returns. :roll:

2). One thing you can do is have a core position in gold/silver related miners, and sell options "around the edges" to earn some pretty decent income. I use GDXJ for this, as it moves a lot and brings in pretty fat option premiums. This requires patience and self discipline, but clearly you are used to your portfolio vascillating wildly in value -- so this could be fairly easy for you.

3). Another thing you can do is take advantage of relative asset swings. Look how far GDXJ has come down compared to GLD, for example. I am patiently, gradually selling GLD and buying GDXJ as GDXJ gets cheaper relative to GLD. Selling PUTs below GDXJ and calls above GLD on an amount I'd like to move just adds gravy to the mix. At the end of the day, both are precious metals investments. On a day like Friday 6/1, when gold and silver soar -- both GLD and GDXJ advance strongly.

4). Aside from easing into some junk bonds (gradually) -- I'd be REAL leery of U.S. treasuries. You get almost no return, from a fundamentally bankrupt (financially and morally) country. After real world inflation, I suspect you get a negative return. Not much to like there. At least with quality Junk bond ETFs, you get some serious yield and a reasonably short (generally sub 5-year) duration, so you are being well paid for your risk. And over time, these have about half the volatility of the stock markets. JNK is my vehicle of choice, due to having a decent options trade.

5). I like things that pay me yield and are real likely to survive, barring total collapse. My favorite ETF, which almost everyone else hates via ignorant posts from "financial journalists" is AMLP. This physical ETF holds an index of 25 solid midstream MLP's (AMZI Index) which are extremely recession resistant and strongly tend to grow their dividends over time. They transport energy. The need for THAT is NOT going away barring total collapse, peak oil or not. Look how these companies performed (earnings and dividend wise) during the collapse/panic in 2008-2009. Solid as a rock, given the financial conditions.

6). I like to GRADUALLY buy high quality, low cost, diversified funds while everyone else is panicking. Yesterday, I sold July 34 PUT options on some VWO (Vanguard Emerging Markets ETF). Also some Sept. 30's. If people want to gradually dump great funds like this on me as the markets panic - thank you very much. I'd be very happy to GRADUALLY buy such funds all the way down. VGK is another example for the long term. Eventually, the dividends will be very rewarding as you wait for a recovery.

7). I like to leave roughly a third to half of my overall portfolio in cash or near cash. Today, something like an AXP or ING internet bank account yielding nearly 1% and FDIC insured is a nice place to park liquid cash. You NEED liquid cash to meet expenses, to sleep at night (IMO), and most importantly -- to be able to BUY cheap assets when most of the world is selling them in a panic.

.....

I actually do what I suggest, just like Warren Buffett. Also like Warren, I make NO promises about how things will turn out. Longer term though, this kind of thinking, with patience and discipline has worked just dandy for me.

Good luck with your investments.
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Re: What to do with all this gold and silver?

Unread postby diemos » Sat 02 Jun 2012, 13:46:04

Outcast_Searcher wrote:Um, there is this thing on the internet called a search capability.


Thanks outcast, that's what you get for picking things up on blogs without checking the source material.
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Re: What to do with all this gold and silver?

Unread postby some_math_guy » Sat 02 Jun 2012, 14:58:21

Thanks for your excellent comments everybody, and please keep them coming. I live in Canada, by the way.

Perhaps I should clarify what my 'portfolio' looks like:

1) I own two mortgaged homes with about $60K equity total (which could be erased overnight once the Canadian housing bubble pops). I have been renting one of the units for 2 years now while my family and I live in the other home.
2) I also own about $6K in mining stocks in my son's education fund, mostly junior miners which are highly volatile. I do not trade, I just buy and hold.
3) The remainder of my wealth is in physical gold (11%), silver (87%), platinum (1%), and nickel (2%) bullion.

I am fortunate in that I have had the opportunity to get a good education and land a good, secure job, and for the past 5 years have also held a second part-time job, 100% of the income of which goes to physical bullion.

The main problem I see with any kind of paper assets, in a SHTF scenario, is 'if you don't hold it, you don't own it'. ETF's, stocks, junk bonds, treasuries, puts and calls...all of these are just paper representations of things that are essentially a promise to pay something in the future. Peak oil utterly invalidates the ability of essentially all economic counterparties to make good on their promises. For example, a bond is a promise to pay you back some money you have lent some entity, with interest, which depends on their ability to use your money to grow their enterprise and produce profits. When sky-high oil prices permanently hobble the economy, the majority of paper promises become worthless or can only be repaid in inflated currency (a real loss).

It's the same with emerging economies; to some extent it makes sense to invest there as western economies are 'mature' and the growth opportunities are in the developing nations such as China and India. But how, pray tell, are these countries going to continue their economic growth with decreasing availability of oil exports, and perpetually sky-high prices for oil - the lifeblood of economic growth?

Eventually it will become clear to rational investors that the 'developing countries' are actually the 'never to develop' countries as Kunstler would put it, and all economic promises related to growth would be worthless, or at least worth much less. That's not to say that you can make some currency in the short term using some of the strategies above, but ultimately all currencies will implode as well, because by definition, there mathematically has to be more debt created each year than the year before in order for there to be enough currency to pay the interest on the currency in existence, otherwise the fiat paper currency system that all countries have lived under since 1971 when the US left the Gold Standard would utterly collapse. Throughout all of human history, unbacked paper currencies like the ones in use in all countries currently have always gone to zero...not a single one has survived. Most last less than 30 years before a major devaluation, hyperinflation, or having to be linked back to some kind of precious metal like gold or silver. It has already been 41 years that the reserve currency of the world has been the paper US Dollar currency, and it's obviously on it's last legs. I do not thing it very likely that the US dollar will survive until 2020 before gold increases by a factor of 5-8x and silver from 10-15x as they revert to the standard of value that they have held through all of human history, with the exception of the past 30 years.

Anyways, what I would eventually like is some kind of simple, 'hands off' asset that throws off inflation-resistant income that will provide for my 'retirement'. Some of the ideas I have been thinking about are:
- construct wind generator or PV array that sells electricity back to the power company or local community for 8-10% annual ROI.
- build a small, partially self-reliant community of perhaps 4 very small houses (<800 sqft) with shared services such as water, sewer, and some energy-generation, and rent out the units to provide income.
- start some kind of business that will flourish in the post-peak period.
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Re: What to do with all this gold and silver?

Unread postby seahorse3 » Sat 02 Jun 2012, 17:58:07

Preparing to retire is analagous to building a zero energy home- meaning reduce your power needs, simplify, before calculating how many solar panels u need. So get debt free. You have mortgages? You are losing money oaring interest. Invest first in yourself by getting debt free and quit paying interest. Your PMs may go up or down, who knows, but as long as you have mortgages you are paying interest that could be put in your pocket. After you become debt free, then possibly look at other investments like PMs. For example, find ways to save money by investing in things like solar for your home, energy efficient appliances etc. If you can permanently reduce what you will spend on heating or AC down here in the States, or on electricity then you increase the amount you can save today and the amount needed to retire. I bought a solar hot water heater years ago and it was a great investment. We receive tax credits for installing them and it works great David me money each month on my gas bill.
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Re: What to do with all this gold and silver?

Unread postby soilmaker » Sun 03 Jun 2012, 09:22:45

My husband and I are in our late 40's early 50's. After learning about peak oil many years ago we made the decision to invest in our home as a hedge against economic uncertainty. We invested in energy efficiency, solar power, geothermal heating and cooling, and a wood stove. This will make our cost of living more reasonable as we get older and energy prices rise.

We have also worked to make our family more food self sufficient. We expanded our food growing from a hobby to a large part of our food needs. It has required purchase of good tools and learning new many new skills. We already lived in the country near a good community so we had the land. We now have a very large vegetable and fruit garden, raise chickens and pot belly pigs (maybe rabbits in the future). We are actually eating better and staying healthier as a result.

We also invested time talking about peak oil with our neighbors and others in our community. We talk about the eventuality of economic changes when oil prices soar and economies collapse; eventually causing recession and/or depression. Our neighbors seem to think I will be the one that they can rely on to grow food, or teach them how. I see this as a good thing because the more people value you the less risk there is of being robbed. No matter what happens it is good to know our neighbors better and know who we can depend on.

There is a difference between work and a job. It requires a lot of work to be self-sufficient; to cut and split wood, raise a garden, harvest food, take care of animals, cook whole food, can food, etc. Although I realize that people worry about not having a job to help them pay for food, energy, etc. the more we do for ourselves the less we need money. A big goal should be getting out of debt so that you don't need money. There really is no shortage of work when one starts doing for themselves.

The most important lesson I've learned is to see the difference between wants and needs. We want more things than we really need. Living off solar power requires serious adjustment in energy consumption. Once we really look at where we used energy we realized how often we used electricity wastefully. Now when I need to wash clothes I think about whether it is sunny or rainy, because I will be hanging them out to dry. Doing without a dryer isn't that difficult an adjustment. I think about harvesting passive solar energy whenever possible.

Like others who have commented to your message we believe in staying fit and healthy. I doubt that in our old age we will be able to depend on the government's social security net to pay for our medical needs. And unless the medical industry collapses and prices come down, no one will be able to afford health care, so we might as well stay healthy. It also makes life easier and more enjoyable!

I think it's important for our future old age to realize that we need to re-form our extended family. Parents will need to depend on children, just as much as children now are finding they need to depend on parents far past college age (if they are lucky enough to afford college). We've been educating our sons (14 and 16) about peak oil and how life could change. They are much further ahead of the curve than most of the children their age. I fully expect them to settle near us and to be helping with child care when I am a grandmother. Just as my grandmother did, who had to take care of her mother and grandchildren when she was my age.

So, I recommend that people invest in self-sufficiency (home, garden, and farm), new skills and lifestyles, health, family and community. These things will be far more important than gold and silver. And these things also make living very rewarding. No matter what happens in the near future, it is important to start changing ones lifestyle and make the transition to living without oil now rather than later. It has been a very rewarding transition thus far.
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Re: What to do with all this gold and silver?

Unread postby Revi » Sun 03 Jun 2012, 20:59:58

I think you will be able to sell or barter your silver and gold for things you will need. Hang on to it until you need it. It's better than money in the bank, especially if you paid an average of around $20 per ounce for the silver. Some day you may need it to buy necessities. Don't tell anyone you have it. It's real money. If the price of silver goes up you will have quite a nest egg. There are plenty of people who left uncertain places with small gold coins sewn into their clothes. It gave them a chance to get on their feet when they got to a safer place.
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Re: What to do with all this gold and silver?

Unread postby ralfy » Mon 04 Jun 2012, 04:35:59

Orlov and others suggest investing in a variety of assets: precious metals, cash, land for farming (near a good source of water, etc.), tools and other materiel for planting, renewable energy, water storage systems, etc., funds and books for learning important skills (e.g., food production, processing, and preservation, water management, basic health care, herbal and alternative medicine, self defense, surviving in the wild, etc.), and so on. The latter will probably be most important, together with working with a small community and focusing on localization.
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Re: What to do with all this gold and silver?

Unread postby furrybill » Mon 04 Jun 2012, 19:39:22

soilmaker wrote:So, I recommend that people invest in self-sufficiency (home, garden, and farm), new skills and lifestyles, health, family and community. These things will be far more important than gold and silver. And these things also make living very rewarding. No matter what happens in the near future, it is important to start changing ones lifestyle and make the transition to living without oil now rather than later. It has been a very rewarding transition thus far.
JKT


This is my strategy too. Invest in things/skills/lifestyle that take you off the grid, as independent financially as possible and part of a community of like-minded people. For example, if the collapse is bad enough gold is going to be worthless whereas knowing how to grow your own food and shoot zombies will keep you alive.
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Re: What to do with all this gold and silver?

Unread postby Tanada » Sun 20 Nov 2016, 22:31:45

Revi wrote:I think you will be able to sell or barter your silver and gold for things you will need. Hang on to it until you need it. It's better than money in the bank, especially if you paid an average of around $20 per ounce for the silver. Some day you may need it to buy necessities. Don't tell anyone you have it. It's real money. If the price of silver goes up you will have quite a nest egg. There are plenty of people who left uncertain places with small gold coins sewn into their clothes. It gave them a chance to get on their feet when they got to a safer place.


There was an old story that went around the history department at University. It seems that the Jewish folks who managed to buy their way to safety during World War II spent on average three ounces of gold to do so, mostly in the form of small pieces of jewelry that were easily concealed. Unfortunately this tells us nothing about the many thousands of others who tried to buy their way to freedom and were simply murdered for their gold possessions, it really boiled down to who they were dealing with. Some guards and other authorities preferred to accept the small bits of gold and tell themselves they had a clean conscious when it came to killing, others wanted it all and had no compunctions about murdering to get what they wanted.
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Re: What to do with all this gold and silver?

Unread postby vtsnowedin » Mon 21 Nov 2016, 01:42:20

Tanada wrote:
Revi wrote:I think you will be able to sell or barter your silver and gold for things you will need. Hang on to it until you need it. It's better than money in the bank, especially if you paid an average of around $20 per ounce for the silver. Some day you may need it to buy necessities. Don't tell anyone you have it. It's real money. If the price of silver goes up you will have quite a nest egg. There are plenty of people who left uncertain places with small gold coins sewn into their clothes. It gave them a chance to get on their feet when they got to a safer place.


There was an old story that went around the history department at University. It seems that the Jewish folks who managed to buy their way to safety during World War II spent on average three ounces of gold to do so, mostly in the form of small pieces of jewelry that were easily concealed. Unfortunately this tells us nothing about the many thousands of others who tried to buy their way to freedom and were simply murdered for their gold possessions, it really boiled down to who they were dealing with. Some guards and other authorities preferred to accept the small bits of gold and tell themselves they had a clean conscious when it came to killing, others wanted it all and had no compunctions about murdering to get what they wanted.

Strolling through the old threads this evening Tanada?
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