Individuals choose to purchase gold & silver coins for a variety of reasons, including as an investment, a hedge against inflation and for protection against financial and economic crises. However, one of their primary concerns is protecting against a potential collapse of the dollar. Considering that most major currencies are being devalued in an attempt to stimulate economic growth, there’s the possibility that citizens will lose faith in the currencies, which has recently happened in countries such as Venezuela, Argentina and Zimbabwe. The dollar, which is still the world’s reserve currency, has often been seen as a safe haven until currencies are reestablished. However, if the dollar collapses, there may be few currencies, if any, to turn to prior to a new currency being established. 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
A few states have already passed gold and silver legal tender laws, including Utah, Arizona, Texas, Oklahoma and Louisiana. These laws have eliminated the sales tax on the sale of gold and silver coins, which is a great first step. Fortunately, coin and currency sales are exempt from sales tax in the state of Georgia. It’s possible that the laws will be expanded to transact in gold and silver coins for their full market value rather than the face value of the coins. 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. This may occur even if states fail to pass laws making gold and silver coins legal tender for their actual market value, as businesses are more likely to accept gold and silver coins as opposed to a collapsing currency.
Gold & Silver Exchanges
Historically, currencies haven’t collapsed overnight. Once holders of currencies begin to lose faith in the currencies, they’ll attempt to exchange the currencies for tangible goods or other items that may be in high demand. This means that, at least for a time, you may be able to exchange your gold and silver coins for dollars to purchase goods and services, as needed. Even under a hyperinflation scenario, most currencies don’t lose a substantial amount of value in a single day. Possible gold and silver exchange facilities include coin dealers, pawn shops, jewelry stores and “we buy gold” stores; however, other types of gold and silver exchanges may open to meet demand. Exchanges are not as likely to be a viable option under an extreme hyperinflation scenario, as everyone will look to purge themselves of dollars.
While we don’t know for certain what would be used for bartering following the collapse of the dollar, 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. We would expect that market values for gold and silver will still be published and made available to the population so that the exchange of goods and services can be adjusted on a daily basis. Individuals that purchase gold and silver coins for the purposes of bartering tend to prefer junk silver, or pre-1965 90% silver dimes, quarters and half dollars, as they’re U.S. currency and are issued in smaller denominations, which makes them easier to trade. Additional coins that are popular for bartering purposes include American gold and silver eagles, most government issued coins, as well as silver rounds and bars from recognized manufacturers. We recommend staying away from obscure gold and silver coins as well as unmarked silver bars and rounds, as they likely would be less recognized and liquid than the previously mentioned items. In the near future, we’ll share with you our thoughts on some of the most popular gold and silver options and our opinion on each from a bartering perspective.
It’s safe to say that gold and silver coins will be in demand in some form or fashion following a monetary collapse. In the event that they’re not used for general commerce, can’t be traded out at a gold and silver exchange facility 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 type of markets tend to develop when there are widespread shortages of goods, which are essential for daily living. As we’ve recently read, most stores in Venezuela are out of essentials, such as toilet paper. However, most Venezuelans are likely aware of an underground market where they can purchase these items at a premium. It’s likely that these underground markets won’t accept the currency that is in the process of collapsing, making gold and silver coins a likely candidate for these types of transactions.
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 time, and there’s no reason to believe that the dollar is impervious to this eventuality. That being said, we’ve 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 daily commerce, we would expect for gold and silver exchange facilities to open to provide an exchange facility for dollars, when needed. Another possibility is that gold and silver coins will be used 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, with gold and silver coins being likely candidates to purchase these items.