Barter

I wrote about this back in January, but the questions still come to me regularly, so I'll reiterate it again, with more details. "I'd better get a few small gold coins so that I can barter when the dollar fails." "I need silver coins so I can trade them for stuff when the dollar fails." Statements like that are indicative of the person's lack of faith in the dollar, and I can't blame them. The dollar is one failing, absolutely ridiculous currency, which has already lost 98% of its purchasing power of a few decades ago, and will undoubtedly continue. It will reach absolute zero as other un-backed paper monies have in 100% of history, and that's why people are afraid they'll have to barter to eat and stay alive. I understand the feelings, but I don't agree.

Basically, barter is good only between two people. "I'll trade your antique car for my antique sofa or picture." Yard sales are actually barter. "I'll give you two bucks for your toaster." "I'll trade my Krugerrand for your 1998 Ford?" Surely that is barter also. It works between two people, and works very well, Sales taxes and other taxes are avoided, naturally, and besides it is fun. "I'll give you a silver coin for three dozen eggs." If you are close to a farmer, and he doesn't need dollars, that will work also.

BUT, without a currency, civilization would collapse. Literally. How can the US nation survive if money can't be wired or sent by mail with checks? Credit cards are now almost universal, and they're denominated in dollars, not ounces of gold or silver. Prices of cars, lettuce, and lumber are in dollars, not ounces of gold or silver. Now don't get me wrong. I love gold and silver! Gold and silver are the best possible way to save yourself as the dollar goes down. Gold and silver are a sure way of preserving your wealth by getting out of failing dollars and into a different denomination. As the buck fails, you are out of them. If you need dollars, you sell some gold or silver to get back into the current currency, which are dollars in the US. If the dollar fails completely, they'll invent another. The "Amero?' Who knows, but I do know that we HAVE TO HAVE A CURRENCY. Without a currency, there could be no credit cards, wire transfers, checks, or money orders.

Without wire transfers, checks, money orders, and credit cards, the civilization would be back in primitive days of horses and buggies or even before. (They had dollars in horse and buggy days). When the US was founded, a currency was placed in the Constitution for obvious reasons. So we could do business!

It is also absolutely true that the politicians have ruined the dollar by deficit spending year after year, and costly wars. The ruination of the dollar is not your fault, as I said previously, and we must hedge ourselves with gold and silver to save ourselves from currency debasement and even collapse. But barter with more than two people, simply will not work, and a civilization cannot survive on barter. I firmly do believe that saving small coins for barter will never happen. It can't happen, other than between two parties.

Gas stations, super markets, oil companies, auto dealerships, hardware stores, or what have you, have to pay their suppliers who are usually in far-away places. They have to wire money or send checks for their foods, autos, hardware or other merchandise, and they can't send gold or silver. They have to transmit dollars. From our earliest days of 200 hundred years ago, nothing was priced in ounces of gold and silver. Things have always been priced in dollars. They have to be priced in a currency with common numbers such as dollars. When the dollar was backed by gold and coins were made of silver, all was well. Now that the backing has been removed, we need to invest in the former backing, to avoid economic personal disaster. No, I am not making mountains out of speed bumps. Just look at history, and the millions who lost their total life savings by staying in failing currencies.

As a currency becomes weaker or fails, another will always take its place. The euro took the place of a dozen European currencies, and seems to be working out OK. I am not defending the buck! I am only saying that we need bucks to buy and sell, as well as pay our bills, so in my opinion, gold and silver are wonderful ways to save ourselves, but not to barter. From Jan 1st 2005-Jan 1st, 2006, gold went up 28% and silver 69%. That's what a wonderful way they are to get out of failing dollars. But you have to get back into dollars to buy orange juice, a new tire, or two by four. You'll never see orchids or squash priced in ounces of silver! You'll never see a new car priced in ounces of gold. How could you possibly make a reservation, or buy something from a distant outlet with out a credit card? You'll never see a credit card denominated in ounces of gold or silver, but in dollars, euros, or some currency.

Fractional ounce Gold Eagles are nice for gifts, but are a lot more expensive than one ounce coins. You pay about $7 more per ounce for tenth ounce coins. The reason is that they have to make ten blanks, and stamp them ten times, rather than one or once. This adds to the cost. I suggest that buying tenth ounce coins is fine if that is what you want, but I think it is extremely doubtful that you'll ever have to barter with them.

As I mentioned in a previous article, the Barter Theatre in Abingdon, VA bartered movies for eggs and radishes during the depression, but they had to pay their film rentals in dollars. No more films there, since the place has become a first rate, famous, live stage house. It still looks like a twenties film house though. Barter is fun, but perhaps a better term would be "bargaining." When you buy a home or car, the price is listed, but unless you are a fool, that is not the price which you may eventually pay. An antique store will always give a 10% "discount" if you haggle with them a bit, and at a garage sale, the bargaining can go on till one side gets tired or angry. Used car lots and realtors expect you to "make an offer," which is bargaining, not barter. Barter, as most think of it, is trading one commodity (eggs, bread, milk, etc) for another (gold, silver, sawdust pellets, ). Bargaining, is just that: Trying to get an item for a lower number of dollars.

Summing up, the buck is probably on its last legs, and will be replaced by another currency. Politicians can always pull another trick out of their sleeve and may make the buck survive longer than any of us thought possible. The United States of America's reputation and even existence depends on having a currency. For that matter, any nation's existence, depends on having a currency. As usual, they all go bad when their backing is removed. Decades ago, in Luna Park on Coney Island, there was an act called Jolly Trixie and Princess Wee Wee. Like much else in those days of yore, it was great fun, but a total fraud. The dollar, and staying in them may be fun, but it is as silly as the above act. Buy the former backing of the buck, and protect yourself.

May 18, 2007

Don Stott has been a precious metals dealer since 1977, has written five books, hundreds of columns, and his web site is www.coloradogold.com