Unless you live in a shack somewhere unconnected to civilization’s “grid”, chances are you must be part of a banking system in order to live life day-to-day.
By “banking system” I mean a system that allows an individual to receive an income whether wage, rent, royalty, dividend, or outside help. That income must be stored safely, and allow access by the individual to use the stored money to pay for bills, groceries, rent or mortgage payment, and everything else.
A banking system can be as small as serving only you and your family, where money is gold as it was for all the years in the US up to 1933. Or it can be global, covering the US and much of the West, and affecting much of the rest of the world. This latter system is what we are all used to.
Today in the West, the bank or credit union you use is part of a larger system governed by a Central Bank. In the US it’s the Federal Reserve, or “Fed”; in the European Union it’s the European Central Bank (ECB). If you use paper or digital money, then you are part of a larger banking system.
The Second Signpost Effect
In the Western banking system, banks hold a “toxic asset” known as derivatives. Derivatives are like futures in commodities and options in stock: they are bets as to the direction in price of underlying assets and indices.
Derivatives began in earnest in the late 1990’s (with the repeal of Glass-Steagall signed by President Clinton in 1999) and quickly became a bad habit for bankers. Trying to get rich with bets bankers hoped were good, the bets turned out wrong, costing the banks money. It was derivatives that almost toppled the banking system in 2008. Much of the derivatives market were bets made on mortgages and we know what happened with that in 2007-2008.
Today, the bulk of the $1.4 quadrillion (yes, that’s right, that’s 1,400 trillion and its going up; five years ago it was half that) in derivatives are bets on the dollar and interest rates. If a bank bets that the dollar will be worth a certain amount and the dollar is all of a sudden cut in half in value (again, due to the Second Signpost), the bank may owe many times more than it currently owes on the derivative.
In other words, the tiny fraction of real assets (cash, bonds, loans), which only needed to be 1% or less of all the debts (derivatives) of a bank, become an even smaller percentage when the derivatives blow up. Accounting rules were changed in 2008 to allow banks to need only 1% or less in fractional reserves. Therefore, the bank, not meeting the fraction of assets to keep the bank afloat, would go under.
This is the basic mechanism for how the western banking and credit system could go under, taking all checking and savings accounts of all people with it. (You don’t really think the money you put in checking or savings is your money do you? When you deposit funds in a bank, you are loaning the bank your money. The money becomes the bank’s money. The reason you are able to deposit and withdraw and move funds around and pay bills is because those funds in the banking system move around from bank to bank. The tight requirements on asset-to-debt ratios is why banks, after 2008, charge fees for moving money around.)
If western banking collapses, hundreds of millions of people in America and even Europe will no longer have a central banking system at their service, but will have to rely on a real money system of their own.
Gold as Banking
So when the banking system goes away, then what? You will still need money or barter to pay for things your family needs. This is where gold shines (pun unintended).
With no banking system for a time, the only money you will have is that which you can hold in your hand and have physical access to. That money must have inherent value. It cannot be inherently worthless like paper. Gold satisfies both requirements to be money: inherent value and physical mobility.
Before the 1920’s, that’s exactly what Americans had. Money was in gold and silver. Every American was his or her own banking system. One day’s wage for an average manual laborer was $2, and was paid in silver, which according to the Coinage Act of 1792 was exactly 1.5 troy ounces of silver. (Whether dimes, quarters, halves, or dollars, they all had the appropriate fraction of 0.75 troy ounces of silver per dollar.)
A person could earn his wage, keep it, hide it, and at an old age all the money he amassed would still be worth the same as when he earned it. A gold $20 piece and a $20 paper bill both put under a mattress in 1913, today would result in a $20 bill which could buy two meals at McDonald’s, and a gold coin worth about $1,500. Whatever that gold coin could buy in 1913 it could also buy today. There’s an old saying that an ounce of gold will always, regardless of the century, but you a really nice suit.
From 1792 to 1913 there was no net inflation. People weren’t paid more, but prices came down for everything due to technological innovation.
In the decades prior to the Financial Crisis of 2008, financial advisors would tell people to put 5-10% of their wealth in physical gold. Nowadays, the good advice is to put 20% in physical gold. With the Second Signpost looming, that is indeed good advice. Do not bother buying gold mining stocks or paper gold (ETFs) which will not be useable to buy your family food, but have real physical gold or silver you can hold in your hand. Do not bother with cryptocurrencies like Bitcoin either, which will have a high chance of disappearing with the internet.
The great majority of people don’t understand gold. It’s been demonized by the current banking system as a “barbarous relic.” Its price goes through some wild swings as the world’s bankers short it and buy it. Central banking leaders discourage people from owning it. But don’t listen to them. Whether you buy gold at $1,500 per ounce, or $900, or $3,000, don’t worry about the price swings. You own gold not as an investment (that’s what gold mining stocks and Gold ETF’s are for) but as a shelter for your wealth, so that when the paper money banking system you are in and use every day goes away, you don’t lose everything, but only lose that part of your wealth that was in the bank. Gold is the one asset that is not in a bubble, but in an “anti-bubble.” Its price should be way north of $10,000, but it is suppressed by central bankers.
Your wealth can be sheltered in more bulky things like land, or a farm, or silver, or barrels of oil, or anything that has value. But gold is the one asset that is measureable when in coin form and is compact.
The End Times
Having gold will help for a time, but ultimately your provision comes from the Lord. Gold ownership may be what He is calling you to do to help others. Gold is merely a device to carry out what the Lord may do. It’s a device to allow one to carry wealth from this current time, into the end time.
Those who live in Center Earth (Europe, Africa) can put some of their wealth in physical gold, but at the start of the Tribulation the Antichrist’s economic system of the mark will replace it.
Those who live in East Earth (India, Australia, Southeast Asia) can put some of their wealth in physical gold. However, at some point in the years before Christ’s return, if China takes over and rules as it looks like they are going to in that part of the world, they may discourage the ownership and use of gold. Right now China is looking both at dominating East Earth, and building a gold-backed currency for nations to use.
Those who live in West Earth (the Americas) can put some of their wealth in physical gold, and it would likely be a hedge for a time against the coming grinding poverty. Why poverty? If the banking system in the west goes down, everyone’s money in the bank goes with it. Then what will people use for money? Exactly, they won’t have any.
Acquiring Gold and Silver
If buying gold and silver is something you think you should do, educate yourself about it.
Gold should be in the form of coins (not bars), one ounce or half ounce, and 80-90% gold like American eagles. Pure gold like Canadian Maple Leafs and Chinese Pandas will wear, scratch, and break if used as money. You can get gold coins at coin shops, or from reputable dealers like these at here or here. You mail them a check and they discreetly mail you gold. Do not buy old gold coins minted many decades ago because there is a collector premium on the price.
Silver should be in the form of the US quarters, dimes, and half dollars dated 1964 and before. It’s commonly called “US junk silver.” Avoid silver dollars as there is a premium on those. Figuring the value of US silver coins is a bit tricky. Every dollar has three-quarters of an ounce of silver. So, four silver quarters would ideally cost $15 if the price of silver per ounce is $20.
Commissions of 1% to 5% on top of the price of silver or gold, is good. Greater than 10% is bad.
As always, do your due diligence, and seek the Lord’s wisdom. This article is a reminder that there is an alternative to having some physical funds on hand if or when the banking system goes down. Paper cash will be good for a short time until people lose trust in the paper money, but the value of gold can last until Christ’s return.