A Medium of Wealth vs. a Medium of Exchange – Time To Buy Precious Metals
May 20, 2015
A Medium of WealthA medium of wealth is an item that will hold its value no matter how good the times are or how bad the times are. That item will still maintain their value and solvency. The more the item is wanted, the more valuable and the higher that item retains its value.
If more people want said item and there just isn’t enough of the item to go around, then the value of that item goes up. Value is based on demand so items that maintain a medium of wealth will be items that will be continually in demand in one form or another.
Here is a quick example. Food is a small example of a medium of wealth.
Food is worth far more to starving people than to well fed ones.
If the starving man can save his life, there is value from both the person with the food and the person who needs the food.
Therefore a medium of wealth is established.
Other things that are mediums of wealth…
- Gold, silver, and other precious metals
- Consumable tangible assets / commodities
Just about anything that will not lose its barter and trade value is a safe medium of wealth.
If you are purchasing an item that will lose %50+ of its value the moment you take it with you, then it isn’t a good investment. This is why it is good to research any item that you may purchase to see if it will retain its value or not.
A great example of NOT retaining value is most new cars today. Now granted, once you get over the $50K mark for a car purchase, they tend to hold their value a little more. But your average car will lose close to 30% – 50% the moment you drive it off the lot.
No matter what, the average BRAND NEW car does not hold its value.
This is why I am a person who believes in purchasing good “newer” used car over that of a brand new car off the lot. This is called a “cash car” and in most cases is the better investment and might hold its value longer than the car that is driven off the car lot. To get an even better deal, I also believe in buying from another person, not from a used car lot. Lots have overhead that they must fulfill, a person usually just wants to sell the car. There is no overhead and in some cases you can get a great car for just a little bit of money.
Money saved is money earned.
Consumable Tangible Assets / CommoditiesI want to touch a bit on what I call “Consumable Commodities”, these are items that we and others consume daily. When they are in short supply, we feel the pinch. Because of this, there is a certain amount of “value” that we place in these sorts of items.
Quick examples are toilet paper & feminine products, medicines, baby formula, toothpaste, soap, just about anything can be a consumable commodity.
So how do you figure out your consumable commodities? Look at the grocery receipts. If you track these over a couple of months, you will start seeing trends in items that you “cannot live without.” These items are your consumable commodities. When you do not have them, life is a little more difficult and you wish that you did have them.
Now, if you wish you had these items, I bet that there are other people out there that wished they had them.
Get the picture that I am painting here?
If you buy and stock up on your consumable commodities, you are creating value as well as saving money.
In a pinch you could use some of these items to barter with or even sell, and if you are going to sell them, I bet that you will be able to sell them for a nice little profit. Why? Because these consumable commodities have gone up in value and there is a higher demand for them. Remember, the higher the demand, higher the value.
Let’s say Crest Toothpaste is a consumable commodity. The SHTF and we are 90 days into the mess. Crest Toothpaste cannot be found on the shelves, but you have 20 tubes that you purchased on sale for $1.00 each. You take a few of these tubes to the open / farmers / flea market, which these will naturally start popping up all over when the SHTF and you are able to sell each tube for $8.00 – $10.00.
Those 20 tubes of Crest Toothpaste were a good investment and you made a great return on that investment.
You have preserved your wealth in the Crest Toothpaste and you increased your profits when you sold those tubes.
You can now take those profits and possibly “invest” them into another consumable commodity that you have had your eye on that will probably give you an even higher return on your “investment.”
I strongly believe that consumable commodities will be an excellent place to preserve some of your wealth.
More on this in later chapters where we will discuss many items that you may wish to consider to help you to preserve your wealth.
A Medium of ExchangeA medium of exchange is the stuff we use to exchange goods and services. It is commonly called money. Well let me correct that. What we have today, that paper stuff in your pocket is really just currency. It is an IOU from the Federal Reserve that we are to have faith in that it will hold its value so we can get the goods and services that we need today.
The problem is that for the last 30+ years, that piece of paper has been losing its value and it is taking more of those pieces of paper to buy goods and services today.
Now do not get me wrong. There is a place for this medium of exchange we call the dollar.
No matter what, cash is king.
You might need a wheel barrel full of it to buy a loaf of bread, but still YOU WILL NEED that medium of exchange to get goods and services.
All these ideas that once the dollar goes belly up everyone will be dealing in gold, silver and bullets are not quite correct.
SO, ditch all these Hollywood ideas that the day the dollar dies is the day the dollar will no longer be used.
All it means is that it will take a whole lot more dollars with probably a lot more zeros behind it to buy your day to day goods and services.
You will need a lot of pieces of paper (medium of exchange) to buy the things you want. It will take even more of those pieces of paper (medium of exchange) to “buy” items that will retain their value (medium of wealth)
And what is important to remember is that in many cases the things that held their value (medium of wealth) will often go up in value, thus protecting your wealth; where it will take more and more dollars (medium of exchange) to gain those items that are mediums of wealth.
In times of financial hardship items that are Mediums of Wealth will almost always retain their value where the Medium of Exchange will almost always lose its value. This is a historical fact that dates back to 600 B.C. Greece when the first fiat currency was created.
WEALTH PRESERVING TIP #2 – IF YOU MUST BUY… buy things of value and high quality. If you need that item, look at how much value does it retain? If you had to sell it on eBay or craigslist could your get most of your money back or would you only get half to less than half back? These are items that can be considered “mediums of wealth.”
Coins / Precious MetalsHow much is a penny worth? If it’s a 1943 bronze Lincoln penny then it’s worth $1.7 million. That’s what a southwestern businessman bought the coin for at auction in September 2010. The penny is so valuable because the U.S. Mint in Denver mistakenly struck the coin in bronze rather than zinc. The government needed copper — the metal of choice for pennies — for the war effort during World War II.
Still, before you break open the piggy bank or check behind the sofa for loose change, there are some things you ought to know. Numismatists, or coin collectors, look for rare coins that are in good condition, freshly minted or old.
Beware! Some coin dealers will often tell you something is rare, when it’s really not. This is why it is critical that you know your investment inside and out or at least as much as possible.
When it comes to coin collecting, price guides are indispensable. Buy and study multiple guides so that you have a broader knowledge. If you don’t take the time to educate yourself, you’ll pay more than the coin is worth.
Buying from the U.S. Mint is a good idea and this is where you can also get involved in buying precious metals.
Buying gold and silver produced by the US mint is a great means to protect your wealth.
No matter what, gold and silver retain their value. The key is that you have got to stop looking at them in dollars, but look at them in how they retain value.
1 ounce of gold has always purchased a good business suit, shirt, belt, shoes, & undergarments. This can be traced back to the roman days when a gold coin bought a good tunic, belt, sandles, and undergarments.
Half ounce of Gold has always bought a good dependable weapon, be it a gun or a sword.
5 ounces of Gold buys a car
40 ounces of gold buys a starter home
1 Ounce of Silver was a standard day’s wage
1 / 4 ounce of silver buys a gallon of gas
1 / 10 of an ounce of silver buys a loaf of bread
There are many more examples of how precious metals retain their value. But you have to look at them as means to maintain wealth and not look at them in currency worth. The value of currency goes up and down, inflates and deflates in light of precious metals. Stop looking at the currency and start looking at what gold and silver will purchase.
A really simple way to collect coins is by purchasing commemorative coin sets. Nearly all have increased in value. Best place to check these out is the US Mint – http://www. usmint.gov
Where to Buy Coins?Well the easiest place is Amazon.
Here are some recommendations…
1 oz. Sunshine Mint Silver Bar .999 – Approx $23.00 per
Engelhard 10 Troy Ounce Silver Bar – Approx $225 per
1 oz American Silver Eagle .999 Fine Silver Dollar Uncirculated – Approx $23 per
$10.00 of pre 1964 face value coins – all the coins add up to $10, but made of 90% silver – Approx $180 per lot
$1.00 Face Value 90% Silver Washington Quarters – four 90% silver US quarters – Approx $18 per lot
$5 American Gold Eagle (1/10 oz) – Approx $160 per
$10 Gold American Eagle Coin 1/4 Ounce Approx $660 per
American Gold Eagle .999 Fine (1 oz) $50 Uncirculated – Approx $1390 per
Another place where I buy a lot of my precious metals is from American Precious Metals Exchange – They have GREAT customer service and their markup is very little.
APMEX – http://www. apmex.com