With all the talk about a collapse of our economy, I asked Mac Slavo over at SHTFplan blog to share with my readers his insights into how a family might survive following a collapse of our money system. Here is his answer, in his own words.
Economist Mike Shedlock defines money through the eyes of Austrian economist Murray N. Rothbard as, “a commodity used as a medium of exchange.”
“Like all commodities, it has an existing stock, it faces demands by people to buy and hold it. Like all commodities, its “price” in terms of other goods is determined by the interaction of its total supply, or stock, and the total demand by people to buy and hold it. People “buy” money by selling their goods and services for it, just as they “sell” money when they buy goods and services.”
What is money when the system collapses and the SHTF?
In disaster situations, the value of money as we know it now, changes, especially if we are dealing with a hyperinflationary collapse of the system’s core currency. This article discusses money as a commodity in an event where the traditional currency (US Dollar) is no longer valuable.
In a collapse of the system, there will be multiple phases, with the first phase being the “crunch”, as discussed in James Rawles’ book Patriots. The crunch is the period of time directly preceding a collapse and the collapse itself.
Initially, the traditional currency system will maintain some value, though it may be rapidly depreciating in buying power. For those with physical, non-precious metal denominated currency on hand (paper dollars, non-silver coins), spending it as rapidly as possible is the best approach.
It is during the crunch that ATM machines around the country will run out of currency as people aware of the rapidly devaluing dollar will be attempting to withdraw as much money as possible. This immediate increase in money supply, coupled with the population’s general knowledge of the currency depreciation in progress, will lead to instant price increases for goods, especially essential goods.
If your physical cash has not been converted into tangible assets, this would be the time to do so. Acquiring as much food, fuel, clothing, and toiletry items as possible would be the ideal way to spend remaining cash before it completely collapses to zero, as it did in the Weimar inflation in 1930’s Germany, or Zimbabwe’s hyperinflation in recent years.
During the initial phase of the ‘crunch’, precious metals will be a primary bartering tool, but this may not last long. The old survivalist adage, “You can’t eat your gold,” will become apparent very quickly. In a total breakdown of the system, food, water and fuel will be the most important tangible goods to acquire.
Consider someone who has a two-week or one-month supply of food on hand. Do you believe they would be willing to part with that food for some precious metals? The likely answer is no. There will be almost no bartering item that one would be willing to trade their food for once it is realized that food supply lines have been cut.
That being said, since most will not barter their food, not even for fuel, the next recognized medium of exchange by merchants, especially those selling fuel, will be precious metals. For the initial crunch, silver coins, especially recognizable coins like 90% silver quarters, dimes, and half dollars, along with one-ounce government mint issued silver coins, like US Silver Eagles, will be accepted by some, probably most, merchants. For those trying to flee cities to bug-out locations, silver coins of the aforementioned denominations may be a lifesaver, as they can be used to acquire fuel. While we recommend having gold as well, the issue with gold is that its value is so much higher than that of silver. Breaking a one-ounce gold coin into ten pieces just to buy a tank of gas will not be practical. It is for this reason that having silver on hand is highly recommended. Packing at least $25 – $50 worth of silver coins in each bug-out bag would be a prudent prepping idea.
In a total SHTF scenario, silver and gold may eventually break down as a bartering unit, as contact with the “outside” world breaks down. One reason for this is that the fair value price of precious metals will be hard to determine, as it will be difficult to locate buyers for this commodity.
This, however, does not mean that you should spend all of your precious metals right at the onset of a collapse. Precious metals will have value after bartering and trade is reestablished and once the system begins to stabilize. Once stabilization begins, the likely scenario is that precious metals will be one of the most valuable monetary units available, so having plenty may be quite a benefit. At this point, they could be used to purchase property, livestock, services, and labor.
Water is often overlooked as a medium of exchange, though it is one of the most essential commodities for survival on the planet. Had individuals in New Orleans stockpiled some water supplies during Hurricane Katrina, much of the loss of life there could have been avoided.
For those bugging out of cities, it will be impractical to carry with them more than 5 – 10 gallons of water because of space limitations in their vehicles. Thus, having a method to procure water may not only save your life but also provide you with additional goods for which you can barter
An easy solution for providing yourself and others with clean water is to acquire a portable water filtration unit for your bug-out bag(s). While they are a bit costly, with a good unit such as the Katadyn Combi water filter running around $150, the water produced will be worth its weight in gold, almost literally. This particular filter produces 13,000 gallons of clean water! It’s a must-have for any survival kit.
Because we like reserves for our reserves, we’d also recommend acquiring water treatment tablets like the EPA approved Katadyn Micropur tabs. If your filter is lost or breaks for whatever reason, each tablet can filter 1 liter of water. In our opinion, it’s the best chemical water treatment available.
Clean water is money. In a bartering environment, especially before individuals have had time to establish water sources, this will be an extremely valuable medium of exchange and will have more buying power than even silver or gold on the individual bartering level.
In a system collapse, food will be another of the core essential items that individuals will want to acquire. Survival Blog founder James Rawles suggests storing food for 1) personal use, 2) charity, and 3) bartering.
Dry goods, canned goods, and freeze dried foods can be used for bartering, but only if you have enought to feed yourself, family and friends. They should be bartered by expiration date, with those foods with the expiration dates farthest out being the last to be traded. You don’t know how long the crunch and recovery periods will last, so hold the foods with the longest expiration dates in your posession if you get to a point where you must trade.
Baby formula will also be a highly valued item in a SHTF scenario, so whether you have young children or not, it may not be a bad idea to stockpile a one or two weeks supply. (For parents of young children, this should be the absolute first thing you should be stockpiling!). In addition to water, baby formula may be one of the most precious of all monetary commodities.
Another tradeable food good would be non-hybrid produce seeds, but the need for these may not be apparent to most at the initial onset of a collapse, though having extra seeds in your bug-out location may come in handy later.
Fuel, including gas, diesel, propane and kerosene will all become barterable goods in a collapse, with gas being the primary of these energy monetary units during the crunch as individuals flee cities. For most, stockpiling large quantities will be impractical, so for those individuals who prepared, they may only have 20 – 50 gallons in their possession as they are leaving their homes. If you are near your final bug-out destination, and you must acquire food, water or firearms, fuel may be a good medium of exchange, especially for those that have extra food stuffs they are willing to trade.
Though we do not recommend expending your fuel, if you are left with no choice, then food, water and clothing may take precedence.
For those with the ability to do so, store fuel in underground tanks on your property for later use and trading.
Firearms and Ammunition
Though firearms and ammunition may not be something you want to give up, those without them will be willing to trade some of their food, precious metals, fuel and water for personal security. If the system collapses, there will likely be pandemonium, and those without a way to protect themselves will be sitting ducks to thieves, predators and gangs.
Even if you choose not to trade your firearms and ammo during the onset of a collapse, these items will be valuable later. As food supplies diminish, those without firearms will want to acquire them so they can hunt for food. Those with firearms may very well be running low on ammunition and will be willing to trade for any of the aforementioned items.
In James Rawles’ Patriots and William Forstchen’s One Second After, ammunition was the primary trading good during the recovery and stabilization periods, where it was traded for food, clothing, shoes, livestock, precious metals and fuel.
Clothing and Footwear
We may take it for granted now because of the seemingly endless supply, but clothing and footwear items will be critical in both, the crunch and the phases after it. Having an extra pair of boots, a jacket, socks, underwear and sweaters can be an excellent way to acquire other essential items in a trade.
As children grow out of their clothes, rather than throwing them away, they will become barterable goods.
It is recommended that those with children stock up on essential clothing items like socks, underwear and winter-wear that is sized a year or two ahead of your child’s age.
Additional Monetary Commodities
The above monetary units are essential goods that will be helpful for bartering in the initial phases of a collapse in the system. As the crunch wanes and recovery and stabilization begin to take over, other commodities will become tradeable goods.
In A Free Falling Economy Makes Bartering Go Boom, Tess Pennington provides some other examples of items that will be bartering goods during and after a crunch including, vitamins, tools, livestock, fishing supplies, coffee, and medical supplies.
Another important monetary commodity after the crunch will be trade skills. If you know how to fish, machine tools, hunt, sew, fix and operate radios, fix cars, manufacture shoes, or grow food, you’ll have some very important skills during the recovery period.
Guest post by Mac Slavo from SHTFplan.
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22 thoughts on “What is Money When the System Collapses?”
Grow tobacco and build a still. The guy with the whiskey and tobacco will be king. Look to the past to see the future. People never change and will always demand their vices. Besides, tobacco is a beautiful plant even if you don't need it for barter. You can get the seeds online.
Tom, Tom, Tom. Next you're going to be advising my readers to open up speakeasies and gambling halls! LOL You are very right about vices, and in fact I have said to my husband, "If I had no scruples whatsoever, I would be in the vice business." One friend told me about a neighbor who grosses over 100K each month from a porn site he operates with his wife. Go figure. Maybe growing a little tobacco, the legal weed, might not be a bad idea. :o)
WOW I hadn't thought of GROWING tobacco. I had planned on stocking some,but my wife is afraid she would no longer be an ex-smoker if that was included in preps. I have been buying whiskey ( making sure to buy varieties my wife and I don't care for ). I have been looking at various articles about distillation. Also, I am wondering about storing beer ( my wife and I can't stand it so no risk there of dipping into the stock ) I am assuming beer would not store well at all. In a post SHTF situation I would prefer to own/manage an establishment where I would rent space and provide a few basic accounting/managerial duties for independent minded "business ladies" . I would just receive a small portion of the fee the obtained for "entertaining" various male "clients".
Tom, a user over at my web site made the same suggestion, and I totally agree. I am a tobacco smoker and occasional drinker, so I am definitely building reserves with this as well. To date, we've got a couple cases of vodka/whiskey and a small supply of tobacco. I will also be ordering some tobacco seeds this year, just in case. Beer is something my roommates and I used to brew back in the day, and I will be returning to this hobby this year as well. Though I don't think these two items will be very helpful for bartering at the onset of a collapse, when the system regains some level of "normalcy" these two goods will be just as valuable as gold, food and clothing!
Well, there might be a huge future for amateur breweries! Good luck with that idea!
Tobacco plants make a natural insecticide when used as a border around your garden.
Tobacco it is, then! If three readers in a row encourage growing tobacco, then who am I to argue? :o) I've used marigolds in the past to deter insects, but maybe we'll try tobacco plants, too.
Any recommendations on a good heirloom seed?
Well, most will be limited on space so I think that the smallest and most versatile thing to store for bartering purposes would be seeds and bullets (the bullets being self-explainatory). Store seeds to be put in the ground but also seeds that can be used for sprouting. I'm just starting to look into sprouting and as soon as the finances allow, I plan to make a small start investment in a sprouting kit and some seeds. Wheat (which should be the staple of your food storage anyway!) can be sprouted but you can also get a variety of other seeds (though bulk wheat is probably the cheapest option). Sprouting can be done with a regular canning jar, a piece of cloth, rubber band. Garden seeds would be great for the bigger picture but immediately after the "event" (whatever it may be), sprouting can be done immediately, with immediate results and in a lock-down situation. And no risk of someone coming to steal your crop! Plus, if on the move (you or the person you are trading with), the items needed for sprouting are few and easy to store in a backpack.
I hadn't thought of storing seeds for possible barter. I can see people wanting and needing fresh produce, and having seeds for sprouting or growing a crop of carrots or radishes might be just the thing families will be willing to barter or trade for. I need to figure out which type of sprouts will pass the taste test with my kids and husband. The other day when my son found, gasp!, bean sprouts in a homemade egg roll, he informed us that he had found some, "rat's tails," in his food and wouldnt' be eating anymore of it! I do have a long way to go, don't I? :o)
Well, I can't offer much advice as I'm just starting to look into sprouting myself. From what I read, alfafa sounds popular. I've eaten sprouts before in salads and sandwiches at different restaurants but it's been years and have no idea what type of sprouts they were. But after reading all the positive things I have about sprouts (both in regards to healthy eating and survival food storage), I'm totally into the idea! Waiting for hubby to go back to work but once he does, I already have the items choosen that I want to order (along with some big buckets of grains to go behind my sectional! LOL). I think another thing that sounds encouraging to me is that the more I read up on sprouts, the more that I learn about ways to "hide" them (or incorporate them) into dishes.
"Rat's tails" HAHAHHA
I've worred about the lack of nutrients in my family's diet should produce ever become scarce or difficult to obtain. That's one reason why I've been dehydrating more and more veggies and fruit, but sprouting is an intriguing option. I have buckets of wheat and could certainly try wheat sprouts first. A survival diet of rice and beans would leave all of us with rickets and scurvy in no time. Gotta have veggies and fruit in our diets, one way or another!
Stockpile vitamins! My local grocery store frequently puts them on sale, buy one get one free. The same store sends me $2 coupons on the same vitamins. I take advantage of the sale and coupon combination. I have over a year's worth for my kids alone.
Sproutings seeds is suppose to provide 10 Xs the nutrients as the seeds alone.
Great suggestion, Cindy! I do have various types of vitamins stored but will be on the watch for the buy one, get one free specials. When storing food, it's important to keep an eye out on the variety of nutrients you'll be feeding your family. Having a good supply of multi-vitamins and other supplements is an excellent way to insure everyone stays healthy. Thanks for the advice!
We have the supplies to start a Square Foot Garden. I'll let you know if I have enough produce for bartering.
Cindy, I'm getting very excited about getting our Square Foot Garden started. I think it will propel me to learn more food preservation skills and will teach the kids some very valuable lessons in pulling weeds! LOL
Will there be a demand for yeast? Brewing, baking, etc.?
Absolutely. I've heard a number of preppers talk about learning how to make their own beer as a barter item, and buckets of wheat can't be transformed into bread without yeast.
I've always wondered…. what's going to happen if bare minimum government stays in place, especially in states, regions, etc. How are people going to pay land taxes? In serfdom, barter, produce, whatever is available? You just know that local government isn't going to let people get away with that one for long, do you? If they can't pay their taxes, how can they stay on their land? Eventually government will reestablish. One thinking coworker says, grow as much food on your land as possible, especially foods that no one recognizes like Good King Henry, Jerusalem Artichokes, claytonia, etc. You and your land will be worth more, and even if you can't pay the tax, you can become the land's caretaker by knowing how these unusual but highly nutritious plants grow more than anyone around. They need you, and you need your land!
To play devil's advocate, they can watch how you grow these things, wait for seed harvest… and kick you off the land if they really want it. Not likely, but you never know. Prove your worth is going to be the true catchphrase of the future.
I have set aside some nice chocolate bars, loose tobacco with papers, a few cartons of cigarettes, some fifths of alcohol, and I think getting some yeast and baby formula would be pretty smart. People who aren't prepping are going to find these things pretty valuable. Growing your own tobacco is a great idea- look up tobacco tea to spray on your veggies to kill different garden pests.
i would recommend you getting a very simple machine that was designed for such a times as this. This will go through most of your heads…some will catch it though. The most important medicine maker you can ever have!
Silver colloid! http://www.sotainstruments.com/default.aspx?page=…
medicine and medical supplies. what could have been a routine injury can now become life threatening. Infection, insulin dependence. etc. Have spare or back up glasses or lens. Keep vitamins on hand also