Chapter seven. When the dollar crashes, then what?



I haven't a clue. Nothing like the crash of our dollar has ever happened in the history of mankind. There have been several nations whose currency crashed. Greece comes to mind. But, the world reserve currency isn't the Greek euro. Most of the world doesn't use euros for petroleum purchases.

The world reserve currency is the US dollar. Petroleum is traded in US dollars (mostly). The crash of the dollar will be felt world-wide, and probably overnight.

When that happens, and it will, what becomes of what we possess? Does our paper money revert to its intrinsic value - paper? Things we have financed will still be contracted and no doubt payable with dollars, even when they are otherwise worthless. I don't know that, it just seems right. Paper dollars may go out of existence in fact. Replaced with computer zeros and ones only.

Food, water and shelter will still be required. Our financed homes will be still there. We will still be able to stay out of the rain. Payment for them should still be in dollars somehow, since that is what the contract calls for. The food shelves may become empty overnight. Make sure you have enough to get by for at least some period of time until the system takes hold again.

Guns and ammo. A necessity. However, contrary to what a lot of websites tell you, a gun isn’t going to help you in "martial law". Nor will having a lot of guns. I actually can’t think of one situation where a gun helps someone survive martial law.   Do you really think your guns are going to overpower the tanks rolling down the street, or the guns of the entire military fleet outside your door? If you use your gun, it is just going to draw attention to you and get you locked up. So, be wise.

So, what becomes of silver then? Will stores start accepting it? If dollars cease to exist and they somehow require payment - how does that work? Will silver skyrocket in value? Should you accept currency for your silver toward the end? If so, exactly when? Should you wait until it reaches a hundred-dollars an ounce? More unknowns than knowns that's for sure.

People tell me "You can't eat silver." That's is true. But, when you can't buy shoes with dollars, what will be available to use then?

I do know that silver and gold have had value since the start of civilization and have never become worthless. Paper, on the other hand has never lasted as a fiat currency anytime anywhere it has been used. 100% of the time - fiat currencies have gone under and reduced in value to zero.

Chapter six. Physical or buy an IRA?

Some folks invest in silver or gold and get just a document claiming they own some silver. These "ownership" accounts may even become a part of an IRA if you wish. Pretty good idea... except for the FACT you bought paper with your paper! Go ahead and do this, if you trust them to actually hold onto some silver someplace with a little "sold" tag with your name on it. I am not claiming they are crooks but just to beware!


My guess is that, as the banks do with fractional reserve, these companies can keep a fraction of what holdings they are supposed to retain. When the dollar crashes we shall find out how much they have held, and if it is even available to the buyer at that time.

Also remember that if you invest this way, it is on record that you 'possess' the item(s). So if you don't want a paper trail of your holdings for some reason, you may not want to invest this way.

However, there are some benefits to buying this way. If you direct the silver/gold to go into an IRA it becomes a tax advantage or write-off to you for now. And if everything goes well, one day you may want to withdraw your savings and pay taxes at that time based upon your retirement income, which will probably be much smaller and give you an advantage at that time. Of course, if the tax rates increase between now and then it may not be an advantage. We simply cannot know for sure.

I don't know if a Roth IRA is available to use for precious metals. If you are interested consult a financial expert. 

As for me, I follow the words in the meme above.


USA = just 5% of the world's silver production.

Chapter five. Buy from ebay?


Sure, why not? Just like any other source from which you buy, you may do well, or maybe not! There are lots of factors to consider. Make sure you "connect" with a few silver companies first so you can compare what is on ebay with a retailer. I see people bidding up over the retail selling price for items all the time. Especially for silver bars.

There are a few ways to buy on ebay. Auctions, Buy and Best Offer. I have used all three at one time or another. Let's start with Auctions. Here are a few tips:

The way ebay works is if you bid an amount on an item, they will place that bid amount for you automatically and just offer from it the least amount required to make you the high bidder. So, for example, if you bid $100.00 on a coin or silver bar which starts at $50.00 (or has already been bid up to that amount) ebay will place you in at $51.00. Unless the other bidder has bid higher already, then it will seek an amount which is a dollar more than the highest existing bid. Your $100.00 will lurk out of sight until the auction time is over. All the while any other bidder that jumps in will increase the amount - with you still ahead at a dollar more than them, unless or until someone exceeds your $100.00 bid. Then at that point they win. But, if they exceed your bid of $100.00, and there is time left, you may increase your bid and possibly still win the auction.

Be careful in this. You are obligated to buy whatever you bid on. It is a contractual obligation and near impossible to get out of. So bid wisely.

Also - know what your are buying! Read the description carefully. Look closely at the photograph(s). Today (9-1-2014) I found this advertised in print:


"1881-S MORGAN DOLLAR PCGS CERTIFIED UNCIRCULATED BU MS64+ OLD GREEN HOLDER".
With this photograph:



As you see, it is NOT a plus (+) coin. The label is NOT green and (I know) it is NOT an old holder. The coin shown is currently worth about $15.00 less than what the print describes. So, be careful.


Here is a way to get past all that bidding. Don't place that bid. Just make up your mind about how much the item is worth to you and sit tight - put it on the watch list on ebay. When ebay notifies you the auction is close to ending (I use five minute warning) then see if the current bid is less than what you "want" to pay. If it is, you could end up as the winner. Remember, ebay wont necessarily spend all of whatever you bid - just what is needed to beat the other guys.

Don't bid yet. Now, sit and watch the item as the clock ticks down. Begin to click in with your bid but don't make that final click yet. (You will need to do a little practice on this to see what I mean - but once you get it right you will be buying stuff!) So, watching and waiting as the onscreen clock ticks down toward the end of the auction. When it reaches a few seconds before the end ZAP it in! If you timed it right (I use six-seconds before ending) you will get your bid in and anyone watching wont have time to counter your offer! You win.
Screen shot. This is it. If you click "confirm" it bids automatically for you.
In the shot above, you will see there is 5 minutes and 58 seconds left. WAY to soon to bid! That screen is active and the timer is counting down. Wait, wait - wait. When it reaches under ten seconds (I use 6) click on it! In the case above, I got the coin for $91.00, which, of course, pissed off that guy sitting on his/her $85.05 bid. But, I got the coin.

How can you know how much to use as my maximum bid? I'm not telling! I have to retain some edge!

This is actually simpler than it appears at first. After a few times you will be able to buy like crazy and be broke all the time, like me!

Chapter four. COINS or BULLION collector?

Diversity!
Definitions.

Bullion - Silver "bug"


Someone who buys silver in whatever form, junk coins, bars, rounds etc. without regard to any collector's value. Staying as close to spot prices as possible. Dealers usually sell a little over spot price and buy at or a little under it. That is how they stay in business. Never expect to buy from a dealer at spot price. They are in business and must pay employees, electric etc.

Coins - Numismatist:

Loosely defined as a coin collector or at least someone seriously interested in coins. Coins can be considered a bullion if they are of no value beyond their silver content.

Is it silver? US dimes, quarters, half-dollars and dollars minted before 1965 were all 90% silver. Nickels had 35% silver ONLY for 1942 through 1945 inclusive. Circulation Kennedy halves were 90% silver in 1964 ONLY. Then begins the confusion for Kennedy halves!
  • Silver proofs 1992–present: 90% silver.
  • 1965–1970 and some dated "1776–1976" special issues: outer layer of 80% silver surrounding a core of 21% silver, totaling 40% silver.
Sooooo. While I do have a couple newer proof Kennedy halves which are 90% silver, this isn't something I would suggest.

Stick to the basics. If it is 1965 or newer it is not 90% silver. Either that, or be prepared to educate others when trying to sell later.

Exception: The US American Silver Eagles are a bullion coin and they are all 99% silver. The newer gold eagles are 91.67% gold 3% silver and 5.33% copper. All older gold coins made for circulation until 1933 are 90% gold.

Confused yet? Me too. Just keep the date 1964 in mind. They were silver then. After that, it gets weird!

I know I am repeating 1964 over and over. It is probably the single most important thing to know about US coins. Other countries are different.

Here is a complete listing of US coins and silver content IF you must go there: http://cointrackers.com/blog/1/silver-content-us-coins/

1964.

Chapter three. Get exactly what you ordered.

Silver dollar on my 40" monitor - standard size CD lower left.
If you decide to buy coins be sure you look closely! This is an actual image from eBay on my 40" monitor. Remember, if you buy a 'certified' coin, you wont need to worry much about the authenticity nor the grading - that's why it is called certified.

Eye appeal vs. condition. Why you need the above large view (or similar) is to make sure what they sold you is what gets delivered. Unless graded as a perfect 70, all coins will have some minor defects from shipping and handling by the mint. The more defects, the lower the rating. Even with certified coins no two are exactly alike in any grade. When you decide to purchase one because you like how it looks online, you need to check to make sure what you paid for is what you get. 

Once delivered, look closely with a magnifying glass or jeweler's loop at the coin, and closely compare any minor defects, bag nicks or marks, with the picture of the coin in the advertisement. Like a finger print, no two will be the same. Make sure the picture and the coin are identical.

This advice is doubly important when buying un-certified "raw" coins. While these coins are not usually numismatic investment quality, the difference in looks matters - especially if you ever consider sending a coin in to one of those services to have it certified.

As for eBay sellers, they covet their 'good' ratings from purchasers and will go out of their way to make you happy. At least that has been my experience.

Read all the advertisement. Often they have several coins for sale and should print a disclaimer stating that the coin pictured is a stock photo etc. So always read all they have to say about your potential purchase.

Chapter two. Coin grading.

A very short primer about coin grades.

As you may imagine grading varies from the USA to Europe, etc. I am dealing only with the USA and only with the current standards. Current standards began in the 1970s. Professional grading services are even newer. One of the very first, Professional Coin Grading Service or PCGS, began operations in 1986.

Currently, there are mainly two coin grading services that I would recommend: Professional Coin Grading Service (PCGS) and Numismatic Guaranty Corporation (NGC). There are other companies out there such as ANACS, and ICG,  but you would be better served sticking with the first two in my personal opinion. Since PCGS was the first commercial coin grading company, they were the "gold standard" for decades. However, NGC has been making great strides by cutting into their market share possibly because they have a more modern looking coin holder.
Perfect coin. Graded by NGC
Grades run from 0 to 70, where 0 means that you can pretty much tell that it was once a coin while 70 means that it is a perfect specimen. This is known as the Sheldon Scale named after the man who devised it. Mint State (MS) grades start at MS60 and go up to MS70. A jump up of just one grade often increases today's dollar value by a 2X factor or even more. Grades below MS60 are for circulated coins and will not be a topic of discussion here. Unless the coin is a rare or special coin, buying less than a 60 isn't advised by me. But, suit yourself in any event. Information describing grades below MS is available many places online.

Older silver and gold coins basically do not exist in 70 grade. Very few 69 and 68s for that matter. Prices for anything above a 66 become almost unbelievable.

MS68 currently $6,599.00 (2014)
Unless you are going into this as a serious coin collector, and not as a basic investor seeking to diversify a little from just silver bars and junk silver (common date worn coins) you probably wont need more information than I am offering.

Personally, I believe the most "bang for the buck" today is with the MS64 and MS64+ coins.

MS means Mint State and a coin never in circulation. PR means Proof, sometimes listed as PF. Proofs are never minted for circulation but for coin collectors. Recently the grading companies have issued an "SP" designation in addition to the Mint State and Proof. These coins are not proofs. The SP stands for SPecimin and means just that. Today, those coins are produced for collectors in MS condition but never sent out to be circulated but treated like a proof coin at the mint. Personally, I can't see any logical reason for this designation. But I'm just a silver/gold bug and not into the depth as some others are.

All of these different conditions of coins were selling for about the same amount when silver spot price was at $34 and ounce as when it went down to $18 an ounce. They were, therefore, a small hedge against the volatility of silver price fluctuations in my opinion.

For me personally, I chose MS64 and 64+ after studying coin value charts. For example, an un-certified "raw" Morgan dollar is valued at about $30.00 in MS "appearing" condition. A common date certified MS64+ coin sells for around $80.00. When you subtract the cost of certification ($25.00) this means you pay about $55.00 for a coin graded professionally about four grades above that raw un-certified coin. That same coin sells for about $130.00 in MS65 which is a major jump in price for going up just half a grade. This is just my opinion based upon my study. You may arrive at a totally different choice. And, of course, all the dollar amounts will change as time goes on and are used here simply as an example of current conditions.

Note: In 2013, both PCGS and NGC implemented a “+” designation to coins. This simply means a coin which is graded MS64"+" is at the upper-threshold of a 64.  

There are lots of coin value books available and lots online as well. Many different things make a coin valuable to a collector. Condition, coloration, scarcity and content (silver, copper, gold) to name but a few. However, for my intent in this blog, you should avoid scarce, rare or mint error coins. They demand a serious premium today, but may not do so when the dollar crashes. Decide wisely.

Proof coins are coins which are struck on specially polished dies made primarily for collectors only. They are mirror like on most surfaces and basically have never been touched by people. They are also rated on the 0-70 scale just like MS coins. However, it would be pretty rare to find a proof coin below a PR-65. There are a lot of certified PR-69 coins out there due to the fact that many people and dealers submit a bunch of coins seeking the elusive PR-70 perfect coin. The cost to send dozens of coins to be graded will be offset by the premium received by selling the PR-70 for top dollar.

Here are two absolutely perfect specimens of the 2009 Lincoln Commemorative dollar:

Proof (PR) 70
Mint State (MS) 70
Proof coins are not always more valuable than mint state coins in the same condition. Many factors are at play. The number produced is one factor. In the case of the above example for the Lincoln Commemorative, the proof is worth more because there were fewer produced as individual coins not because it looks better. A bunch of the proofs were designated by Congress to go into the Lincoln Proof 'sets', reducing what was left for individual sales.

Above mentioned Proof Set.


Chapter one. Are gold and silver real money?

What did he know?
Ron Paul asked Federal Reserve Chairman Ben S. Bernanke if gold was "money". Bernanke said NO!

Was he right, or was JP Morgan right?


Long before the invention of printing, people had money. The ancient Egyptians used gold for exchange. It wasn't yet in the form of a coin, but it was recognized as real "money". Much later the Greeks and Romans used precious metals in coin form, with each coin being hand stamped with a design on front and back (obverse and reverse to use numismatic terminology). Much more recently, Spanish pieces of eight were stamped out. Each part was a called a "bit". Eight bits in a dollar coin. Those coins were made to be broken into pieces - pieces of eight! Still today we use the term "two bits" for a quarter.

These were all used as currency for many years. They all were made of precious metals - at first . . .

After a time the Romans and others began to "water down" the precious metals by mixing in copper. As times got tougher for the government, they became "fiat" coins or currency with little, then zero, precious metal content. Rome fell in no small part because of this.

So the question is: Is gold and/or silver still real money? Or, is paper with a number printed on it real money?

You decide for yourself.

Choose wisely!
You know what I think!

INTRODUCTION - My start or "Knowledge is power and money"

NOTE:  In converting my blog into book form you will encounter many references and links to online information and even a couple videos which would clickable if viewed online in my blog. However, none will work in the book (of course). If you are interested in viewing these, please simply go online and view the blog at ggeiser2.blogspot.com or just make a search online for the information to which I referred. 

Now lets begin with the author's (me) history.


Years ago I used to drive to the local library to study a topic. About a seven mile drive one way. Then I had to figure out their system at the library to locate a book on the topic. Then page through the book looking for the actual topic of interest specifically.

After all that, about half the time, I needed to go after yet another book to corroborate what the first one said. When finished for the day, I returned the books to the shelf and drove home with some notes on the topic. That was in the mid 1960s.

Those books took many months to be written and then published and finally to reach that library. Information in them was historically accurate, but certainly not up-to-date as you need in a market place such as coin collecting or silver investment.

First start - the 50s and 60s.

In my childhood I had always liked the look and feel of coins. I would put back a few silver half-dollars and some dimes to save just because I liked the looks of them. I, of course, knew nothing about actually collecting coins back then. Today I have nothing of what I put back. I never really kept any of them.

After my overseas tour of duty in the Army I began to actually 'collect' coins. I actually still have some coins I put back in 1963. I would go buy twenty-dollars worth of pennies and go through them to find dates to fill up the blue books I had.

Banks back then weren't collector friendly like today. At one bank near Fort Bragg I was accosted by some bank guy who not only refused to sell me twenty in pennies but made me leave the bank while a dozen people watched the disturbance. To this day I can't understand what his problem was, but it was the attitude of banks in general. They somehow figured money was just to spend and not to collect. I'm sure I wasn't the only person who got that treatment. One can only imagine how many more valuable coins would have been taken from circulation back then and saved from wear or destruction had the bank's attitudes been more favorable toward the hobby.

I got away from actively collecting coins for about 20 years, from around 1965 until the mid 80s. Up to that point I had only managed to collect a couple of blue books of pennies and some nickels. Nothing else.

A few of these comprised my entire collection

Second start - the 80s.

Now I relied on coin books and other publications. These were more up-to-date than a library book, but still weeks away from being current. At best, a few  newsletters would be published from week to week. Still not anything in real time which we now have and those newsletters weren't free!

Thankfully, when I started collecting again, the professional grading services like PCGS existed. With these being available, I was at least assured of the quality and condition of a coin. However the eye appeal was still sometimes lacking. For example, I bought a 1909 S VDB penny from a California seller sight unseen over the teletype. Luckily, the coin looked great as it turned out. I was guaranteed as to what I was getting by PCGS, but there is a certain something about actually seeing what you are buying that simply wasn't possible before, unless you walked into a local store and bought.

Most of what I bought was from an individual and I got to see and hold the coins. I collected mostly PCGS certified gold coins at that time.

Once again I stopped being active and sadly, I sold all the gold and nearly everything else. 

Third start - new millenium and the teen years

Enter the computer age of knowledge!

Today, I have this computer. It is light years ahead of the mid 60s and even mid 80s in both speed as well as being far more comprehensive.

Inside this computer is a wealth of knowledge, placed there by experts, on the topic of silver and gold. You can research coin values with up to the minute accuracy. Find the "spot" prices for precious metals, with minute to minute prices being displayed in "real time".

Today, I can look at the actual coin, and I can examine it closely on my 40" monitor to decide if I like the way it looks before bidding or buying. I can even go look up what the coin is actually worth before bidding. I can compare it with similar coins. I can do everything short of actually touching the coin or silver bar. 

Life is good for collectors!


I dwell mostly on silver, but gold is good too! However, today's costs may force most people into silver rather than gold. One tenth ounce gold coins and bars remain somewhat affordable and are a good place to start if you go with gold. You must pay more per-ounce when buying smaller or fractional coins, but they retain that value if you need to sell (so does silver). Plus, the overview on investing is about the same in any event. 

Many people believe that silver stands to gain a lot more than gold in the future - getting back to a 15 to 1 ratio. Nobody knows for sure! In fact, most of what I, or anyone else, posts here regarding values is purely our opinion(s)!

ABOVE ALL - do not buy silver nor gold based upon anything posted here. Do your own research and make your own decisions.



This short video shows how much work is involved to mine silver. (Discovery Channel)


This blog is not meant to be a scholarly work. I'm just an every day person with an interest in saving precious metals and US (mostly) coins. I recently went to a coin blog elsewhere and had to look up many of the abbreviations being used there. Plus, they were getting way deeper into coin grading and coin slabs than I ever have. There was an ongoing debate about which TPG (Third Party Grading service - see! I had to look that one up) was the best and tons of comments about breaking coins out and re-submitting them to test those services. I have never considered doing that, and I'm way below these people in my knowledge and understanding.

What I do know about coins and silver is pretty much all I need at this point in time. Who best grades a coin? PCGS or NGC? All I need to know is that the coin is graded by one of the three top tier services and that grading is accurate enough for me to make a purchase or to turn around and sell a coin. 

There wasn't much discussion about bullion.

Anyhow, I hope what I have produced here is helpful to some of the readers. I have fifty pages here. Check the rest (about bullion and coins and many things surrounding the topics) to see if your questions are answered. Always remember that I am not selling anything. This is a labor of love. I love the precious metals and especially US coins.

And always remember I am not an investment advisor, so:

NEVER TAKE MY INVESTMENT ADVICE! 
Consult the professionals