FRAGILE NATURE OF CURRENCIES: Why Gold & Silver Are High-Quality Stores Of Value

As the U.S. and global economy speed towards the Seneca Cliff, very few individuals understand the fragile nature of currencies.  Today, we use the lightning speed of the digital banking system to make our purchases at the store or online.  It has become seemingly natural to buy groceries at the swipe of a card.  Only a small percentage of purchases are made with cash… paper money.

However, our high-tech digital banking system is built upon a highly complex system that consumes a massive amount of energy just to maintain business as usual.  There’s this notion that technology will grow exponentially while at the same time making our lives easier.  TV commercials are showing how individuals today have more power at their fingertips than entire generations in the past.  While this is currently true, I can assure you; we are not heading into a high-tech world where robots do everything for us.

Unfortunately, due to the rapidly Falling EROI – Energy Returned On Investment and the thermodynamics of resource depletion, we are heading into a future with much less technology and a great deal more human labor.  I know, it sounds insane to say that, but it’s true.  Human labor and human farming have a much higher EROI than any technology used today.

In my newest video, I discuss the Fragile Nature of Currencies and why gold and silver are the high-quality stores of value.  I released the video yesterday on my youtube channel and already there a lot of comments.  One individual commented that the information about the “lifespan of the servers” was inaccurate.  The individual stated that the reason servers are replaced is that it’s cheaper to buy a new one than maintain an old one.  Well, you see… that is the CURSE OF TECHNOLOGY.

Furthermore, most experts agree that CRITICAL PRODUCTION SERVERS should not be used more than five years:

Most of the experts agree that critical production servers should last about five years and should be replaced or at least moved away from critical applications or off production altogether. As mentioned, many opt to upgrade drives or power supplies halfway through the five years make them last longer. Once the warranty is up, there’s no saying how long it will last and at that point, you’ve got to pay to replace anything that fails anyway, but there’s no need to let downtime be another cost.

Looking back in history, we can see the progression of technology and how things don’t last as long as they used to.  There are several reasons for this, but if we consider the mechanical gauges found in older cars, they can last for decades and I have seen some still working after 50 years.  However, the new digital gauges start wearing out after 5-10 years.  High-tech gauges are nifty, but they are not durable or long-lasting.  This is the very same situation with our current digital banking system.

Which is why I believe gold and silver will once again become the high-quality stores of value in the future as technology starts to fail in a BIG WAY.

At the beginning of the video, I start off with an update on the markets.  I discuss two charts by Jill Mislinski at Advisor Perspectives.  One of the charts below shows the inverted margin debt versus the S&P 500:

The graph shows that when the FINRA margin debt peaks, so does the S&P 500, but in an opposite fashion.  You will also notice that a recession occurs in 2001 and 2008 after the peak and decline of the FINRA margin debt.  Currently, with the margin debt peaking at $660 billion, it corresponds quite nicely with the peak of the S&P 500.

Individuals, whether they are mainstream or alternative (sound money) investors need to understand ENERGY and the FRAGILE NATURE OF CURRENCIES.  Unfortunately, a large percentage of my precious metals followers don’t read or watch my energy articles and videos because they just don’t have the time or interest.  THIS IS A SERIOUS MISTAKE.  However, I don’t blame them because most of the top precious metals analysts don’t understand our dire energy predicament either.  So, the blind continue to lead the blind.

I recommend everyone watching my newest video, GOLD & SILVER, HIGH-QUALITY STORE OF VALUE: Fragile Nature of Currencies.  Also, please consider subscribing to my YOUTUBE CHANNEL.

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53 Comments on "FRAGILE NATURE OF CURRENCIES: Why Gold & Silver Are High-Quality Stores Of Value"

  1. I bought this a few months ago

    https://militaria4you.com/wp/wp-content/uploads/90_8G003_Trekzaag_9051013.jpg

    Tech breaks down after a few years. It costs a lot of time, money and energy to keep it functioning. I only buy durable stuff, for many years now. Not in boatloads, but now and then, this saw came from army stock and i paid about €15

  2. Hey Steve,

    I’m curious to know what’s ur take on agriculture and EROI,best if u can sum it up on an entire article. Do u see organic&vegan farming as a viable solution while living an “oil crisis”(I reckon animal farming is negative EROIs since that we feed more the animals than humans, while hunting is positive EROI but it’s too limited for the whole population, thus vegan organic farming should be the only solution?)?

    • DisappearingCulture | April 10, 2018 at 3:20 pm |

      This is the first time I have heard the term “vegan farming” before. BTW, chickens can pretty well forage for food; supplementing their diet with any food scraps.
      And yes more natural methods of farming work; it just doesn’t feed hoards of people. It has a better EROI than running lots of tractors and irrigation and pumps and aerial spraying etc.

      • yeah check vegan farming which is making a “revolution” in India,especially with vermicompost(no use of animal manure)

    • Rabbits = easy to maintain, cheap to raise, and a great source of nutrition. Their biological waste makes great garden fertilizer and last but not least….. very yummy.

      • You can starve eating rabbits, poor meat source.

      • @Petedivine I understand that chickens and rabbits are low maintanance compared to other animals, but in times of caresty I think people would tend to do activities with the highest EROI, thus crops and hunting. Raising animals is anyway very time extensive,there are risks,they need food; u simply cannot beat the EROI of growing crops and hunting(though this last option is not available for everyone)

        • DisappearingCulture | April 11, 2018 at 2:22 pm |

          Ned,
          Your brain & body needs the EPA & DHA omega 3 fatty acids that are in animal fats [like chicken eggs] from animals that eat their natural diet.

          • lol ever heard about olive or flax oil?and about nuts and seeds? Many vegans with 30+ years experience(not to mention also raw vegans) are thriving while their omnivore mates are degenerating in a myriad of diseases…

        • DisappearingCulture | April 12, 2018 at 10:31 am |

          Ned,
          Flax oil and olive oil are NOT the same/equivalent of EPA & DHA [primarily from animal sources]. Nutrition is an area of my expertise; I’m a chiropractor [MD’s have very little training in nutrition]. EPA/DHA deficiency can be an issue for vegans.

          • The body produces it’s own epa/dha by converting simple fatty acids to longer ones , some people cannot produce it cuz they relied for too much and in generations on animal products and the body stopped producing it, but this is NOT normal, we have sabotaged our own body,we have to stop this madness.

  3. Excellent!!! Thanks Steve

  4. OutLookingIn | April 10, 2018 at 5:30 pm |

    The current macro-economic and macro-political developments go hand-in-hand.
    The insipient war campaign underway in the west against Russia, Syria, Iran, North Korea and by way of entanglements China, has pushed the world ever closer to another and final world war.
    This mostly explains golds and silvers strength in the face of massive manipulation.
    Since November 2016 silver has chopped sideways, range bound with price between $16 and $18. Gold has done much the same within it’s own narrow price band.
    When empire’s are in their death throws and failing, they go to war. The greatest monetary/fiscal collision in recorded history is now unfolding and to cover their miscreant dealings, the west’s elite’s are knocking over the game table.
    Unfortunately, the short sighted political gamesmanship practiced by the western oligarch’s will be paid for by the common man, at a very steep price indeed. Prepare accordingly.

  5. If the world is speeding to a Seneca Cliff, technology and currencies are so fragile then the future collapse will be rapid and unprecedented.

    Will the lights turn on?

    Will the water even work?

    Will the heat work?

    Will food show at the market?

    In this type of event, no one will care one iota about gold and silver.

    • Sounds mighty lofty to disregard chunks of metal, but True money is fungible, transportable, durable, divisible and credible. Folks talk about trading copper and lead or other commodities but lead is not as fungible. A 9mm round won’t work in a shot gun or rifle etc.

      Trade relies on trust and a market for what you have to trade unless you have reliable money that people have confidence in.

      Money, a store of value, (silver and gold), is a tool that is used to advance a civil society. It will be needed. It will restablish trust for exchanges, and be the grease to reduce the friction of less fungible bartering.

      They and you will care many iotas.

      • OutLookingIn | April 11, 2018 at 12:56 am |

        Trade.

        When goods are prevented from crossing borders, then armies often do.

      • This is the gold bug and silver shield fantasy…

        That every or anything else can permanently change or utterly fail but right alongside all of that gold and silver will be the Phoenix of truth, advancement, and rescue.

        But worst of all, this demonstrates how far and where faith falls to, a barbaric world indeed.

        • Cary,

          Let’s provide some LOGIC in reference to your assumptions about the precious metals.

          First… there is no guarantee in life.

          Second… if you have SURPLUS FUNDS, then LOGIC suggests Gold & Silver will provide better options under most scenarios. I can assure you that an individual’s chances of trading something for food will be much better if they offer physical gold or silver than a paper statement of their now WORTHLESS 401K, credit card or Federal Reserve Monopoly Money.

          Third… there are many scenarios how the future unfolds. I get a laugh when commenters provide the following scenarios only. The Central Banks will continue to rig the markets, so owning gold and silver is useless. Or the only other option is that we go into a MAD MAX scenario, then gold and silver will be useless because people will be fighting for food and scraps.

          Lastly… I have no idea how the situation unfolds. But, I can assure you that if people own physical gold and silver, they will provide MORE OPTIONS than 99% of everything else out there. If an individual can’t understand that simple LOGIC, then there isn’t anything else I can say.

          However, if an individual believes gold and silver are totally worthless to own in the future, then I would suggest their time might be better spent AWAY FROM THIS SITE.

          steve

          • If you have no idea how the situation unfolds, how can you prominently declare a Seneca cliff? Logic?

            You just don’t want it both ways, you move on and then state gold to be the only way.

            Gold is your faith. It is your blind fantasy.

            Government will decide currency, and if government is ineffective or non existent you will be in a situation where the population or the gangsters de jour decide. And 99%+ of the population does not have gold to trade with.

            Show your face at the black market as that rare gold bug species and if gold has the value the gold bugs dream about you will become a mark.

    • Knowshitsurelock | April 11, 2018 at 12:49 pm |

      under-bridge dweller!

  6. Steve,

    The conclusions you made are vastly oversimplified. Digital monetary system cannot collapse because bank servers fall apart or grid power is gone. A typical large data center requires about 50MW of power, which is 5% of capacity of a typical 1000MW nuclear generator. If falling EROI starts shutting down blocks of economy, the first to fall will be the largest parts: consumer economy with all associated logistics. That is about half of all energy. Without consumer economy and logistics at full capacity, people will not have to walk, or turn to farming, or eat less; they will have no choice but to die in mass numbers, until EROI reaches a new balance. Billions would die, but servers would be able to keep running for a few years even if they no longer could be replaced. So the right conclusion would be to watch for consumer economy ‘crisis’ in dicretionary items first, in essential later, in critical after that, and depopulation of the most EROI-sensitive areas would signify the real onset of the energy crisis. Mass migrations, sudden wars, draconian regulations on consumption — all that would come and become a new norm before lights go out and servers stop.

    • There will not be any seneca Cliff. Just a slow proces of slowing down human economic activity. Even if a new recession starts this year, it will be temporary. Billionnaires investots are scaring people into making wrong investments providing them with false market calls.

      • Ed,

        The majority of collapses from past Civilizations resembled the SENECA CLIFF. While technology was used by the ancients, it was nothing like it is today. So, I would disagree with you that this TIME IS DIFFERENT. Technology made things move faster on the way up and will do so on the way down. I do see a SENECA CLIFF type of collapse.

        steve

      • DisappearingCulture | April 11, 2018 at 2:35 pm |

        “There will not be any seneca Cliff.”

        Study history for clues. https://dailyreckoning.com/is-this-the-moment-of-truth/

    • Reader,

      You must remember this important FACTOR. It takes the SUPPLY CHAIN of 55 countries to produce an I-PHONE. I would imagine the servers have just as large of a supply chain. When oil production starts to decline, it will impact the global supply chain.

      For some odd reason, people continue to think that a computer magically appears in Best Buy’s Store. It takes a MASSIVE SUPPLY chain to get that computer from raw materials to a Best Buy Store.

      And I am not talking about servers running for just a few years when billions starve. I have no idea how the future unfolds. But I would imagine it will be very chaotic.

      steve

      • OutLookingIn | April 11, 2018 at 10:46 am |

        Chaotic.

        Chaos seems to be reigning supreme in the eastern Med.
        With a US carrier group now joining the grand party off the coast of Syria, the area has become that much more crowded. Syria has evacuated some sites in preparation for a missile attack. Israel vows to wipe Assad off the map if Iran attacks from Syria. The Saudi’s have shot down a missile attack by the Houthi’s of Yemen. The Russian’s have reiterated that there will be reprisals against any interference. What could go wrong?
        Meanwhile, today (April 11, 2018) is Holocaust Remembrance Day beginning at sundown. Let the fireworks start at sundown? The war drums beat louder.

        • OutLookingIn | April 11, 2018 at 11:44 am |

          It’s on!

          Latest report.
          Eleven Russian naval units have left Syrian port to conduct “naval exercises” in the eastern Med.

  7. Some feel those who went west with wagon trains were really tuff folks, but were they unusual?
    From where they left they had gathered and burned all the wood, on the trail they could camp next to plenty of wood.
    From where they left their homes were on high ground to avoid floods, on the trail they could camp next to the creek.
    From where they left their outhouses had to be constantly relocated, each time further and further from the cabin while on the trail it made no difference because they were leaving tomorrow.
    In the past every movement to a new life style was easier than the old life style.
    BUT NO MORE because we have harvested all easily accessible natural resources.
    Some see a glass half empty, some see it half full, reality very well maybe the glass is near bone dry with only one solution left.

  8. Steve, Thank you so much for your awesome thoughts and clear explanations!

  9. the whole system is so fracked up….Trump tweets missiles to Syria and bitcoin up 110.00 while gold up 11.00…wth…people so messed up with reality I am starting to think its me thinking wrong…maybe ….just dont know anything anymore….

  10. It seems the price of oil is beginning to diverge from the stock market.
    This would be consistent with a falling US dollar.

    Steve, do you foresee this to continue as the stock market continues to fall?
    If so then the stock market will continue to be pressured down with rising fuel costs.

    • james r,

      The oil price is reacting to geopolitics and war rhetoric. However, when the Dow Jones Index really starts to roll over and fall below 20,000-22,000, then the oil price will decline with it.

      steve

  11. Ned,–regarding your opinion that eroi of hunting superior to raising animals, I would disagree. First, and perhaps primarily, large game numbers are greatly diminished almost everywhere in rural america/Europe compared to only 100 years ago not to mention earlier. Sure, lots of deer it seems but they would within weeks become totally nocturnal and extremely skittish. More importantly they would, despite their caution, become rapidly extinct in any area walkable from even remote homesteads. Stories are replete by old timers of 1930’s of this happening and their collapse not even close to ours, with a much more abundant wildlife and often still some limited access to vehicles.

    so it’s about small game and the eroi of “hunting” such is negative with 22lr, so it’s about trapping with iron traps. Here the eroi can be quite positive if you have right area and willing to eat absolutely anything, but probably only for year or two before you overreach and kill off population unless are very careful and have high self restraint. Even then control of catch quanity is limited.

    Essentially though, sustenance trapping is a high art form, requiring years of full time experience, high skill and an almost metaphysical connection with the earth. which alone takes many years to develop. The people who used to do this were at it from birth almost and had teachers and much more game. Still meant awful amount of walking.

    Under collapse, there will be many people wandering and a trapped animal often makes noise, meaning very high risk of having your whole non replaceable trap line stolen unless MAYBE walk twice a day, cutting greatly your eroi.

    The people doing this nowadays on a commercial basis have to use cars to find game populations. Food trapping with no car means need a lot of land, which means you must own a small piece surrounded by public land, hard for almost everyone. And while out there you will be prey yourself, as lands are public and cannibalism will be common. Definately very high eroi there for those so inclined! Your lifelong domesticity makes you the easiest thing to eat by far and you’ll never catch up.

    Hand made traps, a fantasy. If you brought a skin here from the 17th century he’d still starve with our low game supply without efficiencies of iron traps.

    Do need wild organic animal fat somehow tho. Better count on home raised. Safer, less skill needed by far, much less walking and don’t need boots. Or the million bucks to buy perfect doomstead.

    LOL! little off forum topic here. Meant to just make brief comment

  12. Brian M- Not sure lead is not as fungible as pm as you believe. Is true what you say but lead will be in such extreme demand that people may take
    9mm even tho don’t have that piece cause know they can trade to somewhat else that does.
    Really tho, choosing strictly between the two as currency I’d say silver better choice as it can’t be shot at you after the trade concludes. Plus lead bullion lot harder to store without corrosion and bulkier

  13. Cary– The pm world is about a very light level of collapse or if deeper for use after mystical undefined reset far down road when we have benign rulers who somehow don’t go back to manipulating and stealing everything. You know, shangri-la where collapse elevates us all after little pain to higher consciousness. And of course silver bugs are reacting to the undeniable fact that fiat is an evil instrument of tyranny and pm is the best real money

    Obviously, as you say, in anything deeper then a recession silver will be far to dangerous to use. it’s not a choice between silver and paper. Choice is tween silver and what else you got and that may not be physical. Maybe is knowledge or just your general worth as a man. but better have a lot of something and be a real person with discernable to others personal power. Maybe some silver as a desperate last choice.

    Course best thing is not to have to trade. So…

    Unless you’re a billionaire better to spend fiat fast as you can on land and education. just my opinion and choice for myself and family. Because i understand peak energy and debt enough to believe what we are facing is really nastier then anything before. I have just bought debt free land with fiat i was tempted to spend on pm and have invested a lot of fiat to travel and learn a few skills like making work boots and just sold 1st pair working evenings and weekends. EMT taining. Was all excruciatingly difficult and about financially tapped out.

    Now there’s a second group of people who choose silver and no doubt wisely so. While seeing probable horror they have to take their chances on collapse lite because they simply can’t or don’t want to survive anything deeper whether because of age or whatever. maybe just inclination. If inclination they can not be slighted. maybe they will win and I’ll lose. all a gamble.

    Could be said gold/silver crowd is roughly divided into 2 groups. tho of course as in everything lot of overlap, grey areas.
    First group is a highly urbanized domesticated set that because of this conditioning can literally not conceive of any other choice then that tween buying something with silver or worthless paper. (Subset of this group may conceive but are selling pm)

  14. Steve have you heard about these guys predicting silver to be worth around 12 bucks at the turn of the decade?
    https://longforecast.com/silver-price-today-forecast-2017-2018-2019-2020-2021-ounce-gram

  15. Huge crypto come back with enormous volumes, it seems the bottom have been stuck last week. In the meantime gold still unable to even try to attack the impssable 1350/1400 zone…

    • DisappearingCulture | April 12, 2018 at 10:45 am |

      Like a one day come back?
      LOLOL

      • DisappearingCulture,

        We must remember, RD has the attention span of a GNAT. I am not being derogatory, rather he has proven over and over again that it seems to be the truth.

        steve

        • I am playing the other side of the mirror in some of your articles where cryptos and paper markets are falling a couple of days and that you are posting some obituary for those ones (like with ripple or with SP500 a couple weeks back) : I am just a little bit of balance right here !

          • Cryptos and paper markets falling a couple of days is not the point RD. The fact they go up for decades. That’ s the problem.

            What does RD stand for btw; Research Down?

  16. silverfreaky | April 12, 2018 at 6:56 am |

    A war stands before the door and silver do nothing?Again what must happen that silver increases?
    The miner stocks lower and lower.

  17. As long as physical Gold and Silver are delivered at the paper manipulated price, the manipulation will continue. So hold your metals and stack more if you can. In the meantime figure out a way to make a profit from another asset class…stocks, bonds, real estate, other commodies, cryptos (shhhhh not so loud steve will hear you….)

  18. Consider Monetary Velocity & John Exter’s Inverse Pyramid http://www.kitco.com/ind/Taylor/2014-07-21-Monetary-Velocity-John-Exter-s-Inverse-Pyramid.html & you could make the following observation.
    Gold sits at the top as the monetary system goes into reverse or as currency flees other asset classes.
    Additionally, if you look at Maslow’s “physical – hierarchy of needs pyramid” it will remain for humans as air, water, food, warmth, health etc.
    So the best assets to own are:- water or means of water purification, food or means of food production, medicines – warm clothing or means of producing warmth, shelter & possibly physical Gold or Silver to barter with for that which you haven’t got.Maybe even a gun & bullets for protection.But as Zerohedge states, ON A LONG ENOUGH TIMELINE THE SURVIVAL RATE OF EVERYONE DROPS TO ZERO – anyway, so decide whats best for you!

    • R.M

      “Decide what’s best for you”. Indeed. No one knows the future. We’re all nurtured, until we have to deal with second hand diapers.

  19. Do you know what Ellen DeGener… said to Cathy Lee? May I be Frank with you?

    Ok guys, may I be Frank with you?
    If cryptos or some form of currency is not in the future because there is no active grid because there is no electricity because there is no fossil fuel to produce it then WE ARE ALL SCREWED!
    Millions in our cities will die of starvation. Ok ok the govt will bring them food in trucks that are fueled by what? And that fuel is pumped with what?
    In above situation which will be worth more, your first bullet or the last.

    Steve paints a pretty bleak future but there is no new horizon bed of roses on the other side.

    • Don’t panic ol’ gig. Life is short, and then you die.

      • Don’t worry houtskool For I know whom I have believed and am persuaded that He is able to keep that which I have committed unto Him against that day.
        There is always hope.

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