Your take on Len Penzo's commentary of the looming end to our financial system

[foxswimmer]

I read a large variety of personal finance blogs. I don't remember how I stumbled across Len Penzo, but I have been reading this stuff on and off for at least the last 6-9 months.

Every week, he puts out his "Black Coffee" commentary (http://lenpenzo.com/blog/idcategory/commentary).

Does anyone else read his stuff? If so, I am really interested in your thoughts. He is continually emphasizing the upcoming end to our financial system as we know it.

One example from this past week:

>>>
Debit: This week, Bill Holter passed along the story of one retired couple (http://blog.milesfranklin.com/zimbabwe-to-make-you-think)from Zimbabwe — with roughly 500,000 Zimbabwe dollars in the bank — who went from being set for life to not being able to afford a loaf of bread in two days. And that, folks, is the cruel illusion of paper wealth.

Debit: The truth is, history proves that all fiat money — including the US dollar — will eventually meet the same fate as Zimbabwe’s debauched currency (http://qz.com/426925/i-was-a-quadrillionaire-in-zimbabwe-but-could-barely-afford-to-buy-bread/). Hey, don’t be a chump; the greenback is clearly heading there too.
>>>

His insurance policy against the upcoming collapse is holding gold and silver in physical form.

I know a lot of people sell fear and doom and gloom, but there is a part of my base brain that can't help but have a reaction to this stuff and wonder how terrible it would be if a lifetime of savings were wiped out. Then I come to my senses and realize that it is beyond my control therefore no need to ruminate on it.

Unless there is something I can do ... like hoard gold+silver and guns+ammo ... which seems like a walk on the "crazy" side.

Anybody relate to these mental gymnastics?

[Chris22]

If the US currency experienced Zimbabwe-style inflation, it would be due to an end-of-the-world type event and your money being worthless would be the least of your worries.  There are very few currencies that are more stable than the dollar and are widely accepted.  And if you have to fall back on your gold and silver reserves, there won't be any grocery stores left to spend them at anyways. 

[Rezdent]

Another black coffee fan here.
I'm fascinated with his ability to link the credit/debit.
I don't take it too seriously though.
if things of that magnitude did happen then there's not much I could do.

However, it makes a lot of sense to prepare for ordinary disasters.  Two week's worth of supplies are recommended.  Gold/silver won't be much help in those scenarios.  After the last hurricane in Houston people some folks weren't able to get food or electricity for weeks.

[regulator]

Sounds like a nutball, gold salesman, or both.

[Tetsuya Hondo]

People love to try and make some half-assed link between the US and Zimbabwe or the Wiemar Republic and ignore the overwhelming majority of countries that have done incredibly stupid economic things yet failed to experience hyperinflation of their fiat [gasp!] currencies.

Zimbabwe is a fucking basket-case run by a lunatic dictator. The Wiemar Republic pretty much set out to wreck their currency as a big fuck you to their allied creditors. These are the extreme outliers of the past century.

[mozar]

Oh, when I clicked on this thread I was hoping for something legitimate like talking about the sustainability of consumerism. I think there is plenty to worry about but runaway inflation in the usa is not one of them. This guy is just a typical idiot. Read "debt, the first 5000 years" and you'll feel better.

[golden1]

One argument is that a lot of MMM's philosophy will prepare you very well for this type of scenario.  Being more self sufficient and learning to DIY is going to prepare you fairly well if we did have an economic catastrophe.  Sure, all your index funds might go poof, but you are going to be a heck of a lot better off than most people. 

My DH is a little like Len Penzo and it gives him a sense of comfort to have some precious metals stored away.  I see it as a lost opportunity cost, but I figure it is a hedge against the worst case scenario so I let it go.   

[mozar]

Nobody ever thinks through it. What are you really going to do with gold? Barter? Nobody wants gold. I want to see someone go to the grocery store and try to pay in gold. But seriously though I also pay attention to what the elites/ polticians say. Its good when they say "I believe in America" because a country can decide not to be country anymore and no longer back money. What form money takes is not important, what is important is whether your country backs it with "full faith." If the usa decided not to back the dollar then poof, there goes trillions of dollars of wealth, and the elite would revolt. I don't think gold is going to help anybody in that scenario.

[puglogic]

Sounds like Chris Martenson. 

I take all such predictions with a grain of salt.  I can easily see a big fat ugly mess in the making, given derivatives/speculation/crappy oversight/ever-scarcer resources/changing climate, etc.  But I don't freak out about it.  I stay out of debt, stay out of the Market, build my infrastructure & skills, keep my family and community close, and get on with my life.  They may be right. Who knows?  But I don't lose sleep over it any more.

Goes in the "good to know; what's for dinner?" category for us....

[One Noisy Cat]

     I remember reading a few years ago about someone having problems getting out of some African country, I think it was Zaire.  What finally got him through customs  wasn't gold but a couple bottles of whiskey. Maybe preppers should stock up on Jack Daniels.
    Leaving the Weimar republic (a deliberate decision) about the only First World nation that I can think of that had a sustained period of high inflation was Israel in the 1960s and 1970s. But they didn't collapse and eventually got it under control.

[Bob W]

Ten percent of your assets in gold is prudent. 

[Arktinkerer]

Guns, ammo, crossbow and hunting skills.
Good size garden.
Old school food preservation skills.
Tools to fix just about anything.
Books with lots of info on how to do it.

Some silver--sure.  But lets be honest, you can't eat silver or gold.
Rental houses.  People gotta live somewhere.  Pay me in something I need whether food or paper money.

[Iron Mike Sharpe]

Gold ain't gonna do you any good when the shit hits the fan.  You need a real commodity.  That's why I keep 10% of my NW in heroin.  Much easier to barter with it.

[nobodyspecial]

   about the only First World nation that I can think of that had a sustained period of high inflation was Israel in the 1960s and 1970s.

Argentina and Brazil in the late 90s had to do the rename the currency trick multiple times

[forummm]

   about the only First World nation that I can think of that had a sustained period of high inflation was Israel in the 1960s and 1970s.

Argentina and Brazil in the late 90s had to do the rename the currency trick multiple times

I don't think Argentina or Brazil were First World nations in the 90s.

I read the most recent of Penzo's articles. It wasn't worth the time. For better economic analysis, look elsewhere.

[gillstone]

The Zimbabwe, Argentina, Weimar, Brazil, Greece, [insert foreign country here] VS the US economy is a well worn trope that relies on an apples to submarines kind of comparison to drum up panic.  None of the above are comparable in the structure, scale, or nature of economy.  Not even US in 1929 really works since we were tied to a gold standard at the time (Holy shit! we had an economic collapse almost every 20 years with a gold standard in place!).

The economy will rise.  The economy will fall.  It will even have really big falls that make life hard for lots of folks, but the chances of it just up and disappearing with no interventions to soften the landing are insanely remote.

Finally, be careful in how you buy your gold.  Gold peddlers like to sell people on collector coins on the basis that bullion could be seized like it was back in 1933 (still on the gold standard at that point, just sayin').  However these coins may be valued more on their collectability than they are on the actual weight and purity of gold.  So that gold coin selling at $1,000 may only be worth about $500 in actual gold value.  This really matters because there likely won't be many numismatics in the wasteland so demand for your 1783 French gold coin may be a bit depressed.

[KungfuRabbit]

First of all.  The US is a little more stable than Zimbabwe, or any other country in Africa for that matter.  Our dollar may lose buying power, but right now they are trading in like 2 quadrillion dollars for $1 US.  Not gonna happen. 

Second of all.  if you want to buffer against chaos gold is foolish.  Land will always have "value", the $$ sign attached to it will go up and down, but if you have usable land it will always be worth something. 

[Digital Dogma]

Hoarding and physically holding large quantities of gold, silver, ammo, and guns where you and your family sleep seems likely to attract violent criminals seeking "easy FIRE" even in the best of economic times. Ill stick with a full pantry for hard times.

[partgypsy]

My father lived through WWII in Greece. Due to a number of factors, first there was privation, then widespread starvation. Those who fared the best were the people in the country. They knew it was coming, shifted to crops that once harvested would keep, and hid olive oil in vats of wine. At first people did barter non perishable goods for food, but when it got really tough, people from the cities would come into the country begging for food trying to trade gold watches for a loaf of bread, but no one was was taking up those offers, the bread was more valuable. What did people trade when the going got really really hard? It varied with region but where they were, olive oil. People carried cans of it around to do the trading and shopping. Everything else, you grew yourself or did without.

So as a hedge against inflation/deflation sure have some gold. But when you are talking about when there is a loss in infrastructure to that level, being the most self-sufficient you can be is the most important. 

[Kaspian]

I've read Len's blog for YEARS AND YEARS!  (Before MMM.)  I often refer friends to some of his articles.  He's great on days he's not wearing his tin-foil hat. 

[NoraLenderbee]

Remember the last gold rush? Inflation was high, the stock market was moribund, and the only safe investment was gold. Gold hit an all-time high in 1979, went down, and did not beat that high until 2008. Gold buyers then had an underwater asset for nearly 40 years, during which the stock market went up x17.

[arebelspy]