What Can We Do About Inflation?

In the comments to last night's post on food prices projected by the NIA, reader LeverAction commented,

The only thing I can't figure out is why, after predicting the collapse of society, they then recommend preserving wealth in gold. I would think that if society really collapsed then things of more practical value would be better to have than gold.

Holding gold is a good way to ride out a storm of finite duration, but it carries the assumption that things will return to some semblance of "normal" sooner or later. But if it doesn't, in the case of real 'societal collapse' or 'infrastructure failure', your gold is just a bunch of really dense, heavy metal that you can't eat, can't plant, can't hunt with, and has no value as a tool. If you already have everything else you need the gold might be a good way to preserve the excess wealth, but for goodness sakes concentrate on the practical stuff first.

I envision a multi-layered response.  Gold and silver are part of it.   So are food stores, brass, copper, lead, and a host of other things.  The one common theme is that the response has very little paper; it's all tangible stuff.  Commodities. 

You are right that gold has no inherent worth here.  You can't eat it, you can't plant it, hunt with it, or hammer with it.  It's also so dense in value that you can easily hold $15,000 in one hand.  You're not going to buy a loaf of bread with it.  For that, I think silver coins are going to be well accepted.  I can see both the current silver eagles and the old pure silver, pre-1965, coins commonly sold as "junk silver".  You need to know what they're worth, and the key is that one dollar in face value of the old 90% silver coins held 0.71 troy ounce of silver (silver spot prices are always in Troy oz, not the common avoirdupois oz).  I made a little Excel sheet a while back to do the repetitive calculations for me.  As of right now (spot silver is $27.33) a 1965 face value dollar is worth $19.42 in today's money.  That means one thin dime of junk silver is worth essentially $2.  A silver eagle is going to cost you about $3.50 over spot (you might find a better deal somewhere), so a single one ounce silver "dollar" is about $31 in today's money.  You can find the daily spot price here, fluctuating by the minute.   

If the dollar is collapsing in value, the nightly news is going to be talking about what the closing price for gold and silver are.  The US Silver Eagle will be widely recognized.  Other perfectly good coins, like the Austrian Philharmonic, might not be so widely known.  There's thousands of collectors bars of silver around.  I can imagine them being hit or miss as something you can trade. 

I expect a lot more barter as things get rougher.  We had some major kitchen work done over the summer (a flood/mold issue) so we've worked with several smaller businesses lately.  Most like checks made out to them personally.  Or cash.  I have not broached the subject of "what would you charge me in silver coins?", but I bet that day is coming.  I expect to need to ask my doctor or dentist, someday. 

This website shows projections of how much silver (troy oz) or gold (grams) would be needed by a "typical" family to meet their expenses. 

As barter gets going, depending on how bad the economic mess becomes, then other items of value come forward.  It has been suggested that a round of .22LR will be the quarter or dime of the new millennium.  Consider other common calibers; 9mm, .223 (AR), 7.62x39 (AK), perhaps 12ga, .45 - who knows?  I am concerned about arming people who might want to use it against me, so maybe that won't be my first barter item.  People with addictions to cigarettes will have a hard time and want to trade for them.  Same goes for whiskey, chocolates, and other "traditional" black market trade items (hey - I saw it in a movie, it must be true!). You might trade a loaf of home-baked bread for a can of chili or beef stew or something.  Trade works when each party needs what the other has. 

The nice thing about this system is that you can start from anywhere.  If you're barely able to afford food, get some extra when they have 2 for 1 sales, or other discounts.  You can live on rice and beans in soup for a while if you need to.  If you can afford more, get more.  Junk silver used to be sold only by the $1000 face value bag - which is almost $20,000 today.  Now, you can get $100 face value bag from a major dealer, or buy a few coins at a time from sellers on eBay or other places.  Likewise with Silver Eagles.

90% silver dimes, Roosevelt and Mercury face