PDA

View Full Version : intrinsic value



kiwi
25th August 2007, 08:12
There is a subset of silver investors that are fixated on the intrinsic value of silver especially in the context of a world in which our current society has fallen apart. I think the current acronym is a SHTF scenario so that is what I'll use from here on. The general argument is that money will become worthless but silver and gold will retain value and still be useful.

There are two questions that come to mind. Why does silver have an intrinsic value now, and why and in what times has silver had an intrinsic value? The arguments range from, silver is rare, silver is rare and needed in industry, historically silver has an intrinsic value and so it will continue to, silver is a precious metal (rare and malleable). Malleability gets you ease of trade.

Society has moved from a barter economy (silver was unknown or generally worthless at this point), to an economy using coins, then to paper money, and now digitalized currency. I guess my question is this:
Why will silver retain an intrinsic value in a true SHTF scenario?

If person A has horses, and person B has 10 tons of wheat, why would they even talk to person C with 100 lbs of silver? Why would society (or lack of a society) not just revert to barter if the SHTF. What would keep society at the coin level of abstraction rather than falling back to our bartering origins. Items that are needed for survival have true intrinsic value in my book. Silver's value is just as "fake" as our "fake" paper money's value. The only difference being that we can't just cook up more silver, but that doesn't magically make corn pop out of the ground.

So maybe I don't see something. Why do all of you believe Silver will retain value after the SHTF?

This has been on my mind for some time and it really bugs me to some extent. I typed this up very quickly in a stream of thought manner. If anything else comes to mind I will update the post. I apologize for any glaring errors.

goldminer
25th August 2007, 21:08
History has shown that barter isn't efficient, that's why societies throughout history have moved beyond barter to a "medium" of value that is acceptable to people across the board.

In a barter system, if person "A" has a widget that person "B" wants, "B" will only get it if "B" has something in "A" wants and views as equal value. Otherwise person "B" is SOL.

Enter "medium"...historically (5-6K years) Au and Ag because they meet the necessary criteria: i.e. accepted by folks as having "real" value; easily divisable; etc.

It is the intrinsic value of money that gives it's validity....until some government and people get greedy = enter fiat.

I'm sorry but IMO Ag has intrinsic value. You don't think so, fine....send me all you've got.

kiwi
26th August 2007, 12:16
I don't mean to be confrontational or "give you all I have got" goldminer. This is a genuine question. If I ask "normal" people stuff related to SHTF scenarios they probably wouldn't want to associate with me anymore. So that is why I'm here.

You are correct. Barter isn't efficient. Then you state:

"Enter "medium"...historically (5-6K years) Au and Ag because they meet the necessary criteria: i.e. accepted by folks as having "real" value; easily divisable; etc."

Which is also true. I mean that is obviously why society used silver and gold, but my question remains unanswered. Folks accept silver as having "real" value, and most people today also accept paper money as having "real" value. Obviously a few people around here don't believe in paper money, and I(and maybe I alone) question silver's "Intrinsic value" too.

At least if the SHTF and all of our farm's stopped producing food, I'd rather have a stock pile of Spam somewhere remote, or very large guns and some people that want to stand next to me and hold them. Rather than a supply of precious metals. In a society as large as ours, if everything fell apart, I really doubt silver would have much intrinsic value until the population/food supply finds a new equilibrium.

My question remains though:

If you think people can stop believing and paper money and it will lose its value, why can't you imagine a scenario where silver becomes just as worthless for a similar reason? Maybe the way you guys imagine a SHTF scenario isn't as drastic as mine? if our shipping infrastructure falls apart, I've read that food stores only really have maybe a week of stock to realistically feed our population. Do a bunch of starving people really care about silver? If no one cares, does it have intrinsic value?

Kimber
28th August 2007, 23:00
It costs the same to print a 1-dollar bill as a 100-dollar bill. It “costs” more to make a larger silver coin (presupposing it would be physically larger) because it takes more effort to mine and refine the silver. Unlike paper fiat money there is a physical limit too how many silver or gold coins of a given purity can be made, you can’t just print more. Also silver has an intrinsic value if for no other reason than it is used in industry.