Insurance With a Little Shine

Everyone knows that all investments carry some amount of risk. This ranges from highly speculative cryptocurrencies to low return bonds with far lower risk. One area that people do not assign enough risk to is insurance. Insurance is supposed to be a safeguard against risk, so it seems odd to recognize that it also can expose people to a great amount of risk. Insurance companies can often go out of business and even the most stable insurance companies will be of little help during a radical societal regime change. Insurance denominated in a specific currency is only helpful if that currency is accepted. A society without rule of law will damage the ability of insurance companies to protect their assets or hold other businesses accountable to promises made in times of stability. Numerous shocks can destabilize the economic and governmental systems of a society enough to make the insurance that someone paid for almost worthless. However, gold provides a convenient alternative to insurance that allows durability through a wide range of unanticipated situations.

While it may seem far off, a descent into a regime of totalitarianism is always likely, as evidenced by its popularity throughout human history. No polity is ever fully safe from the threat of a violent authoritarian takeover. Current technology means that this sort of regime would have a technological element that could horrifically enable informational overreach. Currency will be one of the first areas of human ingenuity to be fully controlled by the state. While it is already controlled by the state, digital currency, or other totalitarian techniques could make privacy even more of a farce. Those who bought gold before this situation would be empowered to continue doing business with others freely or to move to a different country and still have access to their assets. Fleeing would only be possible for those with some means to fund transportation across borders. A fully state controlled financial system would make this sort of flight unrealistic. The privacy and universal acceptance of gold make it an excellent currency of resistance against state overreach.

In the much more mundane yet equally frightening situation of currency devaluation, gold would also serve as a uniquely durable store of value. Its steady growth in value in relation to the dollar would let the scale tilt in gold’s favor when compared to insurance payouts denominated in fiat currency. Any negative shock that hurts government issued currency will simultaneously harm insurance companies and the value of the “safety” they provide. Paying for a $500,000 life insurance payout becomes unpalatable if the value of the dollar continues to plummet in relation to gold. Any method of seeking financial safety tied to fiat currency will be out-performed by gold if currency continues to weaken. As the most likely of the scenarios discussed in this article, the devaluation of currency should spur readers to take their financial safety into their own hands through procuring gold. 

The final and most salient example of gold’s ability to protect wealth is in a state of total society chaos. Granted that an individual has enough power to protect gold from thieves, they will be able to conveniently transport and access their assets better than all who chose to stay invested in the bank, let alone the stock market. Some have said that gold would either just attract unwanted enemies or be of little use to people in a time of crisis, however this is unlikely given how it has played out historically. During the collapse of the Soviet Union, one of the only things extending the life of the government were its gold reserves, and Russian consumers with gold were able to avoid the dire consequences of the destruction of the Ruble. The collapse of one country’s government does not mean the destruction of all world governments. Just as in the totalitarian case, even one stable free country still existing will allow gold to provide an escape hatch from the chaotic environment of anarchy. 

While insurance can be a high return investment in some rare circumstances, it also carries some high risks just like any other investment. Gold is not risk-free, but it is more durable to governmental and macroeconomic shocks than almost anything else that could reasonably be used as currency. Some extreme preppers have suggested that ammunition’s practical protection and rarity will make it of use as a currency in an anarchic situation, but in nearly every other conceivable way gold remains untouchable when it comes to holding on to value.