Why I Own Gold Bars

TL:DR – I explain my approach to financial disaster protection including holding physical cash and gold

I’ve had a long career in Software development, and as a result I understand how fragile software systems can be.  As more of our financial infrastructure comes to rely on software as its underpinnings, the more likely it is that we will experience an outage that will last some period of time.

This naturally brings up the question:  how do I protect myself if such an outage occurs?  This is not a purely theoretical question.  The global tech outage that delayed flights and knocked out ATMs is a recent example.

As I thought about how to protect ourselves, I came up with an approach that looks at two levels of financial crises, each with its own approach for protection.

The first I’ll call a “Level 1” outage.  This one that can last a few days to a few weeks.  Imagine that most US financial institutions are knocked offline for that period of time.  Credit cards don’t work, ATM’s are not available, bank tellers are unable to provide access to cash.  

For a Level 1 outage I’ve decided that having enough physical cash on hand to pay for essentials (groceries, gas, etc) to get to the other side of the outage is sufficient.  I took out enough cash in relatively small bills  from our bank account to be able to survive a few weeks, and stored it in an accessible place.  

A “Level 2” outage is more severe in nature.  The US financial system is in crisis.  The dollar is sinking, most related economies are also in free-fall as a result.  Cash is not sufficient insurance for this scenario.

Enter gold.  I’ve bought 1 oz gold bars through Costco and keep them in a safe place.  The thought is that we may have to use gold as currency to support ourselves.  I fervently hope this never happens, and I acknowledge this approach is really a hedge against a terrible scenario.  How much gold to have on hand is a hard question to answer.  And it somewhat mirrors my ancestors fleeing their country of oppression and taking jewelry with them as the smallest items of value they could successfully smuggle out on their person.

The worst case scenario I’ll label “Level 3”.  This is where not only are financial systems down, but so are other infrastructure systems like electricity, water, etc.  Maybe war produces this, or a broad terrorist attack. I don’t have advice for how to deal with this case – we’ll all be in the same boat and struggling to survive.  I’ve thought of installing a gas powered generator as one way to help with survival.  And maybe the gold will prove useful in this scenario.

Thinking about how to buffer your finances against different levels of outages is a useful way to decide on the best way to protect you and your family.  I recommend giving serious thought to coming up with a plan and implementing it.  We can’t foresee all possibilities, but at least it feels better knowing you’ve taken some level of control to protect yourself.