>>You say that you are a former gold bug but that you still keep bags of silver around in case the dollar does a complete melt down. There seems to be some ambivalence here. So, what are your concerns about the soundness of the dollar? That the government might mismanage the currency? That a natural disaster might make it impossible for the government to honor its obligation, or at least destroy the confidence in it? I, personally, have no confidence that the US government, or any other government for that matter, has the ability or will to deal with such contingencies.<<
I don't blame you. Every fiat currency prior to the establishment of today's currency markets has been inflated into oblivion. The Fed could certainly destroy the dollar the same way. So I'll hedge my bets against that with some hard money -- i.e., gold and silver -- in my physical possession. However, if I want to maximize the return of my capital, it is only sensible of me to assess the likelihood of such a meltdown of the currency. It's my observation that the currency markets do a good job of keeping central banks, like the Fed, fairly honest -- just as gold had done in the past.
Of course, we only have about thirty years experience with floating currencies in the wake of the final collapse of Bretton Woods, so the free market in currencies may in the end fail to keep fiat currencies stable as measures of wealth. Gold, of course, has a track record going back to about 500 B.C. So, I'm not disagreeing with you that a fiat currency is made for mischief. My question is whether gold what do any better of stablizing the true value of the dollar as the free markets now do?