Gold bugs often say that it’s important to own gold because it is something real that will retain its value even if runaway inflation devalues cash. I don’t spend much time planning for the breakdown of society, but recent events in Haiti can cause us to think about what we should own that will retain some value when everything else is becoming worthless.
In the face of extreme societal breakdown, nothing can really retain much value, but for lesser calamities, some things are better than others. It’s certainly true that poor fiscal management by governments combined with demographic changes, depletion of natural resources, and natural disasters could cause major instability leading to very high inflation.
However, I don’t see gold as the answer. It has little inherent value. In the face of food shortages, why would anyone trade some food for gold? It’s true that money only has value because we all agree it has value. But the same is true of gold. If things get bad enough, we could just as easily lose confidence in gold as we could lose confidence in money.
So, what could hold its value when everything else is becoming worthless? One possibility is real estate. As long as society continues to respect land titles, real estate should have some value.
The best answer I can think of is a stock index. Owning a small slice of thousands of companies across North America (or the whole world) is a good way to protect against calamity. I would rather own a slice of all business than a few pounds of gold.
I see little point in planning for the worst possible disasters, because almost all things will become worthless other than air, water, food, and shelter, and it would be difficult to control any of these things in great abundance. For lesser calamities, I’d rather own stock index units than gold.