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Roadracer, in addition to the above response, I need to respond to your first question:

Is there any historical precedent of a society that was forced into a black market barter system because the currency was effectively worthless due to hyperinflation? Or perhaps a two tier economy where there was currency control and people used their money (digital or fiat) on one tier and a barter economy on the second tier.

I’m not personally aware of such a system where the economy was forced completely into a black market barter system, but that doesn’t mean it didn’t exist at some point. Even with hyperinflation, the price of gold in the hyperinflated currency will still follow the inflation at least to some extent. One of my favorite sites to check multiple times per week is the Kitco.com home page. Scroll all the way down to the bottom of the center column and look at the price of gold in the various currencies. It fluctuates in a real-time basis in each currency, depending on the value of that particular currency. If inflation goes up, it takes more of that currency to buy the same ounce of gold available anywhere else at whatever price is in play in some other country. There’s been a rule of thumb that has been fairly true for a long, long time – that an ounce of gold will always pay for a very high quality men’s suit. Fifty years ago, that was true, and it’s just as true today, despite large differences in the price of gold between then and now. And I suspect that would also be true in Zimbabwe with their hyperinflation crisis, because one could go in with $US and trade for outrageous “quantities” of their currency (wheel barrow loads), and each quantity of the two currencies had their own gold “price.”

But to my knowledge we’ve never had a time when there was NO physical currency, except before the concept of coinage had been developed – before which it was pure barter of commodities, skills, labor, etc. If we go all digital, and there is a conversion deadline after which no more conversions will be processed (i.e. “credited” to one’s digital “bank” account), the government won’t need to confiscate gold again, because gold won’t be recognized as currency (except such things as the Silver Eagle and Gold Eagle, etc. – which by then would have passed THEIR conversion deadlines). And people would be left with a choice of selling their gold and silver for “cash” just before the conversion deadline so they could then convert it to digital money, or holding it beyond the deadline when there was no longer a recognized currency into which the metal could be converted. Sure, some people would want it, but it would not have an easy or universal pricing scheme, and would probably end up being whatever any two people decided was a “fair” trade. This would be uncharted territory, and any current thinking based on history may end up being entirely meaningless.

This is just my own relatively recent conjecture, and frankly I hope someone can shoot it out of the water – because I don’t like the looks of it. But I can’t figure out a way that precious metals, even in recognizable form (“junk” pre-1965 silver coins, Silver or Gold Eagles, Krugerrands, Maple Leafs, etc.) would really have any quantifiable value if the prevailing government-decreed currency was purely digital, and they weren’t accepting any more “trade ins.”

As for a two-tier system (the “legal” and government-accepted currency + an underground barter economy)? Sure. It’s happening now, and has always happened since the dawn of the first coinage system. Whether digital or paper/coinage, both that and underground barter would somehow still be in play.

By the way – take a look at the bottom of the right column on the Kitco page. That chart is always in that spot, as well as the currency chart being at the bottom of the center column. At the lower right you can always see the real-time price of oil, the $US index, and several major stock markets. It’s interesting (and instructive) to watch those regularly, and get a feel for what’s happening with them. For example, the dollar index has been steadily climbing toward 100 and hovering right there now for some time, while both the Canadian and Australian dollars have been absolutely hammered! (Note they’ve both been hovering right around $1.40 in their currencies compared to the $US, despite having both been at parity with the $US just 3 years ago. And whereas the British Pound would buy more than $1.69 US less than two years ago, today it will only buy about $1.38 in conversion.) We are scared of our economy? Virtually everyone else has been hammered! And that’s by far the reason why the $US is so “high” right now. We just happen to be the cream of the cr@p.