A Practical Guide to Money During Collapse
Let me start off first by saying that if you’re taking financial advice from me, you’re almost certainly doing it wrong.
Having said that, let me give you some financial advice.
I’ve spent a lot of time over my life thinking and researching — and writing — about climate change and collapse, and I believe that there are a ton of misconceptions out there about what to do money-wise when things start to go south.
When Helene blew through here last September and knocked out power and Internet for several weeks, I decided maybe I should write something to help address those misconceptions.
I recently read a whole series of threads on Reddit about what to do when the SHTF, and I could not stop shaking my head at all the cryptobros bragging that their Dogecoin was going to be soooo valuable when the dollar collapsed. Dude, when the SHTF, your Dogecoin will cease to exist, having never really existed in the first place.
Having never experienced collapse, most people can’t conceive of what it really means and what’s actually likely to happen. (It reminds me of people after the Camp Fire. When we told them we had lost everything, they were often like, “But you still have clothes and stuff, right?” Um, what part of “everything” do you not understand?? Not having experienced it, they couldn’t process all the implications.)
So I want to take a minute to look at what is most likely to happen to money in various scenarios. After all, it’s not like economic collapse hasn’t happened before.
When it comes to economic “collapse”, there are essentially three levels, based on the scope and severity of collapse.
- Disasters
- Partial Economic Collapse
- Societal Collapse
I’m going to look at each.
Disasters
I’ve lived through two very different climate disasters now, so this is the area where I can give the most experience-based advice.
Disasters, whether “natural” or man-made (e.g., civil unrest) can disrupt the infrastructure that financial transactions in the 21st century rely on, namely electricity and Internet (and to a lesser degree, roads).
The key to a disaster is that it is a disruption of the economic system, generally local in nature, that has little direct effect on the overall stability of the system.
After Hurricane Helene, there wasn’t power, cell service or Internet within 60 miles of where I live. Roads were blocked by trees or washed out all over the place. People were isolated in ways that we aren’t used to in our connected world.
The massive damage to the infrastructure meant no power to run credit card machines and no Internet to record the transactions. But the dollar still stood, backed by the full faith and credit of the US government.
Cash: In a disaster, cash is king. With power and Internet out, it’s the only thing that will work.
Keep enough on hand to buy food, water, and gas for a couple of weeks. Protip: Nobody wants your $100 bill in a disaster, so keep your cash in 1s, 5s, 10s, and 20s. The smaller the better. People will like you more.
Credit/Debit Cards: Useless unless there is both power and Internet. Both generators and Starlink are becoming more common, so some places might still take plastic. After Helene, we started seeing places accept credit cards about a week after the storm.
Stocks/Bonds: Worthless in a disaster. Though they may be “liquid” in a financial sense, they aren’t liquid in a disaster. You need your broker to transfer it to your bank account, send you a check, or wire you the money. After Helene, when all power, Internet, and access infrastructure was destroyed, there was no way to get that cash to you.
Cryptocurrency: You’re kidding me, right? The issues with crypto are the same as with credit cards and stocks in a disaster. And worse, nobody takes freakin’ Dogecoin or whatever the hell you wasted your money on, so you have to turn it into cash first, which means access to a crypto exchange or a Bitcoin ATM, neither of which are available when there’s no power or Internet.
Physical Gold: Less than useless. It’s actually a liability for a number of reasons. One, it’s heavy. In a flood it will end up at the bottom of the river. Good luck finding it. Two, it has a low melting point. In a wildfire it will turn into gold vapor and waft away. Three, it isn’t very liquid (i.e., easily redeemed). No gas station wants to take your gold bars for a tank of gas. Four, it’s pretty easy to steal, so keeping it safe is an issue. And five, you need an assayer or professional appraiser to determine the actual value of the gold. It’s pretty easy to paint a piece of lead with gold spray paint, so it’s unlikely anybody is going to take your word on the purity of your gold bars.
Barter: Small-scale barter definitely takes place after a disaster. People helping their neighbors, sharing/trading food and supplies, etc. Generally, in a short term disaster, people just give any extra they have to others, which falls under Community, but some trade does occur. The money economy begins to return pretty quickly, however, so barter tends to fade fast.
Community: Community is the only thing that holds value in all scenarios. After both the Camp Fire and Helene, communities came together to clean up and to help provide people with necessities.
For those who had little and lost everything, disasters are akin to societal collapse. The poor and the vulnerable are the most likely to fall out of the bottom of the system in a disaster and become permanently homeless. Community is the only “currency” available to these people.
Partial Economic Collapse (PEC)
Partial Economic Collapse (PEC) is when the economy falters, but society does not totally collapse. The Great Depression is the most well known example, though there have been numerous examples throughout history.
The causes of PEC can be anything from political corruption and kleptocracy to war, resource depletion, greed, massive debt, government overspending, inflation of the money supply, austerity programs, etc., etc.
One of the main signs of PEC is often hyperinflation. Other signs include reduced economic productivity (leading to layoffs, etc.), stock market losses (which are an indicator of faith in the future of the economy), etc.
In almost all cases the value of money is diminished. And where the impacts of disasters on the monetary system may last weeks, the impacts of PEC can last years to decades.
However, societal systems still survive. There are shops and markets and services. There is still some sort of government and societal order, despite perhaps widespread unrest.
Cash: Hyperinflation can quickly wipe out the value of cash savings. In some cases, hyperinflation can devalue a currency by as much as 50% per day. In a single week, one dollar would become worth a penny and a half. So cash can become highly problematic.
In some cases, people try to convert their money into other, more stable currencies, as happened during the Argentine Great Depression at the turn of the millennium. However, since the US Dollar is the de facto global currency, a rapid deflation of the dollar would likely cause the collapse of most world currencies, so currency conversion would probably not be very effective.
Credit/Debit Cards: Since credit cards are generally tied to a specific currency, they would suffer a similar fate. However, given hyperinflation, some people would max out their cards by purchasing tradable goods (toilet paper, baby!) which would hold their barter value as the dollar continued to fall.
Stocks/Bonds: Hyperinflation of the US Dollar would likely cause a global stock market crash, so stocks would suffer commensurately. Assuming an eventual economic recovery, holding onto stocks might be a good long-term strategy, but in the short run… well, remember people jumping out of buildings during the Stock Market crash in 1929?
Cryptocurrency: This is the one circumstance where crypto might actually have some value, though, again, it would require the maintenance of necessary infrastructure (power and Internet) throughout the economic crisis. The advantage of crypto in this situation is that it isn’t tied to any specific currency. If the dollar fell, a single crypto coin would likely rise dramatically in value, acting as a stable currency. Your Dogecoin might go from being worth 36 cents today to hundreds of dollars in a PEC. But if the infrastructure falters, you might never see it.
Physical Gold: Like Bitcoin, during a PEC gold might actually be a valuable asset, with the caveat that it is not very liquid, requiring an assayer or professional appraiser to determine the actual value of your gold and to convert it to cash or goods. To me, the hassle of having to convert gold, as well as the fact that having physical gold on your person would make you a target, makes it a less desirable option.
Barter: In a partial economic collapse, the traditional, money-based economy falters, and people turn to barter for necessities. In the beginning, people may sell off or trade their possessions for necessities, but at some point, people have to begin producing tradable goods and/or services to survive.
That might mean doing something akin to your current job for food and supplies instead of money, or cleaning people’s homes in exchange for necessities, etc. It might mean having a tradable skill like welding or woodworking. It might mean having useful knowledge, like herbal medicine.
In severe PEC’s barter becomes a significant part of the economy.
Community: As the money economy falters, more and more people become poor and unable to provide for themselves. This is where community begins to play a bigger role.
Community can be everything from your family to your neighbors, to your church members (if fairy tales are your thing), to your model train club, to your anarchist mutual aid group (you have one, right?).
Community is people you know, with whom you share something in common, who are willing to help each other in a time of need.
Mostly, now, we don’t need community. People are paid to feed us, to provide us with necessities. But when things go south, we will need people who are willing to help us, share with us, support us without a monetary incentive.
Evolutionarily, that was the clan or the tribe’s role. That’s how we survived as a species. We are still tribal, and when things get tough, humans retreat to their tribe.
But, as Jessica Wildfire points out, creating community from scratch isn’t easy.
I spent years studying the histories of various hippie communes (I lived on one myself in the 70s and 80s) and intentional communities because my ideal was to start one myself.
But intentional communities (communes, etc.) have a long history of failing sooner or later due to internal conflicts, sometimes spectacularly. And the ones that do persist? Well, they don’t want you, and you’d likely find them kind of strange. Why? Because they have created an insular culture, born of isolation and shared experience. That shared experience and insularity bonds them. They are their own culture, with their own history and stories.
Remember the snow storm of 2007? And how it took weeks to get the tractor out of the mud?? Good times!! Oh, you didn’t share that experience? Hmm. Are you really one of us, then??
I’ve been to these places. They’re nice, mostly. Remote, frequently. A bit creepy, usually. It’s very, very clear that you are an outsider. They are clans. That’s what holds them together. You are not part of the clan.
But regardless, communities of some sort, and to some degree (not necessarily full interdependence), are vital to surviving a PEC.
Whether it is just a neighborhood pulling together to support local vendors (who are also family and neighbors) or strangers helping those in need, community is the most robust currency of all.
You’ll need a way to build some semblance of that, fully understanding that all but the closest communities (families and clans) have limits.
Societal Collapse
Societal collapse is the complete breakdown of governmental, social, and financial systems. Any economy that remains is a survival economy. Money is worthless, except perhaps for available foreign currencies (if they aren’t themselves worthless).
Outside of war and the occasional genocide, few people have experienced societal collapse in this century. Certainly nothing like the fall of an entire civilization. But given how we have degraded the earth’s ability to support us, it is possible that we could witness this in our lifetimes.
Cash: In societal collapse, cash will have no value. It is possible that stable foreign currencies may become the de facto standard (if they exist), as sometimes happens after war, but that’s unlikely in the US, given the size of the country and the fact that is US dollar is already the de facto world currency.
Credit/Debit Cards: The only value credit cards will have is whatever you can do with a rectangular piece of plastic... pick your teeth with it or something. Credit cards are based on government currency. If currency has no value, then neither will credit cards. In addition, the infrastructure required to use credit cards is likely to be either gone or highly damaged, so they won’t be usable in any case.
Stocks/Bonds: When social, governmental, and financial systems collapse, so does faith in the value of the future, which is all stock markets are. So, yeah, your stocks will be worthless.
Cryptocurrency: As with PEC, this one depends partially on the scale of collapse. But even assuming that your Dogecoin still has value in Outer Bumfuckistan, with the collapse of the required infrastructure, you won’t be able access it. And what are you going to convert it to, if there is no functional currency? Less than worthless.
Physical Gold: Gold might retain some value as a rough form of currency, but once again, its illiquidity, and the danger of possessing something so valuable, make it a less than ideal choice. In a total societal collapse, finding a reputable appraiser would be unlikely, and people are going to be much more interested in obtaining food than a bit of glitter. Hard pass.
Barter: Without a common currency, virtually all trade will be barter-based, so having something you can produce (e.g., food) or a needed skill or service (e.g., sewing) will be vital. You might want to think about taking up a useful hobby, like gardening. It might become your means of survival someday.
Community: Societal collapse will return us to a stone age economy, and to stone age communities. Everything I said above about communities will be ten times more important.
Ultimately, community is the only way to survive societal collapse. Without currency, someone will need to grow your food and be willing to give it to you. Someone will need to help you thatch your hut against the rain. Someone will need to be willing to treat your infected cut.
That’s community.
Takeaway
As things get worse, the migration is from cash to barter to community.
You can skip stocks, crypto, and gold altogether without missing out on a damn thing.
See? I just saved you from having to read this whole article. Aren’t I nice?
