Overstock Accumulating Gold (and Food) for Next Financial Crisis

"We are not big fans of Wall Street and we don't trust them."

Online e-tailer Overstock.com, which has become better known as one of the most vocal supporters of Bitcoin and its technology, has also been accumulating gold to protect itself during the next financial crisis.

Overstock was one of the highest profile companies to accept bitcoin for payment when it did so in early 2014. Months later, it embarked on a project, Medici, to use the blockchain to streamline the settlement of securities trades.

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CEO Patrick Byrne has been a vocal critic of US monetary policy and Wall Street, taking strong issue with practices such as naked short selling. He hopes to address these concerns with Medici.

Overstock’s embracing of gold, therefore, is not such a surprise, though it is ‘low-tech’ when compared with its more recent pursuits. At the United Precious Metals Association, or UPMA, Overstock’s chairman Jonathan Johnson disclosed that the company has been accumulating gold since the last financial crisis, after which the Fed began several rounds of quantitative easing.

The company now has $10 million worth of gold and silver, in denominations small enough to pay employees. The holdings comprise 10% of liquid assets.

More than to simply preserve value, Overstock’s gold would be outside the reach of banks, and therefore, the company would be able to pay its employees during the next financial crisis even if the banks collapse.

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Johnson was quoted as follows:

“We are not big fans of Wall Street and we don’t trust them. We foresaw the financial crisis, we fought against the financial crisis that happened in 2008; we don’t trust the banks still and we foresee that with QE3, and QE4 and QE n that at some point there is going to be another significant financial crisis.”

Furthermore, the company keeps a 3-month supply of food for every employee.

Bitcoin is often compared to gold by its supporters because both come in limited supply, and as such, may appreciate in value relative to currencies subject to inflation.

Unlike most merchants accepting bitcoin, Overstock has actually retained a portion of the bitcoins paid. The value of their bitcoins, on average, has declined significantly.

Gold, currently trading at $1,106/oz, has lost roughly one third of its value, relative to the dollar, during the last three years. However, it has gained 19% since the climax of the financial crisis in March 2009, and over 130% during the past 10 years. Historically, it has overcome sharp drops to appreciate over the long term.

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