Life Between 0 and 1

While sitting down and entering in receipts and paying some bills, I started to laugh. Looking at the electronic representation of money I never really had in my possession had a comical and humorous feel to it. I mean, I worked to earn the money that was deposited in my account that I then spent on things. At no point was this money actually ever in existence except as numbers in some software. It first started at my company, then transferred to the payroll company, then to my account, then to the final destination after leaving my account. It was all electronic transfer of money relying on a system that is horrifyingly fragile to a number of external threats, all of which are real possibilities in the future.

Somewhere out there is an electronic record of my finances that is being used to judge my creditworthiness for almost everything. The shear amount of things that require good credit is staggering especially when you consider that more than 50% of the country is in some form of debt beyond a home or vehicle. I’m in that category myself despite having significant control over what is purchased and when. Despite my best efforts, there always seems to be something that hits the bottom line making it nearly impossible to actually save money. Everyone wants their piece of the pie along the way leaving the guy at the end left to pick from the crumbs. I’m not complaining by any means, I take responsibility for the money I’ve spent regardless of whether it was a “want” or a “need”. There are certainly things I can live without, but weighed against whether I want to or not, some things are just too convenient to live without. An example, a garbage disposal, have one for 12 years and then take it away, you suddenly realize how convenient it was.

Recalling back the last several years, I realized I rarely carry paper money anymore. I’ve come to rely on cards (ATM/Debit, CC, etc.) so much that the need to carry paper money has all but disappeared. There are only a few places that I require paper money at this point, but only because they don’t accept cards. The only other reason is when you need a purchase to be under the radar (like an anniversary or birthday present). Previously I wrote about being off the grid as a personal decision. What if living off the grid was necessary because the grid was no longer functioning? As in the case of computer hacking, electromagnetic pulse bombs, or a complete collapse of the financial infrastructure as it exists today. What do you do then knowing you have electronic money but no electronic means of getting to it or knowing if it still even existed?

While I’m not a doomsday prepper by any means, I do want to make sure I’m sanely prepared for certain disasters that have a relative certainty of happening in the future. One of them being a collapse of the financial system where paper money might be the only currency that is left and actually still works. In the case of a market collapse, the only sure means of wealth to purchase what you need is precious metals like gold and silver. For over 100 years, the American currency was both gold and silver backed at least until the turn of the 20th century. People have been pushing for years to get back to that standard, however, it would mean pulling billions of dollars out of circulation in a system that is only backed by trust. Not a good place to be in my honest opinion because if it weren’t removed from circulation, the value of the dollar would fall significantly to match the gold or silver being used to back it.

With that said then, I’ve got a stash of paper money in my safe at home specifically for when all electronic means to access my money aren’t working. Regardless of the reason, until such a moment that the financial system collapses, paper money will still hopefully buy the necessary things to survive. Depending on the type of financial system collapse, paper money might also be worthless. An example of that was in 1929 at the start of the Great Depression, paper money was only worth cents on the dollar. The monetary system at that time was very different than it is today, however the underlying factors of wealth, greed, and power have never changed. Whether it be borrowing to purchase stocks (sometimes $.20 on the dollar) or to finance sub-prime loans for people who couldn’t afford it, economies will fluctuate regardless of circumstances. Fear is the driving force behind all the stock market plunges through history. If you objectively look at the system in place, it fundamentally doesn’t change pre-plunge to post-plunge, however people fearing they will lose money (they never had in their possession physically) make a run on a system that can’t support conversion from electronic to physical form.

An article I read recently detailed the warning sign that the housing market is again going to take a downturn. The basis of the article explained how seasoned infrastructure investors have backed off purchasing foreclosed (fixer-upper flips basically) properties due to demand for inventory and the return falling below 30%. The unfortunately side-effect of that is that novice or misinformed first time investors are purchasing these properties, on slim potential margins, often utilizing credit to do so. The red flag here is that there is the potential for that first time investor to not only lose the investment they just purchased, but also lose their current property as well. That doesn’t turn out well in a market still fragile from 2008 and serves to show that things haven’t changed that much despite the new regulations that have been put in place. Having just purchased a new home, I’m concerned that a downturn in the economy at this point would hit much harder than the previous one. The correction mechanisms in our economic systems have not recovered and would be inadequate to offer any help if a downturn happened now.

The bottom line here, and the main point of this, is we rely too much on electronic technology. There aren’t enough adequate safeguards in place to ensure the systems protection. The irony is that I’m explaining this through an electronic journal.