Outlaw cash

When cash is outlawed, only outlaws will have cash.

Louisiana has outlawed cash for second hand goods. They claim it’s to prevent criminals from selling stolen goods. Maybe it is, but it’s also a dandy control mechanism to find out where all the money is going and who’s buying what. When you know where it’s going, it’s much easier to take it away through taxes.

I see some possible outcomes from this law.

It could do exactly what’s intended with no negative side effects. (I give that outcome long odds.)

A lot of businesses could suffer losses. Many could shut down completely.

More and more business could be done “off the books.” That would make more people criminals who weren’t before. When government passes stupid laws that are ignored, respect for all law is diminished. Maybe that’s not totally a bad thing. Too many dumb laws are taken seriously as it is.

One interesting result is that it could be an incentive to develop alternatives to cash that also are not traceable. We could all decide to do business in something like Canadian dollars. We could make up a new local currency. Precious metals could be exchanged. Heck, people could set up a bookkeeping system of credits and exchange them in a totally independent economy. Hybrids of different exchange systems could come into play.

Business could take place totally outside the governmental system. Maybe this law is a good thing in the long run, as it’s a wake up call to the way money works.

-Sixbears

The neutron bomb of disasters

Economic collapse is the neutron bomb of disasters. The disaster hits, everyone gets “wiped out,” yet all the material things are still standing. The buildings are still there. None of the factories have disappeared. All the farms are still intact.

Unlike a real neutron bomb, the people are still standing too. The only thing that’s really disappeared is the medium of exchange. Since our “money” has no intrinsic value anyway, it’s like losing nothing at all. Most money isn’t even in paper, but ones and zeros in a computer somewhere.

In a more perfect world everyone would blink their eyes, shake their heads, and realize that the whole fiat currency thing was a bad idea. They wouldn’t go right out and replace it with another make believe money system. Perhaps the smart thing would be some sort of elaborate barter system. Maybe something like the barter networks that are springing up in Greece right now.

Those barter networks function just fine on the local level, and there’s no intrinsic reason the whole world could not operate on a similar system. Instead of dollars, we could be trading things like hours of labor or calories of energy.

The problem that Greece has is that it’s one of the first to hit by the financial neutron bomb. Those areas less affected, like Germany, are heavily invested in the old imaginary system. They want the real things in Greece: land, resources, and labor, to be turned into these imaginary “Euros” and sent back to the rest of the EU. The best thing for Greece, and other countries and regions in the same boat, is to say no. Eventually those financial bombs will hit the rest of the world and everyone can wake up from the bad dream.

It’s not the collapse of the fiat currency that’s the problem. It’s all those obligations and relationships that are held over as the money itself disappears. Those imaginary monetary units have been concentrated in a relatively small number of hands. Right now it’s possible to trade those imaginary units for real things: houses in the Hamptons, yachts, pretty cars, and sexual favors from much younger women. Of course, those people want to keep the game going as long as possible.

Those with big imaginary numbers want the economic disaster to happen slow enough that they can take the last real things from people who still have stuff. As long as police and the military will accept those imaginary units, they can provide real enforcement. The way those with big piles of ones and zeros want the game to play out is for them to get all the stuff.

It’s a silly rigged game. It’s hard to see how silly as it’s the one we were born into. It’s like being born into a bizarre religious cult. Growing up, you don’t notice how crazy the cult is. If most of the world is in the same crazy cult, it’s even harder to become sane. The only people not in the cult are those who’ve been kicked out -the ones without any money.

The good news is that they might have kicked too many out of the cult. After the initial shock, many are shaking their heads and saying: wasn’t that crazy? Let’s not do that again. Lets find other ways of exchanging things of value. Now if only those crazy cult members would leave us alone. Of course, you can’t be too hard on those cultists. Most of the sane people believed the crazy doctrine once too.

Now that tiny percentage of the people who understand the game are really worried. Their only real talent is running a crazy cult. They fear everyone will go sane. Then they’ll be unable to exchange their imaginary money for real things. They have few other useful skills. They fear no one will love them.

They might be right.

-Sixbears

Been expecting this for some time now

The unraveling of the stock market doesn’t surprise me. My only real surprise is that it’s taken this long to tank. Of course the market could just as easily rise to new heights in the next few days or weeks. Since the market has been unhinged from reality for decades, it doesn’t really matter what it does. For some time I’ve viewed it as a mechanism for the big guys to rob the little guys. The only way for an individual to win is to not play the game.

The fundamentals of our economy is what interests me. Our fiat money system only works in an expanding economy. Cheap oil is what allowed the economy to expand so much for so long. Peak oil happened in 2005. The cheap stuff is gone. Supplies will be harder and more expensive to get. The game has been kept going with smoke and mirrors. Unfortunately, since the downgrading of US credit, the world has seen the wizard behind the curtain.

Currencies have a lifespan. Over time the value gets diluted down to the point where it’s essentially worthless. In the past, when a currency failed, there were other currencies to flee to. Now there isn’t. Almost all global trade takes place in dollars. There’s nothing big enough right now to take its place. Maybe in the future China’s currency might do the job, but right now they have problems of their own.

Plenty of people put their faith in precious metals. To be fair, historically, it’s been a safe haven. If that works for you, fine. I’ve a friend who bought physical gold around $300/ounce. Last I heard he was looking for a big cruising catamaran and planned to head to South America. As for me, my only gold investment is the wedding ring on my finger. Since my wife is a pearl beyond price, it’s been a great investment. My head tells me precious metals are the way to go, but my heart just isn’t in it.

What is really valuable to me is my family and friends. We are there for each other in a pinch. My good water well that can be accessed with something as simple as a bucket is hugely valuable. The trees on my land that can burn in my woodstove are valuable. The fish in the lake are valuable. The game running around my swamp is valuable. A bit of stored grain and beans is a pretty good insurance policy against immediate hunger.

For years my wife and I have prepped to have some basic security in real goods and relationships. With that done, I don’t really have to worry about the stock market. Even if we loose all our stuff, it’s just stuff. We still have family, friends, and the knowledge in our heads.

The real immediate danger is what other people will do. When the guy who’s been waiting for the economy to improve so he can go back to work realizes there is no recovery, there will be hell to pay. When all hope is gone, the smashing and looting begins. It could get ugly. My plan is to sit out the unrest as much as possible. I pity those people who live in big cities.

That’s not to say that rural areas don’t have crime. Robberies and violence are up in the country too. There are desperate people everywhere. At least in the country, there are a lot less of them. Still, there may be a time of wandering robber gangs hitting isolated farm houses. That’s where having some level of community solidarity is important.

It’s still possible to go into the grocery store, spend a few hundred dollars, and have basic food security for some months, depending on family size. You’ve got to shop wisely: rice, dried beans, lentils, dried peas, cooking oil, flour, and some spices. That’ll keep you from starving -if you know how to cook and have backup methods of cooking if the grid goes down. If you don’t have these basics, go out and get them -today. It’s stuff you’ll use anyway, right?

My situation isn’t perfect. Nobody’s is. There are no guarantees in life. All we can do is improve our chances. Make sure you’ve got at least the basics. My guess is that your food stocks will be much more important to you than stocks in the market. Make sure you’ve got at least that basic investment in your future.

-Sixbears