What would happen to your wealth if the value of paper money went to zero?
What’s so bad about cash?
Isn’t it great? After all, someone told me a famous lady once said, “The thing I like most about cash — it never clashes with anything I’m wearing!”
And, what about the financial battle cry, “Cash is king!” Doesn’t that mean something? Doesn’t it mean cash is the “be all end all?”
Nope. Not even close.
Why?
Well, permit me to start my explanation by asking a pointed question as follows:
What is the value of paper money — cash?
And, permit me to suggest the correct answer as follows:
The value of cash is Zip, Zero, Ziltch or if you prefer Nada, Nil, Nothing!
I can almost hear your retort, “How do you figure?”
Well, I figure this way …
Can you eat cash? By eating cash can you get the nourishment you need to live?
Can you wear cash? Have you ever worn cash to keep yourself warm on a cold winter’s night?
Can you live in cash? Have you ever built a house using cash as a primary building material?
So, stay with me here as I probe further.
What would happen to your wealth if the value of cash went to zero?
In other words, if you had one hundred bank vaults stocked with a virtual endless supply of cash but the value of the currency went to zero, how much financial wealth do you have? It’s like having a million dollars stock in a company that goes bust; the stock is worthless.
Can’t happen you say?
It happened in the United States during the civil war. Confederate ‘money’ was virtually worthless and the northern greenback wasn’t such a stellar standout either. Inflation during the war drove prices into the stratosphere.
It happened in Germany. Between world wars German cash became virtually worthless — by November 1923, you had to come up with 4,210,500,000,000 German marks to buy one US dollar.
Can’t happen again you say?
Well, what happens when folks start waking up to the fact that the United States is simply printing more and more cash? Printing more and more paper money backed by … nothing?
What happens when a loaf of bread costs $50; when a gallon of milk sells for $100; when a bag of potatoes gets $120?
What happens if prices double every month?
And here’s something to ponder, what happens when the checks stop coming? What happens when people don’t get their monthly welfare checks? What happens when the social security checks stop coming? What happens when government employees don’t get their retirement checks? What happens when the US government stops paying their bills?
Ok, I hear you — “It can’t happen! Government will just print more!”
Then consider this … What happens when the checks keep coming but real value of the money — the cash — become apparent; becomes known; becomes understood? In other words, people start to realize it’s not worth anything? In other words, people can’t use it to buy anything? In other words, people won’t accept it as payment anymore … no one wants it; no one will take it. You have to find some other — some real — form of payment; some other form of exchange. You have to offer something of real value in exchange for the product or service you want to buy.
Scary?
Yes.
Something to consider?
I think so.
So, the question — I feel — for you and for me is this … What have I got of real value to exchange with others for the things I want and need; the things I currently buy with paper money?
Right now, owning a farm is starting to sound really good. I love the idea of a farm. It’s the basic business model. It’s recession proof.
As I understand it, during the great depression of the 1930s and 40s, the farmers did well; they ate well and they lived well. They were essentially self-sufficient. They had goods, services and skills that everyone wanted — everyone needed. They provided for themselves and the extra they could sell. And, if their customers didn’t have money, the farmers could exchange for other “currency.” For instance, a farmer could receive payment in labor; the farmer hands over fresh food and the worker pays by fixing the farmer’s fence.
Now, I’m off to search for a nice block of land to start my farm just in case my cash becomes trash.