[color="Red"]A Curiously Timed Warning

--George Ure
UrbanSurvival.com

I don't like coincidences, and so when news items and things I hear from friends start to pile up, I start paying a lot of attention to that pile of data. That's the case this morning I read that the government is warning private financial services to be ready for a cyber attack, possibly starting as early as today. The reason the timing has me scratching my head a bit is that Steve Quayle has recently been talking about rumored meetings of bank tellers and such and reports about credit unions having systems down for reasons that weren't clear. It's a subject Steve and I talked about over the past two weeks or so. And then this warning comes out. It's all a bit too coincidental for my tastes.

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The alert from the feds brings to mind an important box that the financial industry has put Americans in. On the one hand, the only "money" that claims to be legal tender for all debts private and public is Fed-issued paper money. Yet, if a person is caught in possession of more than $10,000 in cash, there's a law enforcement (which is really paradigm enforcement) presumption that such a cash-laden person must be some flavor of nogoodnick; drug dealer, terrorist sympathizer, or other un-American, anti-social sort.

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I'm sure the deep thinkers have thought this through, but what would be the impact if Americans took such a warning seriously? A prudent person might respond by stashing a few extra dollars around the house in whatever passes for a cookie jar these days. But, let's face it: There's so little actual cash money in circulation today, because of the emergence of digidollars and webbucks, that if the public really got concerned about a cyber attack on financial institutions, and wanted to hedge by keeping a few thousand around the house, banks would quickly run out of actual cash. We've chronicled before how at most banks, a withdrawal of more than $2,000 of your own money from a bank can result in supervisory interest in your plans and telling a bank official "I'm going shopping and I don't want to use checks" doesn't play well. There's a presumption of guilt.

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This quite naturally gets me to re-reading the short Wikipedia entry covering the history of bank runs. But, as I read economic history as a professional worrywart, a comforting thought comes to mind: Most people don't take the time to think through the actual meaning of news headlines. They just catch a story here and there and pass it off with a "Well, ain't that interesting..." and then it's on to another cup of coffee.

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It would appear that the more technologically savvy a person is, the more they develop first confidence, then reliance on computer-based financial systems. When I first started trading stocks back in the early 1970's I had a choice between having certificates delivered or "held in street name." Now days, virtually all securities are held in electronic trust. While my confidence may be relatively high in that system, I choose not to own stocks at the moment. About the only thing I'd have in event of an electronic catastrophe (think about the fed's warning here) is maybe a PDF or a piece of paper arriving in the mail that says I bought this or that security.

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In the event of a worst case failure, what would pass as proof of a deposit or proof of the purchase of a security? How in the world could you prove that you still had custody or ownership at the time whatever system went down? I may be the only person on the planet that backs up my Big Bank checking account statements as PDF files every couple of days, and that's one reason I haven't "gone paperless." - I worry about things like things are vicious as cyber attacks and as benign as power failures, and have taken every step I can think of to avoid exposure to risks I don't control.

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And just when I catch myself saying "George, you ought to get back into the market and do some trading...build up a little extra cash..." I see a story that shakes my confidence. No, not the fed's cyber attack warning. Im talking about the failure Thursday of the floor trading computer system at the NYSE tyhat forced traders to revert back to manual operations for about 3-hours.

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Based on my expectations for next week, I find myself in a regulatory conundrum. How much cash can (or should) a person have on hand, and how much should be in banks? The conservative side of me says "Remember the 1930's!" But having too much cash is a crime, too, dammit. Besides, I love the convenience of online banking. But - I still keep paper statements.

It's a difficult question made doubly important because how you answer it could be intuited by federal officials (or local police) as evidence of intent to do something un-American. Yeah. Like think through the implications of some of today's headlines.