Opting Out, Part 2

We have become so accustomed to living life as we have been, whatever that may look like for each of us, that we have to varying degrees suffered a sense of shock since our economies have become depressed.  It is a built-in part of our economic cycle that there are periods of contraction followed by shorter periods of expansion.  Lately we have seen more expansion, and most of us grew up with easy credit, borrowing and spending were part of our economic system as we knew it.  We thought nothing of borrowing heavily, buying our way to happiness and a sense of “the good life”.  Lately though, our thinking has changed.  We now talk of saving, spending less on things we use every day, trying to need less in the first place, and some of us, whether we realize it or not, are really looking for ways to live off the grid.

As I started to say yesterday, the “opting out” revolution seems to come from the sense that in order to survive, we will have to find different people with whom we can play this game of life if we are to have a fair shot at it, a game in which dollars are not used as a means of exchange, or in which whatever means of exchange we use is not controlled by people whom we don’t even know.  Everyone I know and meet or read about who makes less than $100,000 USD per year is feeling the pain of America’s economic contraction. 

Today everyone not in the upper tax brackets is in freak out over their economic security.  Going cold-turkey from spending has been hard on those who used to be middle class or upper middle class, the strata of our society that really drove our economic expansion with their consumer spending, which has led to common use of new terms such as “frugality fatigue”.  Even that phenomenon is wearing off, though. 

The behavioral shift that has taken place in the aftermath of this consumer spending binge, our economic hangover if you will, is similar to the behavioral changes that followed the spike in gas prices.  Permanent changes in behavior and consumer spending took place because of the prolonged and unexpected period of high gas prices.  We are now entering a phase of acceptance that we can never trust again that if we work hard we will be rewarded with a good paying job that provides a nice home in a good neighborhood where our kids can go to good schools and we can drive decent cars that are well-maintained, and still have money for vacations and Christmas presents and college funds.  In place of that trust in the system we took for an impermeable reality, we now look more and more to self-reliance and to our local community for economic exchange.  Overwhelmed by the staggering and incomprehensible workings of our complex economy, the only thing about which we understand is that it is on the verge of collapse, we seek instead to make our immediate surroundings, our neighborhoods, our homes, safe and viable.

In this blog over the next week or two I will share with you, the reader, the steps people are taking to feel safe once again, to assure them that they can survive an economic collapse or a power outage due to a natural disaster, or the loss of income for an extended period of time.  These responses include but are not limited to:  Thrift store shopping; growing food at home; earning extra income; stocking up a supply of food and water; ways to stay healthy for those with no health insurance; and buying local and handmade items from people they can shake hands and talk with, local people, rather than from a nameless, faceless corporation, just as Faith Popcorn predicted we would after the banks were bailed out and people felt burned by Wall Street.  The undercurrent of this thread of topics will be the low-tech revolution, growing out of the grass roots response into what I believe will become varying degrees of practice and acceptance nationwide. 

*Note:  Sadly, one of the very things Americans are doing nowadays to protect themselves from economic collapse or to remain self-sufficient in the face of a Katrina-level natural disaster has potentially become illegal.  The Senate passed the National Defense Authorization Act last week, making America a battleground upon which our military can act as if in a war zone, detaining without due process or habeas corpus or even assassinate any citizen suspected of being a terrorist.  Unfortunately, part of their definition of a terrorist was a person who has more than 7 days worth of food stored.  Doesn’t that mean pretty much everyone who shops at Costco?

America's Growing Trend: Opting Out and Becoming More Self-Sufficient

Currently, my interest revolves around the developing trend of “opting out”, the phrase I use to describe Americans growing distrust of those in charge of our economy, both macro and micro, to the point where they are looking for ways to not engage with them anymore.  When you were a kid, did you ever find yourself sitting opposite a friend, playing a game, when suddenly you realized they were cheating, or otherwise bending the rules to insure their victory?  How did you respond?  Some of us called the other kid on it, and we gave them a chance to come clean and compete in a fair manner.  Others got mad and punched him in the nose.  Some of us got up in disgust and walked away, whether we gave them a chance to make it right and they refused, or we just left right away.  The latter is what I see and hear now in terms of the average citizen’s response to our country’s financial system.  Those at the top have gamed the system to their own advantage, regardless of the cost to the rest of us.  Only a very small percentage of our population is winning at this game.  It is only a matter of time before they start to lose, though.  For the last several years I have asked out loud this question:  “Who do these people think is going to buy their products and services if they keep all this money to themselves?”  Only recently have I received an answer, from my friend Alan Shelton*, one of the most intelligent persons I have ever met.  His answer was essentially this:  “Eventually, the wealthiest Americans will realize that their assets are devalued by the inability of people to buy things.  Most of their net worth is not in cash but in their assets, so this will ultimately eliminate up to about half of their wealth.  Homes, yachts, bonds, all these things that they possess will have less value because the market will no longer bear the prices they had when money flowed.  When money stops flowing, it becomes stagnant.  They will eventually realize that they will have to pay taxes and in other ways put money back into the system if they want their assets to retain or regain their value.”  By the time the folks that occupy that strata of our economy realizes this, it will likely be too late to make amends with their customers and consumers.  The former middle class members will have already moved on to a more self-sufficient lifestyle, playing the economic game with those who know how and are willing to play fair.  There will be fewer people in the market place for what it is the very wealthy want to sell us.  Trust will be the new currency, I hear from time to time.  Bartering will be the way we get what we need, rather than an exchange of cash.  We are a resourceful people, and we will find ways to get around whatever barriers are erected before us.  I don’t foresee us going completely without cash anytime soon, but I do believe more people will opt out more often as fears of a deep recession languish.  

No one fully understands how our economy works, no one.  It is too large a machine with too many moving parts.  There are those who can guess at how A affects B better than others, but it’s still a crap shoot in terms of exactly what the outcome will be if say, Greece’s economy collapses, or Italy’s, or if any of the EU countries stop participating in the use of the Euro. 

However, I can tell you this:  Every day I hear from people all over who share their concerns about America’s economy and what they perceive as their tenuous foothold in it.  These people, everyday average working Americans, are looking at a future of not using money to get what they need, because they sense that in the not too distant future, they may not be able to win this game against those that designed it. 

Check in tomorrow to read the rest of my overview of the “opting out revolution”.

*Special thanks to my friend Alan E. Shelton, a philosopher and the West Coast's best financial guy turned corporate thought leader, for all the many and varied conversations over the course of our friendship.  It is due to his level of analysis and his ability to get to the heart of complex issues such as government, economies, and when to worry (almost never, he says, at least not about those two areas of life) as well as his crystal clear explanations of these complex issues that have led to the level of clarity on my part in understanding what's going on in the worlds of finance and government.  Any inaccuracies are my fault, not his.  Alan's first book, "Awakened Leadership:  Beyond Self-Mastery" is due to be released in May of 2012.  For more on Alan, check out his website:  www.alanshelton.com