Over the past year I have been engaged in negotiations with my former employer concerning the amount of my pension. I thought I had an iron clad case. I possessed company documentation from several years back. It clearly specified at the time of the conversion of the plan from a traditional defined benefit plan to a cash balance plan, that if I was over the age of 55 at conversion time, which I was, at retirement you could choose to take the amount of the traditional plan if it were of greater benefit than the cash balance plan would pay. Surprise, surprise. That provision, which was put in place several years ago, was no longer part of the current plan, and as such, my plan documentation was just words on paper, no longer valid. After getting legal counsel, it was obvious that my iron clad case was less durable than wet tissue paper. What I found is pensions are not regulated, and there is no guarantee of benefits until the day you sign to accept your pension. Not only did my company reserve the right to change the pension provisions at will, the practice is widespread throughout the corporate world. Today the pension amount on which I had planned has been drastically reduced from what I thought it to be, to over 40% less than earlier provisions allowed.
I began thinking about how much we assume that something will be valid for us today or in the future. We trust a piece of paper because it seems to promise value long term. Once we start the peak oil decline, how many additional pieces of paper in our lives will continue to deliver value to us personally? As if the proverbial light bulb went on in my brain, I began to realize that I had structured some of my life around promises on paper that may not be sustainable in a declining economic/energy environment.
In Paper We TrustIn my wallet are pieces of paper we commonly call money. Eighty years ago, one could take a five dollar bill to the bank and exchange it for a five dollar gold coin. That ability was removed by more words on paper that eliminated the possibility of your owning gold during the depression. The dollar remained tied to the fixed price of gold until the early 1970s, when that connection was broken by more words on paper. The dollar in my wallet was still a valid measure of value as long as the people regulating the monetary supply maintained accurate tools to measure and regulate the supply. Now it seems that the regulators have begun flooding the economic system with more dollars in an effort to restart something that may not be restartable. Today I am not so sure that the piece of paper in my wallet will mean the same thing 3 years from now.
Also in my wallet are insurance cards for auto, health and life coverage. Insurance is predicated on taking in premiums on policies, investing those premiums, and paying off claims when they arise. Their business model is for the economy on average to continue growing, so that ongoing investments will continue to provide sufficient income to cover the cost of claims and corporate operations. I don’t know that they have a business model for the continually declining economic environment that will accompany energy decline. Does this mean that you shouldn’t carry insurance? Absolutely not. But you need to think in a different way about the promises on paper. You shouldn’t live today without setting aside tangible assets for tomorrow. Depending upon words on paper to sufficiently support you tomorrow may be a faulty assumption.
Look about your lives today and ask the difficult questions. How much are you planning your future based upon man made promises on paper, that may not materialize, or may be severely devalued when you reach your point of greatest need?
I will personally continue living utilizing all the value derived from the words on paper for as long as it lasts, but I am formulating plan B just in case it doesn’t. It may be in the future the only paper conveying value may be toilet paper; you may be able to trade a roll of it for something you really need!