How Safe Are Government Bonds in Cyberspace?

BY Paul Solman  August 24, 2012 at 10:01 AM EST


Photo by the PBS NewsHour.

Paul Solman frequently answers questions from the NewsHour audience on business and economic news on his Making Sen$e page. Friday’s query comes from a reader at Next Avenue. The NewsHour has partnered with Next Avenue, a new PBS website that offers articles, blogs and other critical information for adults over 50.

I used to buy I-bonds through payroll until they stopped issuing certificates and changed to a digital system with difficult to understand (for me) password rules to protect your investment data. I agree they’re a good product, but I guess I want some of my financial assets in a more tangible form. So my question: do
you really think financial records are safe in cyberspace? I, for one, don’t.
–Dave Rask

Paul Solman: Fascinating question, Dave. I myself have I-bonds in the old certificate form and I share your anxiety about the purely digital variety. But then I think: all my retirement assets are 100 percent digital. So too my bank accounts. So what’s the difference?

I have for years repeated on Making Sen$e this old saw so I might as well debut it for Next Avenue readers as well: “credit” comes from the Latin verb “credere” — “to believe.” The implication is that any asset has value only to the extent that we collectively believe it to.

NextAvenue

There’s plenty of reason to be nervous about cyber crime, as Singularity University’s Marc Goodman made clear in a story of ours some months ago. And he never even raised the specter of an EMP event — an electromagnetic pulse like the one Don Cheadle used to knock out power in Vegas in the modern version of “Ocean’s Eleven.” But I think we’re all in too deep to refrain from investing in U.S. government I-bonds because they no longer come in a physical incarnation. Want a paper record? Print out the Treasury.gov screen on which the transaction in recorded.

As to the formula for getting to those screens, yes, it’s astonishingly complex. But then, if it weren’t, it would be easier to hack, right?

As usual, look for a second post early this afternoon. But please don’t blame us if events or technology make that impossible. Meanwhile, let it be known that this entry is cross-posted on the Making Sen$e page, where correspondent Paul Solman answers your economic and business questions