The U.S. economy is unstable, as is the future. Learn how to protect your wealth from the dollar collapse and discover viable ways to grow your wealth as well.
Table of Contents
Introduction
The period of the U.S. greenback’s “exorbitant privilege” because the world’s major reserve currency is coming to an finish. Then French Finance Minister Valery Giscard d’Estaing came up with that phrase back in the 60’s (probably out of frustration), lamenting that the US called freely upon the rest of the nations of the world to help cover its’ over-extended, lavish lifestyle. For over half a century, the world complained but didn’t take action to change that fact of life. Well, those days are done for.
The economy in the United States has gotten to be more and more unstable over the last ten years. The global debt has jumped to new peaks, and inflation continually diminishes the value of your assets.
Combine this with the institution of quantitative easing and you might be fearing your own financial future should the dollar collapse. Some may think this is an impossible scenario, but it is in fact quite realistic, and even quite likely, with the current global climate amid the likes of COVID-19 and racial disparities.
This article aims to instruct you on ways you can safely diversify your assets in order to best protect them from the dollar collapse, and you may even grow your wealth with these methods at the same time. Before we dive into the 3 ways of protecting your wealth from dollar collapse, let’s explore the reasons the dollar collapse is likely to happen in the first place.
Why might the US dollar collapse?
The United States dollar was backed by gold until 1971, by what was commonly referred to as the gold standard. This gave actual value to paper money, because each dollar printed was reflective of a particular amount of gold.
50 dollar gold certificate exchangeable for equal value in gold, this was the “gold standard” until changed by president nixon in 1971.
Members of the public deposited gold in the bank, and in return received paper certificates indicative of the value of the gold they had stored. This predated what you know today as cash, and looked similar to today’s cash, except on the left side of the bill it stated “gold certificate”.
These “gold certificate” papers could be used to trade for goods, just as we use regular cash today. Eventually, the certificates would be returned to the bank in exchange for gold.
President Nixon nixed (pun intended) this system in 1971 though when he took away the ability to convert dollars into gold.
Now, instead of being backed by gold, the world’s most powerful unit of currency was instead backed solely by blind trust in the government. After that, the United States federal government began to print exorbitant amounts of unbacked paper money, and has continued printing money ever since.
Conditions required for the dollar collapse to transpire
Lots of folks wonder if this transition marked the beginning of the end of the dollar. Author of Rich Dad, Poor Dad and world-renowned investor Robert Kiyosaki explains the aftermath of this transition particularly well in the following video. He also describes what transpires when the federal government prints too much money, which h he refers to as “fake money”, and also gives his own advice on protecting your assets from the dollar collapse.
Two conditions have to be met before the dollar collapse becomes a likely scenario; a weakness in the dollar’s value, and a viable, more attractive alternative.
To sum it up, for the dollar collapse to transpire, there must be a good reason for the public to want to drop the dollar, and the public must also have a viable, alternative option for the storage of value. If both of these conditions are not fulfilled, the US dollar will likely remain a leading currency.
Reasons currencies collapse
A currency’s stability directly relates to its trust from the people. When a currency lacks faith from the public, it leads to collapse. This has shown to be true throughout history, even as recently as the 20th century we have seen several countries experience a collapse of their currencies.
Once a lack of trust becomes prevalent, issues begin to percolate. Right now, the dollar is in a rather unfavorable position. To better dissect the current state of the US dollar, let’s explore its’ current strengths and weaknesses.
US Dollar Strengths
Actively used as a reserve currency, the United States dollar is, at least right now, the primary currency utilized internationally in trade. It was, in fact, the only currency sanctioned for international transactions up until 2016, when the Euro, Japanese Yen, and British Pound were qualified by the International Monetary Fund as reserve currencies.
Most of the world’s currencies are tied to the value of the dollar. This illustrates both the power of the current US economy as well as how detrimental a dollar collapse would be to the entire global economy.
Import and foreign travel becomes more inexpensive when the dollar strengthens against competing currencies.
US Dollar Weaknesses
The primary disadvantage currently dragging down the dollar is the fact that is only exists through government fiat, since it’s no longer backed by gold. Most major global currencies find this blind trust to be a major issue. Still, the United States takes advantage of the situation by printing far more sums of money than any other country.
One issue especially prevalent to up and coming market economies are exposed to risk because they rely on US dollar reserves and wind up paying much more in order to obtain them.
5 Factors that could lead to the dollar collapse
What are some factors that could lead to the collapse of the dollar? Here are some realistic scenarios that could lead to the dollar’s demise.
1. Government giving away free money
The recent coronavirus relief fund gave every adult citizen of the United States $1200. Granted, this was a much needed relief fund for many, and it helped momentarily ease some of the difficulties created after the country virtually shut down due to COVID-19. Many other countries soon provider their citizens with a similar stimulus fund.
However, this stimulus came with a price beyond face value; for the government to absorb the cost of this expenditure, the US dollar decreased in value due to inflation, and down the line it’s likely that Americans will face unfavorable tax increases as a result.
2. Printing more money
The United States has made a habit of printing its way out of fiscal issues for the last 50 years. Most people were, at least until recently, unaware that this was happening until the coronavirus pandemic exposed to the public to the ease with which the government can make money seemingly just appear. From March through June of this year, the United States printed over 20 trillion dollars.
3. Economic events that may lead to the collapse of the dollar
With the trade war and other geopolitical uncertainties, the capacity for another financial crisis could be the tipping point in the global economic chain of command. What that tipping point could be is the real question. World war, pandemics such as coronavirus, and unleashed money printing are all things that could trigger a sudden dollar collapse.
4. Viable alternative currencies
The recent fed interest rate cuts and giant devaluation of savings have led the public to begin to realize the financial system is fixed and designed to take from the poor and give to the already rich.
Because of this, Americans are beginning to look at alternative ways to protect their wealth. Bitcoin is one viable alternative that has seen a lot of action over the past couple of years. Even so, the cryptocurrency is still merely in its adolescence, but it does illustrate the need for a decentralized financial system.
5. Other countries stop using the dollar
It’s more likely that the world’s trust in the US dollar will lead to the dollar collapse sooner than the American public’s lack of trust will do the same. Foreign nations currently own more than 6 trillion dollars of United States debt, the majority debtors being China and Japan. Should these two countries elect to drop their holdings, it could cause a panic around the world that would lead to a global recession as well as the collapse of the dollar.
When is the dollar collapse going to happen?
If you consider all the factors plaguing the dollar, and the instability in general of the global economy in the aftermath of COVID-19, a financial collapse and/or the dollar collapse could happen at any time.
This isn’t something intended to ensue panic, bear in mind this wouldn’t be the first economic reset in history. In fact, major monetary system changes tend to occur on a semi-regular basis. The world economies adapt and eventually life returns to normal.
That isn’t to say you shouldn’t prepare yourself as best as you possibly can. There is a massive opportunity looming for those who see the dollar collapse coming to be able to protect their wealth.
3 ways to preserve your wealth and survive a dollar collapse
To protect your assets and wealth, and to thrive during an economic recession, you should keep the following points in mind. These tips come primarily from seasoned investors who have seen opportunity where others saw only loss.
1. Diversify your portfolio with precious metals and other alternative assets
Precious Metals
The first way to avoid the dollar crash is to diversify with gold and other precious metals. Historically, precious metals have a contrary relationship.
p with the stock market, when the market collapses, metals jump in value. We predicted that the gold value will soar to $2000 earlier this year, and sure enough we’ve briefly reached that level once. Gold has lasted longer than any currency in the world, and long been considered one of the safest investment vehicles. If you study gold’s price performance over the past two decades, you’ll see why investors seem to flock to it. It’s grown over 250% in the last 20 years, and has made numerous investors wealth surge.
One strategy for protecting your wealth is diversifying your portfolio with a Gold IRA. Oakhurst Metals specializes in Gold IRAs and can help you convert your traditional or Roth IRA or 401(k) into a Self-Directed IRA, capable of investing in IRA eligible precious metals. To get started, give us a call at (888) 260-4749 or fill out your information here.
Bitcoin
Though barely 10 years old, Bitcoin was introduced as a decentralized currency as a way to help citizens shield their assets from governments and banking systems alike. Since its’ inception, bitcoin has seen an enormous appreciation in value, going from a mere few pennies per bitcoin to upwards of $20,000 per coin at its highest. Right now, the cryptocurrency sits around 50% of its high point, but it has been steadily growing and seems to have somewhat stabilized.
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Federal Bond Funds
There are some types of bond funds that are favored by investors seeking low-risk investment vehicles. Funds made up of US Treasury bonds are some of the safest options available to protect your money. This option is only viable for American citizens.
Real estate market
Real estate holds some of the lowest amounts of risk as far as investments go. Buy a property to fix up and flip, or buy a rental property, because regardless of what’s happening in the economy people will need somewhere to live. This is a great option to make sure you’ve got some stable cash flow.
2. Make investments using the DCA strategy
The DCA strategy, which stands for Dollar Cost Averaging, is one of the safer investment methods when it comes to viable risk management. DCA is pretty much a strategy involving purchasing minor quantities of a certain investment such as Bitcoin, gold, or stocks, over an extended length of time. This has proven to be a fantastic way to circumvent volatility in the markets and invest with minimal risk.
Many investors don’t really care for this particular strategy because it necessitates a good deal of focus and a great deal of patience in order to achieve the end goal. It is quite contrary to the get rich mentality plaguing many investors today.
To illustrate how effective the DCA method can be, we used this intriguing bitcoin dollar cost averaging calculator to see what would happen if we were to invest $10 per week over the last four years into bitcoin. The value of the funds invested would have increased by just 332.62%! Precisely $2,090.00 invested would have turned into the equivalent of $9,041.66 US dollars as of today, August 18, 2020. That’s quite an attainment considering the notorious volatility of bitcoin.
The results from a bitcoin dollar cost average calculator showing the return on investment if someone hypothetically invested $10 us dollars weekly over the last 4 years.
3. Avoid getting yourself into debt
This final tip may seem like common knowledge, but it’s so often overlooked. Considering the astonishing fact that nearly 80% of all American adults are currently in some sort of debt, this tip may feel somewhat like a guilt-trip, but we assure you it’s valuable advice to consider in your financial strategy.
If you yourself are a part of this 80% no need to fret, just be sure to consolidate your debts and pay them down as soon as you can. Getting caught up in debt could send you in a less than ideal trajectory should the economy tank.
You will be able to safeguard your wealth in different safe investments, such as gold, if you aren’t reliant on the banking system.