With the world economy in a tough spot, many people are looking for ways to protect their finances. While a complete currency collapse may seem like a far-fetched scenario, it has happened throughout history.
And as economic turmoil continues to grip the country, the possibility of a currency collapse becomes more real as more people lose confidence in the U.S. dollar.
In this article, I'll go through some things you should own to prepare you to weather the storm if the dollar collapses.
Let’s get started.
Knowing How The Dollar Affects Everything
The United States dollar is the world's reserve currency.
This means that it's used to settle international transactions and is held by central banks as a store of value. With economic uncertainty gripping many parts of the world, the role of the US dollar has become even more critical.
This also means that the US dollar would likely depreciate sharply in value in an economic collapse.
As a fiat currency, the US dollar is not backed by any physical commodity like gold or silver.
What To Own When The Dollar Collapses
Having too much money in a single asset is always a risky proposition. A varied investment portfolio is crucial to weathering any financial storm.
The following are some of the things you should own if the dollar collapses.
If the dollar falls, commodities will likely increase in value.With the global economy in flux, many investors are turning to commodities as a safe haven.
Land and agricultural commodities provide the perfect hedge against inflation.
Agricultural commodities can also be used to barter if the dollar collapses (more on this later).
The falling dollar also means that foreign bonds become more attractive.
With other countries having stronger economies, foreign bonds offer a way to hedge against the falling dollar.
Unlike more volatile stocks, bonds also provide a stable source of income.
A Variety Of Currencies
Foreign currency is another asset class that can be used to hedge against the falling dollar.
From the Euro, the Sterling, the Japanese Yen and the Chinese Yuan, and many other currencies, it’s a good idea to have a mix of specific foreign currencies you can use to hedge against the dollar.
Gold And Precious Metals
Gold and silver have always been seen as a safe haven during economic turmoil. In addition, other precious metals can be used to store value in a dollar collapse situation.
Having such assets in gold IRAs that can be easily converted to cash if needed is a wise move.
An all-time favorite of many, income-producing real estate is a great way to diversify your portfolio.
This type of real estate refers to properties that generate rental income.
If you have a portfolio of single-family homes that are rented out, the rental income will continue to come in even if the value of the property falls.
This can provide a stable source of income even if the economy is in turmoil.
Items To Barter With
Many investors will find value in having items that can be used as a means of barter.
Such investments might include food, water, and fuel.
While it's unlikely that we'll ever end up using a bartering system like in the olden days, it's still a good idea to have some items on hand, just in case.
An investment away from central banks that includes a mix of cryptocurrencies has become more appealing to many in recent years.
Bitcoin, Ethereum, and Litecoin are some of the most popular options in this regard.
Having your own currency that isn't subject to government manipulation is an intelligent move at this point in time.
Artwork, Cars, Jewelry, And Other Collectibles
A physical asset that appreciates will always be valuable in a stock market crash.
The most valuable assets in this situation include items like artwork, cars, jewelry, and other collectibles.
Physical gold is another valuable asset that can be used as a safe haven in times of economic turmoil.
With gold and silver coins being popular options for many investors, these tangible assets can provide a sense of security during times of uncertainty.
Gold coins include the American Eagle, Canadian Maple Leaf, and South African Krugerrand.
Silver coins include the American Eagle, Canadian Maple Leaf, and Austrian Philharmonic.
The local stock market is not the only place to invest your money.
Having a savings account and investing some of it in foreign stocks could be a wise move.
The difference between foreign stocks and regular stocks is that foreign stocks are less volatile and offer a way to hedge against the falling dollar.
Long-Term Independent Living Solutions
From natural gas generators to solar panels, a variety of long-term independent living solutions can be used in case of an economic collapse.
If one has to live off the grid for an extended period, it's essential to have the necessary supplies. In addition, investing in long-term independent living solutions can also provide a sense of security and peace of mind.
While some people can go to extremes when it comes to off-the-grid living, there are more sensible solutions that one can use as well.
Mutual funds are a type of investment that pools money from many different investors and invests it in various securities.
Various asset classes can be found within a mutual fund, including stocks, bonds, and cash.
The difference between a mutual fund and other types of investments is that a mutual fund offers diversification, which can help mitigate risk.
A retirement account is another way to invest your money and diversify your assets.
If this is part of your retirement portfolio, choosing an IRA that best suits your needs is essential.
Having your life savings in an IRA can provide peace of mind and help you accomplish life-long goals in your retirement years.
Over the past few years, many new companies have been formed that offer IRAs. Many offer low fees and various investment options, so research is essential.
The Role Of Inflation
With inflation eroding the monetary system as we know it, having a solid understanding of how it works is critical for anyone looking to protect their wealth.
This includes knowing the different types of inflation and the factors that contribute to it. In addition, knowing the risks involved in investing during periods of high inflation can help you make more informed decisions about your portfolio.
There are a couple of inflation types: demand-pull inflation and cost-push inflation. When an increase in goods and services demand exceeds the available supply, this is generally known as demand-pull.
This results in prices rising to reach equilibrium. On the other hand, cost-push inflation happens when production costs rise, increasing prices.
Factors that can contribute to demand-pull inflation include population growth, increases in government spending, and increases in consumer borrowing. Factors contributing to cost-push inflation involve increases in the cost of raw materials, energy costs, and decreases in productivity.
Investing during periods of high inflation can be risky, as the purchasing power of your investment may decrease.
In addition, high inflation can lead to political and social unrest. Before making any decisions about your investment portfolio, it is essential to be aware of these risks.
The Importance Of Diversification
Diversification is a risk management technique involving investing in various assets to mitigate the risk associated with any particular asset.
The main benefit of diversification is that it allows you to offset the risk of any one particular investment with the performance of another.
For example, if you have a portfolio composed entirely of stocks and the stock market crashes, your entire portfolio will likely lose value. However, if you have a diversified portfolio that includes both stocks and bonds, the loss in the value of your stocks may be offset by the increase in the value of your bonds.
Another benefit of diversification is that it allows you to take advantage of different investments. For example, if you invest in both domestic and international stocks, you can take advantage of the growth potential in both markets.
The key to successful diversification is to choose a variety of assets that are not perfectly correlated with each other.
This way, you can mitigate the risk associated with any particular asset while still having exposure to various investments.
Is The Economic Situation Going To Get Any Better?
There are a few different trains of thought regarding the future of inflation. While no one can predict the future with complete accuracy, some general trends can be observed. As inflationary pressures continue to mount, it is unlikely that the situation will improve in the short term.
This keeps interest rates low and makes it difficult for savers to earn a decent return on their investment.
In the long term, however, there are several possible scenarios. If inflationary pressures finally begin to ease, it is possible that interest rates will rise, and savers will finally be able to earn a decent return on their investment.
Alternatively, if inflationary pressures continue to increase, it is possible that the situation could deteriorate further and lead to even more economic problems.
What To Own When The Dollar Collapses - FAQ
Amongst other things, the Federal Reserve is responsible for setting monetary policy in the United States. This includes setting interest rates and influencing the money supply.
It also provides financial stability in the event of a financial crisis.
The dollar's purchasing power can impact your investment portfolio if you are invested in assets that are priced in dollars. For example, if the dollar decreases in value, then items priced in dollars will become more expensive for foreign investors. This could lead to a sell-off of dollar-denominated assets, negatively impacting your portfolio.
If the dollar falls relative to other currencies, it means that it takes more dollars to purchase the same amount of foreign currency. This can have an impact on your investment portfolio if you are invested in assets that are priced in foreign currencies.
Exchange-traded funds (ETFs) are not typically considered safe haven assets. This is because ETFs are subject to market fluctuations and can lose value over time. However, some ETFs track defensive sectors or commodities, which may be considered a safe haven asset by some investors.
Some investors may choose to invest in asset classes considered safe-haven assets, such as government bonds or gold. Others may invest in volatile asset classes, such as stocks or commodities.
It is important to remember that all asset classes come with risk, and there is no guarantee that any investment will appreciate. You should always consult a financial advisor to discuss which asset class suits you.
In this economic downturn, you can find yourself in two positions:
The best way to predict the future is to prepare for the worst. If you diversify your portfolio and include safe haven assets, you will be better positioned to survive an economic downturn.