A harsh reality is about to descend; the reality is that the US Dollar has been in a decline for years and the weakening US Dollar will have worldwide ramifications and will be felt my millions. From Wall Street to Main Street, from Retirees to FOREX Traders, everyone is going to feel the inevitable “currency war” that is fast approaching. If in fact it is not already hear.
The History of the declining US Dollar
The reality is that since the end of World War II, the United States Dollar has been the world’s reserve currency. Most people do not realize this but as far back as 2006 the United States Dollar has been in decline. Further, fiat money, which is what the American Dollar is, is only worth what people “think” it’s worth. Remember, we went off the gold standard years ago. So, with our governments reckless spending and the ever growing national debt “people” are starting to no longer believe in the US Dollar and that is a very dangerous belief that once accepted will be very hard to change. With the loss of “faith” in the US Dollar and “people” no longer wanting to underwrite our Nations debt load, the Dollar has been and will inevitably decline.
What the Decline of the Dollar means Globally
One clear issue you must understand and accept is that we are “global.” Meaning the US dollar, as the world’s reserve currency, is tied into almost every Country on Earths economic systems. Further, the United States has been for years in a trade deficit. Meaning we buy more than we sell. Whereas China has been in a trade surplus meaning they are selling more than they are buying. And guess who their largest purchaser of goods’ are? That right, the US. As the US dollar declines, Chinas goods become more and more expensive so we buy less because their just is not enough money. So China artificially controls the value of its currency in order to keep their prices cheap so that they can keep selling their goods (Exports). Other nations do not have this option; they cannot artificially control the value of their currency so the prices of their goods go up making it almost impossible for them to compete globally. So then what happens? It becomes a currency war. Nations that artificially control the value of their currency go to “financial war” with those nations that are demanding that they stop. Look what has already happened to Greece and now Ireland.
What the Weakening US Dollar means for the Rest of us.
Simply put, the United States has been for years living beyond its budget. Now let’s use an analogy we are all familiar with; the credit card. In essence the United States has had a credit card that they have been using to borrow money. Now what happens when you go over your limit and can no longer make minimum payments; because that my friends is exactly where the US is at. When you cannot borrow any more money and making the minimum payments is almost impossible you cannot afford to buy anything! And that is what is coming. A declining US Dollar means that your dollar is not worth what it was and it takes more of those paper “dollars” to buy goods and services. You are going to have to work harder for less money that buys less of what you need. This perhaps helps to explain why so many people are buying into the “gold” craze as a means of protecting themselves from the dreaded “I” word, inflation.
But unlike you the Government has one option and their fancy term for this “nuclear option” is Quantitative Easing. “Quantitative Easing” or “QE” is just a fancy word the Fed’s created to describe the process of printing more money. Here is the way it works, The Fed’s print trillions of dollars at little to no cost and then use these newly created paper “dollars” to buy the US treasuries. This is never a good option. Check your history; quite a few nations have tried to solve their problems this way and guess what…
They have all failed.
The only way out of this mess is that we as Americans have to start saving more, balance our budgets and stop paying for stuff we do not need and demand the same of our Government.