End Of US Dollar As World Currency

[JohnyMac]

I ran across a good article titled, If the Dollar Loses Its Status as the World?s Reserve Currency?, which explains what is and what happens to a country is they lose their world reserve currency status.

Here is a copy & paste of part of the article.

How could your standard of living change if the dollar loses its world reserve currency status?

Through the reserve currency privilege, we in effect let the world share our debt and finance our needs. This cannot last forever. The continuous weakening of the dollar could lead to a significant decrease in demand for the dollar and dollar-backed securities. That means that the United States won?t be able to sell off its debts to foreign countries.

A weakening dollar in itself makes foreign goods and services more expensive for American consumers and businesses, and should the dollar lose the reserve currency status, it would make our transactions more expensive as well ? costs that businesses would pass on to US consumers.

Here is a situation where our current rising inflation could explode higher just because we will be forced to trade with other currencies to get the goods we want and need. Interest rates for American consumers and businesses would likely also increase, making everything from buying a house to building a factory more expensive, which equals more inflation. Let?s not forget our corporations? easy access to debt, which will be more difficult and more expensive if the dollar is not Numero Uno.

In recent months, inflation has become an increasing concern. Without the global demand for the dollar and with countries offloading dollars, inflation is likely to rise even further. This should concern everyone, especially those of us who have retirement savings. Your hard-earned money could lose a significant portion of its value if the US dollar loses its spot as the world reserve currency.

In short, for us Americans, our standard of living could decrease dramatically.

It?s time to protect your wealth.

I suspect the article was written by a gold lobbing group however, it is a good 3-minute read.

[Felix]

I speak with my ML advisor in the AM.   
Will make a point of asking how his firm views my account's position with regard to American loss of "reserve currency".
Will let you all know what (if anything) he is allowed (or comfortable with) saying.

[JohnyMac]

Thx Felix. Curious to what they say. Maybe ask about your ESG score too.

[Felix]

Merrill Lynch advisor call yesterday...
Made some changes in retirement account.
I actually agreed to book a loss selling gold - a position I've held without any reward for a long time.  "Sell gold"?!?!?  Heresy!!! Foolish!!!
Depends on belief that a financial system will behave historically or not.   And I'm talking paper gold, not the physical held in hand.  Decision made on basis of "opportunity costs".
Something folks thinking about acquiring more gold (and holding it) are conditions found in real meltdown might mull over are the experiences in the Balkans during their fratricidal civil war.   Bullion didn't compare to things like food, medical supplies, ammunition in barter.  The critical need for convertible value made clear where useable value lay when the chips were really down.

Currency collapse/dollar as dominant world reserve currency:   M/L does not see the dollar losing its place as leading reserve currency at this time.    Personally, my gut sez such a loss would be like going broke.  How?   Slowly at first, then all at once.

My "ESG" score (Environmental Social Governance)  -  how do I think or rate in terms of "doing what's 'right'".
Years ago I divested out of the tobacco companies.  The purveyors of cancer sticks.   Stupid of me.   First, smoking is a choice.  Second they remain stabile companies and third pay a good dividend.   Who did I help or hurt by reallocating my dollars elsewhere?
I own stock in WalMart.   I avoid shopping there if ever and at ALL possible.
I own some Amazon.  Share prices/capitalization is quite uncaring who owns what shares.  But I patronize local shops whenever I can.
The big change that was made in my account yesterday was rotating completely out of ETFs/companies with large positions linked to Chyna.
This Afghanistan fiasco can only serve to accelerate Xi's timetable on Taiwan.   I believe it will now be Hong Konged sooner than later.   And considering where the bulk of our semi-conductors are coming from today...
We are at war now and it will get hotter (maybe even world hotter) before it gets cooler.

[JohnyMac]

Good update Felix.

To be honest, I put financial advisors in a similar category as lawyers, just above used car salesman and Politian's.

We have been with the same financial advisor for ~25-years. Our relationship started out when she was just a advisor. Currently, she is the President of the organization. She keeps us as clients for sentimental reasons.

Maybe a 2-3 times a year she emails me asking for my 2? on predicting the economy. Short term, 3-years and then 5-years out. My analysist is always backed up with facts in the form of links and graphs. I put a lot of thought into my reports. She always thanks me and on occasion challenges parts of my predictions which I enjoy. I like to debate.

There are times where I have been partially wrong and others where I have nailed it! The most resent was inflation for 2021. I predicted we would see 6-9% inflation. With July's number coming out at 5.4% YTD, by year end we will be in my prediction range. That is using the 2018 CPI formula. Using the Jimmy Carter 1980 formula, we are at north of 14%.

IF I could trust the banks, I would close our portfolio and put the money in the bank. However, when the SHTF our portfolio nor the proceeds of if we cashed it in, will be worth squat. To think otherwise is sophomoric.

Thanks again Felix for sharing with us your discussion with your financial advisor. It was eye opening.  Remember, as Felix pointed out, the finacial advisor works for you. Do what YOU think is right. 

[grizz]

Good update Felix.

To be honest, I put financial advisors in a similar category as lawyers, just above used car salesman and Politian's.

We have been with the same financial advisor for ~25-years. Our relationship started out when she was just a advisor. Currently, she is the President of the organization. She keeps us as clients for sentimental reasons.

Maybe a 2-3 times a year she emails me asking for my 2? on predicting the economy. Short term, 3-years and then 5-years out. My analysist is always backed up with facts in the form of links and graphs. I put a lot of thought into my reports. She always thanks me and on occasion challenges parts of my predictions which I enjoy. I like to debate.

There are times where I have been partially wrong and others where I have nailed it! The most resent was inflation for 2021. I predicted we would see 6-9% inflation. With July's number coming out at 5.4% YTD, by year end we will be in my prediction range. That is using the 2018 CPI formula. Using the Jimmy Carter 1980 formula, we are at north of 14%.

IF I could trust the banks, I would close our portfolio and put the money in the bank. However, when the SHTF our portfolio nor the proceeds of if we cashed it in, will be worth squat. To think otherwise is sophomoric.

Thanks again Felix for sharing with us your discussion with your financial advisor. It was eye opening.  Remember, as Felix pointed out, the finacial advisor works for you. Do what YOU think is right.

I'm not looking for an argument but I dont understand how something (your portfolio) on a computer will be more valuable than if you cashed it in?

When the shit hits the fan the govt will have access and control over all banking and will most likely redistribute everything as they see fit

[JohnyMac]

No argument.

If no when the economy goes nuclear the whole economy crashes. Portfolios, money in banks, cash under your mattress, etc.

The only think that will hold value are commodities. Tractor, truck, cow, horse, etc.

Good question Grizz.

[pkveazey]

No argument.

If no when the economy goes nuclear the whole economy crashes. Portfolios, money in banks, cash under your mattress, etc.

The only think that will hold value are commodities. Tractor, truck, cow, horse, etc.

Good question Grizz.

Yep. I think Johnny is right. Money won't mean squat. When Hyperinflation really kicks in, nobody is going to want money. The beginnings of hyperinflation are already here. A few months ago a bag of cat food was about $6, then $9, today it was $12. I don't even like Cats but we have several Feral Cats hanging around and I can't just let them starve. At $12 a bag and using 2 bags a week, I'm spending $24 a week to feed about 4 or 5 cats , one Skunk, and at least 2 Possums. There's going to come a time when I'm going to have to cut them off and just put out Water for them. I went to the drugstore and bought a small 3.53 ounce jar of Vicks Vaporub. Damn!!!! It was $12. If you have Physical Gold, Silver, Common calibers of Ammo, Food Stuffs, Galsoline or fuel like Kerosene, Fire wood, Labor skills like Auto or Small Engine Mechanic, Electrician, Carpenter, Plumber, then you'll be able to trade for what you need. Right now there are Cell Phone Zombies out there paying up to $300 a month for internet usage on those things. Ooops, I hope I didn't step on anybody's toes with that one. What are people going to do when their Electricity bill jumps from $150 a month to $1,500 a month. He who has a Solar system will at least be able to run an extension cord next door to run their neighbor's refrigerator as long as they have something to trade. I've talked to the wife about what we can do when it all goes wrong and although we love out Satelite TV and our Telephone but those will be the first things we shut down. We will use two way radio to Communicate and our prepaid Tracphones.   

[Felix]

"I'm not looking for an argument but I dont understand how something (your portfolio) on a computer will be more valuable than if you cashed it in?" - grizz

Succinct... that is the nub of it.

Anything that resides on paper or _electrons_ is as perishable as the smoke ring from a bad cigar.  Maybe even a good cigar.

If you can't physically touch it, do you really own it?
Directly, no.
What we have here is more than a failure to communicate though.   What we have is a failure of full faith and trust combined with (and owing to) the monster called "Inflation".   
All of my "paper" is ethereal value.   But its "value" inflates along with the inflated _price_ of everything else.   Which means that, like gold, an once of this buys the same suit as an once of that 50 years apart (more or less historically, asset price and consumer prices rising together).

It's a game of musical chairs and don't I know it.   Some assets are solid and in hand, some are ethereal and keep pace with worldly inflation... the better to be converted into solid items later...   how much later?  When the music stops and there is a shortage of chairs?

I'm always open to suggestions...
(and today I added another 20#s of rice and a tub of Snowcap lard  to the "pantry", over and above the shopping needs for the moment)

[Nemo]

There comes a point where the attic, closet, and space under the bed is full and boxes are getting kicked as one gets in bed. 

I have pretty much arrived at the total storable provision EOTW assets I can handle or have a place to put them.  I am primarily going to metals and repelling items.

I figured out a couple years ago that someday it goes past the 3 Bs and adds the Plus2.  Barter and bullion. 

Thats where I am.

Interestingly enough a relative outlaw (kinda inlaw by way down the chain) and others in the family are beginning to approve of the idea of getting a couple extra things to keep in the cabinet.  A bit of explanation and guidance (and showing how to use a vacuum sealer) is personally satisfying.

Nemo