Is the Dollar Dead?

After reading this article on Bloomberg about the end of the dollar, I thought about some important points that the author brings up. First, the dollar is declining as gold rises. This is a trend that has been going on for years, but most people are totally unaware of it.

I think it is interesting to note that even though the information is available to everyone for free, most people choose to ignore it. When we get our information from the “news”, we don’t learn about what is really important. This includes ideas like the dollar will soon become nearly worthless and the fact that the savings of a whole country is disappearing.

I think it is important to notice that there is a fundamental shift that is happening throughout the world. The dollar has been the default currency for perhaps 100 years. People don’t remember what is was like when the dollar was not the reserve currency. This has meant that the U.S. government could borrow and spend as much money as it wanted.

That was then. This is now. When the dollar ceases to be the reserve currency for the world, countries will start to sell it. That will cause a flood of dollars, and cause its value to plummet. In the last 10 years, the dollar has lost 40% of its value. It is definitely possible for it to lose a lot more in the next 10 years.

In contrast, gold has appreciated by a factor of 5 during the same period. Before the dollar even existed, gold was held as reserve throughout the world. Perhaps gold will replace the dollar as the reserve asset of choice. If that happens, gold will continue to appreciate and the dollar will continue to fall.

Most people are blissfully unaware of the problem because there are few people who want them to know. The government doesn’t want you to know because it will cause people to be dissatisfied. The media doesn’t want you to know because there is no money in it for them.

Fortunately, one of the biggest changes in the world is the availability of information. Just 20 years ago, it was fairly difficult to find out this sort of information. You had to read books or financial newspapers to learn. Even fewer people were aware. Information was designed for people who were already financially literate and made it difficult to decipher the content.

All that has changed. The Internet has not only made all the information available to everyone for free, but it has had one even more powerful effect. It has made the information easy to understand. This information has gone from the domain of the expert to being available to everyone. However, it is only available to those who desire it.

It is pretty obvious that the dollar is in serious trouble. Yet many people will be surprised to discover that their life savings has disappeared. There is no one else to blame. We are responsible for our own finances and our own future.

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  1. October 30th, 2010 at 08:04 | #1

    Great reading. Yeah, information is king and internet means info without borders.

    “This has meant that the U.S. government could borrow and spend as much money as it wanted.” Are you serious about that?

  2. October 30th, 2010 at 08:36 | #2

    Yes, I am serious. Since the dollar was the reserve currency, there was no limit to how much money the government borrowed. There were always other countries and individuals who were willing to buy the debt. So, the U.S. could just spend as much money as it wanted. At least until now.

    Are you in Germany?

  3. October 31st, 2010 at 21:22 | #3

    Having such a huge $13 trillion deficit puts us at a lot of risk. I am really hopeful the govenment will get serious about debt reduction after this election has concluded.

  4. November 1st, 2010 at 07:19 | #4

    That’s an interesting point. There has been so much money and energy spent on improving the economy and healthcare. I hope some politicians are voted in think that financial responsibility is important.

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