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 Originally Posted by Donachello
What is everyone's thoughts on the value of the dollar going forward? With rumblings of the possibility that many countries begin or at least try to switch off the USD as a reserve currency in the next 5-10 years where does that leave the USD? If it does tank as would be expected are commodities the way to go as far as "proofing" yourself against that scenario?
Do you have a specific concern? In other words, as an individual, what do you feel you need to be proofing against?
A declining US$ isn't all bad as an investor, because it means that foreign demand for American-made goods should increase because it becomes cheaper for me as a Canadian to buy your shit. That's good news for the stockholders of these domestic companies that have strong international markets or for companies in a position to start selling internationally. But I need to re-emphasize AMERICAN-MADE goods. American companies with significant overseas manufacturing operations will be affected in the opposite manner; it becomes more expensive for them to buy the raw goods used in manufacturing in their countries of operation or to import finished goods from foreign companies and this will affect operating margins or possibly demand if there is an effect on the price of the finished good.
As a US-based consumer, you could be facing interest rate hikes as lenders need to make up for decreases in demand. You could also be facing inflation as companies need to pay more to borrow due to the mentioned interest rate hikes, increased prices on foreign goods and increased demand for domestic goods (which also places an upward pressure on prices). The hope would be that the increase in domestic production and the resulting positive impacts would at least offset any negative impacts due to inflation and it could even end up being a good thing for your economy if it can lead to sustained domestic investment on the part of corporations.
As a US taxpayer, the declining dollar isn't necessarily a terrible thing either. If I understand the US situation correctly, inflation would devalue the outstanding debt you have to foreign nations, ie. the value the US owes would be paid back in dollars that are now worth less globally.
So, yeah, there would be some negative aspects but some positive aspects too. This is all somewhat speculative as no one can be sure exactly what the impact of all these variables would mean. That said, I'll believe that China and European countries want to boot the US dollar as the reserve currency when I see it, especially China since they hold so much of the stuff.
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