Back To The Future Part 2

businessman working with virtual screen - Back to the Future Part 2<< Read Part 1: Back To The Future

Last week Chuck Butler and I accepted a challenge from subscriber Charles F.

“Describe life in the US 5 years into the loss of our currency reserve status. Winner, Losers, what does gov’t look like on different levels, our position in the world, let your imagination run wild. When I do this my thinking quickly turns to mush.”

Much like the movie Back to Future 2, we tried to look at life down the road when the US loses much of its status as the world reserve currency. We focused on what things would look like.

Now it’s time to sort out what separated winners from losers. The discussion continues:

DENNIS: Before moving ahead, let’s summarize. Who are normally the winners and losers when a country loses reserved currency status?

CHUCK: Good question again!

I would suspect that the Winners are those of us that:

  • Diversified their investment portfolios to include precious metals and other currencies.
  • Got out of debt.
  • Had a good base of cash before all this came raining down on us.
  • Moved that cash, grabbing hard asset bargains that will become available, while avoiding huge inflation losses.

The Losers will be those who:

  • Didn’t diversify their investment portfolios
  • Don’t understand that inflation could ruin their lives, as well as their investment portfolios.
  • Held debt that got called with worthless money or defaulted.
  • Probably started out with a bad understanding of what it takes to “make it”.

There are also some who feel they can time the market perfectly and, when things turn on a dime, think they are smart enough to beat everyone out the door. They will get clobbered!

DENNIS: I want to address one inflation concern. Historically inflation hurt creditors and helped debtors as they are paying back their obligations in much-depreciated dollars. I’ve had readers ask about borrowing money to invest.

Chuck, that concerns me. Many of our readers are baby boomers or retired. The theory might make sense as long as you have a good job and can continue to earn money to pay the bills. If you lose that income, then loans could be foreclosed.

I know many retirees who have a government pension and think nothing about financing purchases.

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