Rising Debt Means A Weaker Dollar

As more nations abandon the dollar, more dollars will flow back into the U.S. And as the supply of dollars climbs, the value of the dollar is likely to fall substantially – not just against real goods, but against other depreciating currencies.

A weaker dollar may be good for the government (and other borrowers too), because it makes debt payments more manageable.

But it’s bad for cash savers, consumers, wage earners, and retirees on a fixed income. Currency weakness makes everything more expensive.

As the cost of everyday goods and services goes up, disposable incomes go down.

As disposable incomes decline, so does economic activity. The reluctance to spend by Americans could, in turn, force the U.S. economy back into recession, or even a depression.

Debt-driven dollar weakness could become the ultimate economic driver in the decades ahead. Not only does debt lower the value of the dollar, but it can also cause U.S. borrowing rates to rise.

Higher borrowing costs can further dent economic output while also causing a higher likelihood of default. As the cost of loans rises and economic activity declines, the risk of recession or worse also rises in a cycle that fuels ever more Fed “stimulus” (currency debasement).

That makes now a critical time to diversify your portfolio with asset classes that can potentially benefit from a weaker dollar.

Gold and silver have long been considered the ultimate hedges against paper currency weakness. This time around will be no different.

After pulling back from its all-time high at $2,100 last August, gold is basing out and could be gearing up for a fresh, significant leg higher that could see it reach $3,000 or higher within a couple of years.

And a rally in gold (and silver) could happen fast once investors catch on to the full ramifications of the debt/devaluation cycle into which our nation is now locked.

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William K. 3 weeks ago Member's comment

My concern about inflation is not new at all, but possibly now others are beginning to understand.

Of course the Federal Reserve group seems to be focused only on assisting the wall street crowd at the expense of all who are not able to magicaly adjust their incomes to keep a constant buying power.

And now it seems that the national debt has become large enough that it can no longer be ignored, maybe even by those who for 50 years have been telling us that it is fine and wil not be a problem. But now it appears to be so big that others notice it and tend towards avoiding dealing in US dollars.

It might be that the government is reaching "the end of the rope"and at that point comes the very painful realization that "when it's gone, it's GONE, and there ain't no more." That might be the last page in the book: No happy ending when Superman arrives and saves the day.