Will the Perceived Safety of the U.S. Dollar Turn It Into a Bubble?Jennifer Anderson
As the world economy becomes increasingly unstable, people are looking for safe havens to protect their investments. To that end, many have turned to U.S. currency. The dollar is strong right now, which means it’s secure against financial disaster, right? Not quite. In fact, it’s that very strength that may prove to be its downfall, as experts warn that the U.S. dollar could turn into a bubble.
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The Dollar’s Over-inflation
In the wake of Brexit and other major events on the world stage, the pound and the euro have both been decreasing in value. Other forms of currency have been getting weaker as well, such as the Chinese yuan. Meanwhile, their loss has been the dollar’s gain, as it continues to grow stronger by comparison.But investor and financial commentator Jim Rogers warns that this increasing strength is only an illusion. In fact, the dollar is only becoming a bubble.
As people see the world economy gradually weakening, they fear it may be on the verge of collapse. In the midst of this turmoil, as they see the dollar’s comparative stability, many choose to put their money there, in the hope that it will be protected against impending disaster. These fear-based investments in turn send the dollar’s value up even further—driving foreign currencies still lower in the process.
This continues to fuel investors’ false sense of security, making the bubble bigger than ever. But it can only increase for so long. Eventually, it’s going to burst and take all of those investments with it.
When the Bubble Bursts
This sort of thing has happened time and again throughout history. In the 1920s, people bought stocks on spec, making everyone rich—until the crash of ’29 kicked off the Great Depression. In the late 90s, a sudden surge in online companies led to the dot-com bubble, which burst in the early 2000s, sending stocks plummeting and driving many websites out of business.And then, of course, there was the subprime mortgage crisis which formed the major part of the 2008 financial collapse. All of these events began with a false sense of security, even invulnerability, and ended in disaster.
The same is true of the U.S. dollar. It can’t keep increasing in value forever. In fact, the higher it rises, the worse things will be when it finally falls. And all of the people who trusted it as a safe haven will end up losing a significant portion of the savings they’ve worked so hard to build.
Currency seems like a safe investment on the surface, because in our lifetimes it’s always had value. The problem with investing in dollars is that inflation makes them decrease in worth – and buying power – over time. The same amount of money doesn’t go nearly as far today as it did ten years ago. In another decade it will be weaker still.
So then, where can you put your money? As the global economy draws ever nearer to calamity, what can you do to protect your nest egg? The only true safe havens are physical assets that can increase their relative value over time. This way, as inflation continues and prices go up, your investment maintains its overall buying power, regardless of the markets or current currency values.
Real estate used to be a great safe haven, but since the 2008 housing crisis, property values are no longer reliable. Indeed, there are very few stable places left to put your money anymore. Even savings bonds are losing value. However, gold and silver still make for safe investments that can keep your savings secure. They generally increase in value over time, and particularly go up as the stock market falls.
So if you want to prepare for retirement, you could put your money into something that seems strong on the surface, then wait around for the bubble to burst. Or you can choose a true safe haven that will protect your investment and keep you prepared for the future.