What To Own When The Dollar Collapses
Imagine this scenario: a couple of years from now, the U.S. economy is in shambles.
The dollar has collapsed, inflation is raging, and unemployment is sky-high.
The country is on the brink of default, and there is talk of a complete economic collapse.
An investment portfolio heavily diversified across different asset classes is one of the best ways to protect against the risks of an economic collapse.
When considering the economic collapse in other countries (Venezuela comes to mind), it is essential to be prepared.
In this article, I’ll explore what assets to own now in case the dollar collapses.
I’ll discuss foreign currency, gold, and other assets that can help protect your wealth in an economic crisis.
Considering that one U.S. dollar has decreased by 86% in the last 50 years, here’s all you need to know.
The dollar price has a significant effect on the stock market, and the falling dollar creates economic uncertainty.
This is because the U.S. dollar is the world’s reserve currency.
When the dollar falls, it affects Central Banks around the world.
The first effect of a falling dollar is often inflation since more dollars are in circulation, but the same amount of goods and services are available.
As a result, prices go up.
In some cases, the falling dollar can lead to hyperinflation.
This is when prices rise so rapidly that it becomes difficult to buy everyday items.
Having safe investments that you can rely on is more important than ever.
With the recent pandemic, short-term and long-term investors are looking for such investments.
Gold, silver, and other precious metals have traditionally been considered safe investments.
They are often seen as a hedge against inflation and economic uncertainty.
Let’s consider the specifics of these assets.
Gold coins are one of the best asset classes to own during an economic crisis.
They are considered a safe haven asset and have historically held their value well during economic turmoil.
In addition, gold coins can be easily bought and sold and are also easy to store and transport.
Apart from physical gold, Gold IRAs are another way to invest in this precious metal.
A Gold IRA is a retirement account that allows you to invest in gold without taking physical possession.
The best gold IRA companies can provide you with the proper knowledge and are a popular choice for investors looking for a safe place to store their money.
The purchasing power of the US dollar has been on the decline in recent years, and another way many investors are looking to protect their wealth is by investing in foreign stocks.
In the case of a U.S. currency collapse, foreign stocks would likely increase in value relative to the U.S. dollar.
This would provide a nice boost to your portfolio.
Foreign stocks also offer diversification benefits.
Investing in stocks from different countries makes you less exposed to any particular country’s risks.
Foreign bonds are debt securities issued by a foreign government or corporation.
They offer higher yields than U.S. bonds and can be a great way to boost the income in your portfolio.
Knowing how foreign currencies perform relative to each other is essential when investing in foreign bonds.
For example, if the U.S. dollar is strong, you want to invest in foreign bonds denominated in weaker currencies.
This is because you would get more bang for your buck when the bond matures and you convert the proceeds back into U.S. dollars.
The economic turmoil also paves the way for cryptocurrency to become more mainstream.
Being decentralized from banks and other financial institutions, many investors see Bitcoin and other cryptos as a great way to diversify their investments.
Cryptocurrency is also becoming more mainstream, with major companies like PayPal now allowing some users to move Bitcoin around.
Mutual funds are another option for investors looking for safe investments.
Mutual funds are pools of money that professional investors manage.
With fiat currency, there is always the risk of inflation eroding the value of your investments.
The interest rates on most savings accounts are also meager.
This makes it challenging to grow your money.
Mutual funds offer the potential for higher returns and can help you grow your money faster.
Examples of mutual funds that have performed well in recent years include index funds, bond funds, and international funds.
Index funds track a specific market index, such as the S&P 500.
Bond funds invest in various bonds, which can offer stability and income during an economic downturn.
International funds give you exposure to foreign stocks, which can be a great way to diversify your portfolio.
Collectibles can be another great option when the global economy is in turmoil.
There are various types of collectibles you can invest in, from art to coins to stamps.
Collectibles offer the potential for long-term growth and protect their owner from inflation.
They can also be a lot of fun to collect.
If you invest in collectibles, it’s essential to do your research and only buy what you love.
Here are some examples to consider.
The rise of Non-Fungible Tokens (NFTs) has been one of the most exciting developments in the collectibles space in recent years.
NFTs are digital assets that are stored on a blockchain.
Buying NFT tokens is attractive for investors as they are unique, and no one can replicate them.
This makes them valuable, and collectors are willing to pay high prices for rare and desirable NFTs.
These can all be stored in a digital wallet and traded on exchanges.
One of the other types of collectibles that not many people might think of is food storage.
This physical asset is ideal when there is high economic turmoil and inflation.
Food storage can be a great way to hedge against inflation and protect your wealth.
Having the proper infrastructure in place is essential for food storage.
This includes a cool and dry place to store the food and containers that can keep the food fresh for a long time.
The best foods include rice, beans, wheat, and other dried goods.
Canned meats, fruits, and vegetables are also good options.
With the proper food storage in place, you can be prepared for anything the future might bring.
An economic crisis would still present opportunities for those with cash-flow-positive real estate.
The U.S. government’s quantitative easing program would likely lead to higher inflation, which would be suitable for real estate investors.
Historically, a stock market crash doesn’t affect real estate as much since this type of asset has a low correlation with stocks and bonds.
Instead, real estate has had a high risk-adjusted rate of return relative (historically) to stocks and bonds.
This means it has tended to preserve capital while providing a higher return than other asset classes.
Income-producing real estate can provide stability and growth during an economic downturn.
This type of real estate includes rental properties, such as apartments, office buildings, and warehouses.
Another real-estate-based investment that one can consider is land and agricultural commodities.
If the U.S. dollar falls, land and agricultural commodities will likely increase in value as they are denominated in U.S. dollars.
This makes them a great way to hedge against inflation and protect your wealth.
Land can be a significant investment in its own right and can also be used to grow various crops you can store.
In a U.S. dollar collapse, other currencies may be more stable or even increase in value.
This could include the Euro, Canadian dollar, Japanese Yen, and Swiss Franc.
Some exchange-traded funds (ETFs) may do well in a collapsing dollar scenario.
For example, ETFs that track commodities or foreign currencies could benefit from a weaker USD.
However, it’s important to remember that not all ETFs will perform well in this environment.
For example, ETFs that focus on U.S.-based companies may suffer if the economy weakens significantly.
Inflation can have a significant effect on the value of the USD.
If inflation rates are high, this can cause the dollar to lose value relative to other currencies.
Conversely, if inflation rates are low, this can help the USD to maintain or even increase in value.
The world economy can have a significant impact on the USD.
For example, if global economic growth is strong, this can increase demand for the USD and vice versa.
The Federal Reserve (the central bank of the United States) can influence the value of the USD through its monetary policy decisions.
If the Fed raises interest rates, this can make the USD more attractive to investors and increase its value.
Events that happen in the United States can have a significant impact on the dollar.
Any political or economic event affecting the country’s stability can lead to changes in the USD’s value.
In the case of an economic downturn in which the U.S. dollar collapsed, there are several things you can do to protect your wealth.
With the possible devaluation of various currencies, it is essential to have assets that will hold their value.
The above list can help you diversify your portfolio and protect your wealth.
Owning any or all of these things could help weather an economic storm better than those who don’t.
Planning and diversifying your portfolio today is a great idea.
Do you have other suggestions for what to own when the dollar collapses?
Let me know in the comments below.
Further reading on AdamEnfroy.com: Crypto credit cards can help you spend your crypto in the real world.
This ensures you have a wide range of assets to choose from during an economic downturn.
Moreover, as a business owner, building up your credit score will give you more options and better terms on loans should you need them in the future.