From time to time, the world economy becomes uncertain, and people are used to asking themselves what to own when the dollar collapses.
Current events in the global economy remind many people of previous economic uncertainties and motivate them to learn more about how to secure their finances.
It’s hard to tell now if the US dollar will collapse or not, but we’ve prepared this article to help you become ready if that happens.
Read on to find out the best way to keep your finances stable during economic turmoil.
What Is The US Dollar Crash?
A “dollar collapse” happens when the value of the dollar falls quickly compared to all other fiat currencies. Other currencies not backed by a central bank and governments, such as the pound, euro, and yen, are referred to as “fiat currencies.”
A dollar fall is unlikely but not impossible because the dollar serves as the world’s reserve currency. However, we saw how an entire financial system can collapse.
In the past, several currencies have failed and plummeted in other countries, including Argentina, Venezuela, Ecuador, Cuba, and Zimbabwe.
Traditional Assets
According to the American Enterprise Institute, the US dollar has lost 96% of its purchasing power since 1913. This process wasn’t linear, and many professionals have studied different methods we can use to avoid a complete catastrophe.
Let’s take a look at the proven ways that helped people during the economic downturn.
Gold, Silver, and Other Precious Metals
People have used precious metals like gold and silver as a form of money and a store of value for centuries. When there is a political or economic disaster, precious metals are traditionally considered a safe haven asset.
And there is a reason for that. Precious metals can’t be printed like paper money, which makes them a good hedge against economic collapse. Since their supply is limited, the value of gold and silver holds better over time.
Many investors buy gold when there is a geopolitical risk or when they are worried that inflation will make their investments worth less. On the other hand, silver is more associated with economic trends because it’s used in many different industries, from electronics to photography.
Investing in gold and silver is the same as investing in any other asset; it’s not for everyone.
One of the biggest drawbacks is that precious metals, gold and silver do not yield any income. As a result, when interest rates rise, precious metals may underperform other financial assets.
If you’ve decided to invest in gold and silver, you can do it in two ways: by purchasing physical gold and by investing in gold IRAs.
A gold IRA is a specialized individual retirement account that allows people to invest in gold both physically and non-physically. They can have a physical asset in their gold IRA, like bullion or gold coins, but also precious metals-related securities within the investment portfolio.
Buying physical gold isn’t really popular these days because it’s impractical and unsafe for storage, so investors who choose to invest in gold usually go with non-physical gold IRAs.
Gold and silver aren’t the only kinds of precious metals; there are also:
- Platinum – is a white metal that is even rarer than gold. Platinum is usually used in jewelry and its price is usually more volatile than gold prices.
- Palladium – is a silvery-white metal that is similar to platinum, and its prices tend to follow the same trends as platinum prices.
- Rhodium – is another silvery-white metal, also pretty rare. It is often used in catalytic converters and its price can be very volatile which is why not many investors choose this metal.
Bitcoin and Other Cryptocurrencies
The economic crisis also paves the way for bitcoin and other currencies to become more popular. Because bitcoin and other cryptocurrencies are not controlled by banks or other financial institutions, investors use them to diversify their portfolios.
Another reason investors believe in bitcoin and cryptocurrencies is a prediction that they will benefit when the dollar collapses. But it’s hard, if not impossible, to guess how a drop in the value of the US dollar will affect bitcoin.
There is evidence to support both the positive and negative effects that a decline in the US dollar can have on bitcoin. So, even though it might be good to have such investments if the dollar collapses, it’s not completely reliable.
In fact, according to very successful investor Warren Buffett, “cryptocurrency is considered to be a highly volatile asset that is subject to unpredictable fluctuations in price. Financial experts typically advise against investing more money into cryptocurrency than you’re willing to potentially lose, since there’s no guarantee of earning a profit.”
Foreign Currencies
Some economists and market specialists answer the question “What to own when the dollar collapses?” with “foreign currency.”
Why?
Because whenever any fiat currency is concerned, there is the lurking possibility that it might collapse under its own weight.
Usually, investors choose one of the following foreign currencies:
- The Chinese Yuan
- The Japanese Yen
- The European Euro
- The Norwegian Krone.
Specific foreign currencies can increase your chances of surviving a dollar collapse. Owning foreign currency can also help you rebuild your fortune if the dollar ever falls.
However, no fiat currency can be guaranteed to do so.
Foreign Stocks and Mutual Funds
One way for investors to protect themselves from a falling dollar is to buy foreign stocks and mutual funds. In addition to earning appreciation, investors can also make money when the value of a currency goes up.
Another option is purchasing shares of large American corporations with considerable international sales. Furthermore, there are numerous ways for investors to buy international equities.
Investing in a fund that purchases foreign stocks directly is the simplest option. Investors have a quick and simple solution thanks to closed-end funds.
Stocks from developed markets, emerging markets, growth stocks, value stocks, and dividend-paying stocks are just a few of the many alternatives available.
If an investor wants to buy foreign stocks directly, they can either buy the foreign companies’ real shares or their American depositary receipts (ADRs). Some large overseas companies offer ADRs, which trade on the U.S. stock market and make it easy for American investors to buy foreign stocks without having to do business across borders.
Despite the fact that ADRs are traded in US dollars, their value will fluctuate according to how much the dollar is worth relative to the stock’s native currency. The price of ADR shares will therefore increase for investors if the dollar falls.
Example
Investors can also buy foreign stocks directly from the company on the stock market where it is based. Let’s say you purchase 100 shares of Company XYZ for 5,000 yen each on the Tokyo Stock Exchange.
Your investment will cost $5,000 if the exchange rate at the time of purchase is 100 yen to the dollar.
Let’s imagine you hold this stock for a year, during which time the dollar’s value drops to 80 yen to the dollar. Your investment would be worth $6,250 in dollar terms even if the share price remained the same, representing a gain of 25% just from currency exchange!
Real Estate
Usually people invest in real estate because it can maintain or grow in value. But there is another reason for those investments: real estate will be valuable even if (or when) an economic downturn comes.
When the dollar’s purchasing power goes down, real estate prices aren’t likely to drop as much.
Big real estate investors often invest in properties in other countries. They usually generate income through rental services (like Airbnb and Sonder).
Real estate is one of the best investments to have as protection in case the dollar collapses.
However, real estate investments aren’t for people who don’t want to do investing professionally.
Even though you won’t need a real estate license to become an investor, there is a small chance you can do this at a high level without it being your primary work.
Another important thing to keep in mind is that real estate is an extremely illiquid investment. When investing, we want to have cash available whenever we need it, and that’s why real estate isn’t the best option for everyone.
Physical Storage (water & food storage)
Making a food storage plan is one of the things you can do if you want to be ready for economic uncertainty.
Having a supply of food on hand will help you weather any price increases or shortages that might happen during economic turmoil.
Even if the U.S. government has programs to help people in financial trouble, having your own food storage will give you more peace of mind.
You can build your food storage in several ways. For example, you can buy non-perishable items in bulk during a sale. Or, if you have the opportunity and willingness, you can grow your own fruits and vegetables.
Another storage option that can be really helpful is water. Water can be kept in barrels or other containers and cleaned with boiling or a filtration system. You may create your own water system as well.
Many economists and professionals advise having this type of physical storage in times of economic uncertainty, but we have to be honest with you: it won’t totally save your finances.
You must have another asset if you want to ensure that the world economy doesn’t affect you.
Why These Assets Aren’t Good Enough?
Traditional methods of surviving when the dollar collapses are proven, but not enough. And there are a few different reasons for that:
- The traditional assets are overused, and almost everyone knows about them. There is a high chance that most people will run to get gold or other precious metals.
- They don’t guarantee enough protection. Usually, you have to combine multiple different assets to ensure stability. And for the average man who has a job and a family, it’s simply too much.
So, what to own when the dollar collapses then? Let us tell you about a personal banking system that isn’t too common and will give you peace of mind.
And the best part? It can be used whether the dollar collapses or not.
The Ultimate Way to Secure Your Finances
Infinite banking is a way to manage your money in which you start your own bank and stop using banks or other financial institutions. As Nelson Nash, the founder of this method, says, “it is a process of becoming your own banker.”
How Does Infinite Banking Work?
Buying a well-designed whole life insurance policy is the first step in making your own banking system. It means a policy that is intentionally purchased for infinite banking.
The next step is to overfund your whole life policy so the cash value grows as quickly as possible.
You can start taking loans against your cash value once you’ve built it up (this will depend on many factors such as your age, health, and how much money you have to invest).
You take the loan out, the cash value from your policy is still growing with uninterrupted interest, and you can use your money for anything you want.
Since it’s supposed to work just like a banking system, you should pay back the loan. However, you can dictate the rules under which it will happen, and you’re also going to recapture the interest.
There are an infinite number of different ways your personal bank can be used, but let’s talk about the situation when the dollar collapses.
Even if we are going through hyperinflation, if you handle your banking transactions according to the policy, the policy will make more money. And because all of the money is coming from and going to insurance policies, you will profit more from this than if it were coming from and going to bank accounts.
And you have to remember that whole life is a kind of life insurance policy, which means you have lifelong protection.
Note: Even though the economy is bad, you will still have the opportunity to earn dividends if you buy your whole life insurance policy from a mutual insurance company. This type of income isn’t guaranteed, but it’s highly possible if you choose a reliable insurance company.
