Declining US Dollar: What To Do Now?

Introduction – With the banking and housing crisis in the USA there is talk of a dropping or even plunging dollar. With the bailout bill gone through and many other billions of bailout having been paid before the law as well, it is no wonder that there is concern. So far this has not happened since the crisis began to make the headlines. The dollar even gained some strength. The Euro is getting weak as well. So the question is how to guard oneself from a dropping dollar if it does occur.

FDIC – The FDIC is not going to help against a dropping dollar. It only insures against losses from bank closures. The FDIC replaces dollars with dollars. If the value of the dollar plummets your dollars can be safely stored in the FDIC insured USA banks but these dollars may one day be worth a lot less than they used to be. A subtle form of theft resulting from a fiat money system. The FDIC is also a private company that can file bankruptcy. What if the government does not bail them out? What if the crisis keeps repeating itself and it reaches a point where there are no more bailouts? They can file bankruptcy and then the losses for the bank depositors will be great. Do you trust the USA leaders and corporate heads? Have they done well for you so far? Do they have your confidence or are you waiting for the other shoe to drop?

Sub Prime Market Offshore – There is no sub prime mortgage problem offshore. Mortgages require a 25% to 40% down payment. There really isn’t much of a second mortgage market, almost non-existent. Refinancing to get the equity out of the home is rare. Many houses are paid for with cash. Taxes are often far less and this makes it possible and even easy to pay for houses with all cash. One has to convince the bank they have the ability to pay and that they are credit worthy before a mortgage is given. There is no such thing as 100% or even 80% financing. Car loans require a 30% down payment. Car leases are rare. The lions share of the Visa and MasterCard cards are debit cards not credit cards. If the bank gives credit cards out it is done conservatively. People don’t have five times their annual gross income in credit cards like in the USA. They probably will not even have more than six month worth of credit on their credit cards. Usually a credit card is only given out from a bank you bank with. If the bank sees your income stream cease, they will probably decrease or completely cut off your credit limit. This means the average working person is not going to have a collection of credit cards, one or two cards is what one usually gets. Offshore banks usually have cash reserve requirements ten times greater than what the USA banks require. There is no FDIC so they do not practice wild lending like in the USA.

US Banks Interest Rates – The bailout and increased funding for the FDIC is going to mean higher operating expenses for the banks. This translates into lower bank interest rates. This means you are worse off than before banking there. As inflation rates exceed interest rates your savings diminish steadily.

Fiat Money – What is meant here is a money supply consisting of nothing more than printed pieces of paper with numbers on them to tell you what they are worth? They are backed by nothing solid. There are no more gold or silver certificates in the USA like there used to be, which allowed the paper money to be redeemed into hard silver or gold coin. When they start eliminating a precious metal backing the paper money it always ends in disaster, check the history books. Sadly there is no currency being used today that is backed by gold or silver. So what to do is the question.

The Solution – The answer is to diversify. Hold your currency holdings in several different currencies. We can arrange a bank account for you in Panama where you can have Euros, US Dollars and UK Pound Sterling holdings. Put a third of your funds into each. If one goes down the others will generally increase. It would be very unusual for all three to decline at the same time. This is giving you all sorts of protection against inflation, fluctuating currencies etc.

If this is not enough for you we can get accounts elsewhere in these three currencies plus the Yen and Swiss Franc, total of five currencies. This is how to protect yourself from a loss of the value of the dollar. The FDIC cannot help you here. It will just replace dollars with other dollars while the value plummets so you still have your dollars but they are just not worth as much as when you started.

Other Options – Real estate is always good but as you know it can drop sharply in value but you never seem to get wiped out. Gold and silver can be good but now you would be buying in on the high side of the market and you could get hurt. Stockbrokers have a number of options available to offshore clients using corporation and foundation like government-backed bonds paying 12% with low risk (of course not USA Government).

Don’t think the USA banks and the FDIC are your best resource; they are not anywhere as secure as you might think and they may cost you a lot more than you are aware of. Stocks can be good and they can also plummet overnight. No matter what your investment plan is holding currency is always part of any sensible strategy. Better to diversify these holdings into several different currencies.

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