The Coming U.S. Dollar Devaluation - A Major Impact on All of Us?

Originally submitted at the coming U.S. dollar devaluation.

The coming U.S. dollar devaluation will have a major impact on all of us.

The fact that the dollar is falling in value means that investors consider the United States economy to be in disarray and out of control.

This is not something that has occurred in the last year or even in the last decade. This is an event that has been in the making for much longer than that.

I don’t have to tell anyone this. The U.S. economy is mired in a huge amount of debt.

In fact, the U.S. government is sitting on up to $125 trillion of debt which must be paid at some time in the future.

This debt includes:

• $11.5 trillion National debt – this debt has exploded in the last 12 months. It includes cumulative debt plus all the bailouts, stimulus plans, and the 2009 deficit.
• $104 trillion Unfunded obligations – this includes obligations for social security and medicare. There are 80 million baby boomers scheduled to retire over the next decade. We do not have the money to make these payments.
• $9 trillion Projected deficits over the next 10 years
• $1 trillion Health care reform – When the final health care reform package is passed, this number will probably be much higher.

Investors have major concerns about the U.S. government’s ability to pay what it owes.  Therefore, we are seeing the dollar on very shaky ground.

In order to pay its bills, the U.S. government must borrow a significant amount of money from investors (lenders). A large percentage of these lenders are foreign countries such as China, India, Brazil, and European countries.  Spending Huge Amounts of Money is Hurting the U.S. Dollar

For some time now, many of these countries have been complaining about the falling value of the dollar. They are imploring the Obama administration to start getting its financial house in order. Instead, the government continues to expand its debt level in a very major way.

Let’s look at it this way. China and India have built up large cash reserves because their economies are booming. They want to invest this reserve cash.

In the past, U.S. dollar investments made sense. For example, long-term bonds were a good investment. They were backed by the good faith of the U.S. government.

But because of the falling value of the dollar, this is slashing the return on their investments. They have every right to move from the U.S. dollar into stronger investments. Many are doing just that by investing in gold, oil, and natural resources. This puts pressure on the dollar to fall even further.

A United Kingdom newspaper recently reported that Gulf Arab nations were joining with Russia, China, Japan, and France and are considering replacing the U.S. dollar in all oil transactions. This would be a major blow to the dollar. When this report came out, the value of the dollar slumped.

Even if this meeting did occur, they are probably far away from doing this. However, this is the path we are on. It supports the strong probability of the coming dollar devaluation. Most likely it will not occur immediately. It could happen in a few months or even a couple of years.

Another way to cover these huge deficits is to tax Americans. Unfortunately, this will probably be coming soon. But in the middle of a serious recession is the worse time to impose a major tax on us.

The only other alternative to covering our deficits is to devalue our currency, the U.S. dollar. This will have a very detrimental impact on all of us.

I will not go into this subject right now because of its complexity.

This scenario is likely. Here’s how it will impact you and me.

The result is major inflation. Many Americans don’t remember this type of inflation unless you remember the 1970s. I do remember it, and it’s not pleasant.

This will primarily hit seniors and those living on fixed incomes.   They will discover that their lifetime savings do not cover their rising expenses.

Even those who have built up a nice nest egg for retirement will be hurt. As the prices for goods and services soar, they will find that they haven’t saved enough money to cover their accelerating costs of living.

But inflation will hurt all of us. Because of the coming dollar devaluation, the price of imported goods will rise. That means that we will be paying much higher gas prices at the pump.

Walmart’s revenues have held up fairly well during the current recession because of its low prices. Because many of its products are imported from other countries, Walmart will be forced to increase its prices substantially.

In the past, a high percentage of our country’s Gross Domestic Product (total sales of goods and services) was from manufacturing. Today, it’s not. Much of our country’s sales are now from imported products.

The purpose of this article is to let you know that the coming dollar devaluation is probable. This impacts all of us, whether you are a corporate professional looking to leave your job in corporate America,, a small business owner, or a network marketer.

But there are things you can do to help offset the negative effect of this event and even profit from it.

I add one additional caveat to this article.  Inflation may not come as soon as many experts expect.  Why do I say this? I list two factors below that can cause this.

The federal government continues to throw tons of cash at our economic problems.  But the United States doesn't have this money to spend.  So it must borrow the money, or increase the taxes on Americans, or print the money out of thin air.  In normal circumstances, this would soon lead to major inflation. 

1. Much of this money is going to U.S. banks.  The banks, instead of lending this money to businesses and individuals, are hoarding the cash.  They are doing this because of the high level of bad debts on their balance sheets.

2. U.S. consumers are not spending.  Instead, they are saving and paying down their debt.  

Both of these factors are preventing this money from getting into circulation in our economy.  They may be a factor in delaying inflation in the near term.  On the other hand, the fact that banks are not lending and consumers are not spending has a major detrimental impact on our economy. 

Scott Hubbard has retired from 25 years as a Chief Financial Officer in corporate America.  He now teaches corporate professionals and network marketers how to start a successful internet marketing business. 

You can reach him toll-free at 877-878-4036 or by email at Scott@ScottHubbard-Consulting.com.  He promotes a simple, fun, moderately-priced travel business opportunity.