What Will Happen to You When the U.S. Dollar Collapses?

By: Casey_Research

Jeff Thomas writes: Historically, when a nation’s debt exceeds its ability to repay even the interest, it can be assumed that the currency will collapse. Typically, governments exacerbate the situation by printing large amounts of currency notes in an effort to inflate the problem away, or at least postpone it.

The greater the level of debt, the more dramatic the inflation must be to counter it. The more dramatic the inflation, the greater the danger that hyperinflation will take place. No government has ever been able to control hyperinflation. If it occurs, it does so quickly and always ends with a crash.

Although there are observers (myself included) who frequently discuss what a reserve-currency crash would mean to the world, there is little or no discussion as to how this would impact people on the street level, and perhaps that discussion should begin.

When currencies crash, the state often tries to float a new currency. Sometimes, it’s accepted, sometimes not. Generally, the people of the country (and those trading within the country) move immediately to “the next best thing.” In 2009, when the Zimbabwe dollar crashed, several currencies were used, but the US dollar was the clear favourite, as it was the world’s reserve currency and therefore the most “spendable” currency.

Not surprisingly, the Zimbabwean government fought the use of the dollar, as they wanted to retain control of the economy and the people. People were therefore penalised for using the US dollar and other currencies.

And that’s what most governments do, but here’s where that idea usually falls down: First, the “black-market” currency is so desired by the now-jaded citizens that they do all they can to avoid the new official currency. Soon, most transactions, although illegal, are undertaken in the black-market currency. Second, since no one really wants the new currency, even the political leaders are soon using the black-market currency.

Ultimately, the black-market currency is legalised (since it’s the only truly workable solution), and it often becomes the unofficial currency, if not actually the official one.
First, the Euro Crash

It’s safe to say that the EU, the US, and quite a few other jurisdictions are nearing currency crashes, and in all likelihood, the euro will go before the dollar. So, unless the EU has already prearranged a new euro, the US dollar might well be chosen as an immediate solution to the problem, as the US dollar is presently recognised and traded throughout Europe. Therefore, a relatively painless transfer could be made.
Then, the Dollar Crash

However, the dollar, which is presently praised as being a sound currency, is really only sound in relation to the euro (and some other lesser currencies). Once its less stable brother, the euro, collapses, the dollar will be exposed.

As the US dollar is a fiat currency and is on the ropes, the US (and any other country that is using the dollar as its primary currency when the time comes) will experience a currency emergency at the street level that will be unprecedented.

The big question that is generally not being discussed is: The day after the crash (and thereafter), what will be the currency that is used to buy a bag of groceries, a tank of petrol, a meal at a restaurant? Certainly, the need will be immediate and will be on a national level in each impacted country, affecting everyone.
And Then…

I have discussed for some time that the US will be prepared ahead of time with a new, electronic currency. This will serve three purposes:

It will allow the US government to blame paper currencies for the crash, in order to distract the public from recognising that the government itself is the culprit.

It will allow the US government to create a currency system that disallows the holding of tradable currency by the population—that is, a debit card would be created by banks through which all transactions must pass, assuring that all transactions are processed by (and thereby subject to the control of) a bank.

It will allow the US government to have knowledge of every penny earned and spent by any individual or organization, allowing for direct-debit income taxation.

If the US does institute such a system, US citizens will then become the most economically controlled people in the world, overnight.

It’s likely that a black-market system would spontaneously be created by US citizens in order to bypass the new government system. A portion of daily trade would occur under the table. It would unquestionably be made illegal, and we can only speculate as to how prevalent it would become: 10% of all transactions? 30%? Anyone’s guess. Certainly, the government would crack down, and penalties might become severe.

Elsewhere in the world, there would be greater freedom, but what would their currencies be? There are many countries that presently use the US dollar as one of their official currencies. After a crash, the greater the link to the US dollar, the greater the loss of economic freedom, although, in most such countries, the government is likely to be less efficient than in the US, which would work in favour of the individual.

Such countries would also have the option of switching from the dollar to another dominant currency. With the euro and dollar gone, that currency might be the Chinese yuan. The difficulty with this possibility is that, presently, the yuan is not in common use on the street.

Adoption of a currency such as the yuan would require a sudden switch in monetary policy, complete with teething problems. However, recent developments amongst the BRICS and others indicate that many countries are already seeing the writing on the wall and are readying themselves for the use of the yuan as an alternate.
A Return to Precious Metals as Currency?

A further possibility is taking place in Mexico today. Mexico is remonetising silver. A one-ounce pure silver Libertad coin will function in parallel to (and be interchangeable with) the existing paper peso. Banks will value the Libertad daily, based upon the silver price. Thus, Mexico will create a legal way for its citizens to protect themselves against devaluation of the peso, whilst creating an internal protection against currency crashes in other countries.

If the Mexican government remains consistent in its plan, it will do more than simply help stabilise Mexico economically; it will serve as an example to other countries that when the Goliaths of the euro and US dollar fall, there is a very sound alternative.

Further, the more countries that follow this policy, the more silver (and for that matter, gold) would become an international currency. It would matter little to a petrol station owner in Canada, Australia, or Chile whether his till was filled with coins marked, “Mexico,” or whether they said “Iceland,” “New Zealand,” or “South Africa.” After all, an ounce of silver is an ounce of silver, no matter what the issuing country is.

As the Great Unravelling proceeds, we would be wise to monitor what happens with the Libertad in Mexico and watch for a similar return to precious metals in other jurisdictions. As this development progresses, we might wish to consider that, whatever jurisdictions are the most forceful in demanding the continued use of doomed paper currencies (or, worse, transferring into electronic currencies), we may choose to store our wealth, no matter how great or small, in a safer jurisdiction. Further, we may choose to reside in a jurisdiction where a currency crisis will be less likely to occur; to live under a government that does not seek to monitor and tax our every economic transaction.

The article was originally published at internationalman.com.

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Observing...

As a consumer Nation, most of our business transactions are done in US Dollars. It is very obvious, by all indicators, that USD is going to crash. Remember the economic melt down of 2008? It was because of a similar crash and this may be the final blow to the USD. So, how do we guard our businesses against the collapse of USD?

There are many things that will accompany the collapse. There will be a lot of opportunities for those who have foresight.
Let's see the effects of the collapse in this article;


7 Economic Consequences of a Dollar Collapse
TOPICS:dollar collapse

Since World War II, the United States Dollar has been considered the world’s reserve currency, i.e. the money held by foreign banks to back up their own currency. However, a number of recent events have caused some analysts to begin questioning whether that dominance will continue for foreseeable future.

These events include murmurings from the Chinese government that they want a new reserve currency to be created based on a basket of currencies and whispers from some Middle Eastern oil barons that they would like to start pricing oil in Euros instead of dollars.

While no one can say for certain what the future will bring and how governments of the world will treat the dollar going forward, there are a number of precedents that can be instructive in helping us understand what could happen if the worst happens and the dollar is suddenly uncoupled from the world economy as the world reserve currency. Note that this would be a worst case scenario where there was a sudden change rather than a gradual one.

Given the Federal Reserve’s penchant for simply printing more money whenever there is a need to borrow additional cash, the value of the dollar once it has been removed as the world’s reserve currency would plummet dramatically against other world currencies.

This would have a number of effects on the American economy and way of life.
7 Economic Consequences of a Dollar Collapse

1) Bank run. The first thing that is likely to happen in such an event is that there will be a bank run, as there was after the stock market crash in 1929. With dollars suddenly falling rapidly in value, people will try to withdraw their money and change it to something else quickly before it becomes worthless.

2) Capital controls. Next, the government would pass laws to restrict the ability of private citizens to convert their dollars into foreign currencies. This would be done in order to “protect” the dollar so that it doesn’t fall any further.

3) Rising unemployment. Unfortunately, because we live in a globalized economy, protecting the dollar in this way could lead to severe problems at home. Unemployment could rise dramatically as manufacturers find it impossible to purchase needed parts from other parts of the world, which would be prohibitively expensive.

4) Soaring consumer prices. Similarly, retail sales would suffer as imported goods become pricier.

5) Food scarcity. Scarce food supplies could set in as well because the cost of purchasing food is tied in large part to the price of oil, which would now have to be purchased with expensive foreign currency.

6) Public riots. In extreme cases, rioting could ensue and martial law could be imposed in order to restore order.

7) Increased tourism and exports. On the good side, foreign tourism would likely boom and production of “Made in America” products could increase dramatically as long as the raw materials are all locally sourced since American products would now be considered bargains by the rest of the world.

While all this may sound like a nightmare scenario, it must be remembered that these are some of the worst case scenarios possible. The odds of the world completely and suddenly divorcing itself from the dollar as a reserve currency are fairly small since there is no currency currently available which has the ability to replace the dollar. Nor would an artificial creation from the World Bank be likely to gain traction in the short term.

While the dollar will eventually fade as the world’s reserve currency, in much the same way that British Pound faded after World War II, it would be unlikely to be the dramatic, sudden drop that some analysts are predicting. Therefore, while it would still be wrenching for the American economy, because it would be a slow, gradual process rather than a sudden one, the absolute worst case scenarios are somewhat unlikely to develop. However, you should still be focused on preparation strategies.

Check out more articles on FTMDaily.com for creative strategies on how to hedge against what is coming.

Many of us have never thought of the fact that whatever happens to the USD will impact on Nigeria's economy.
But great opportunities await those who can see through this imminent collapse of the USD.


We'll continue tommorrow.

Good night.

oloyetomoye:
Many of us have never thought of the fact that whatever happens to the USD will impact on Nigeria's economy.
But great opportunities await those who can see through this imminent collapse of the USD.
We'll continue tommorrow.
Good night.

Some time in the next few years, we will experience a "new" crisis of epic proportions.

We're going to have a major stock market crash - and it will be worse than the one we experienced seven years ago.

We're going to have a currency crisis too - because investors and governments around the world will realize the U.S. dollar is not the safe haven it once was.

As my friend James Rickards (who's a financial lawyer and consultant for the U.S. government) wrote in his book Currency Wars:

"If the currency collapses, everything else goes with it... stocks, bonds, commodities, derivatives and other investments are all priced in a nation's currency. If you destroy the currency, you destroy all markets and the nation."


I know that the fewer people who are prepared, the worse this crisis is going to be.

As Biggs said:

People "almost always are too complacent, because they cherish the illusion that when things start to go bad, they will have time to extricate themselves... It never works that way. Events move much faster than anyone expects... History usually doesn't evolve in a slow and orderly way; often it leaps forward in disorderly, chaotic jumps."

Source: Porter Sansberry

insightful, but unlikely scenario.

rigarmortis:
insightful, but unlikely scenario.

Sounds unbelievable right? but it is coming. Most American Millionaires are already moving their assets and investments out of America. This is where opportunities lie.


America is hugely indebted now! And that was what ruined most super powers before America! USD is on that path now!

See u later for more info