The Dirty Dollar

The Dirty Dollar

Earlier this month, I hosted the best 3-Day Event yet, “Gold vs. The U.S. Dollar”. The event featured Mike Maloney, my precious metals advisor and author of Guide to Investing in Gold and Silver, and Richard Duncan, former advisor to the IMF and the World Bank and author of The Dollar Crisis and The Corruption of Capitalism.

The event was enlightening on many levels, and people were scared, empowered, and shocked all in one weekend. You can still listen to my exclusive podcast with Mike Maloney and Richard Duncan for free by clicking here.

The main topic was the coming collapse of the US Dollar. If you’ve read my new book, Conspiracy of the Rich: The 8 New Rules of Money, you know that while many people think of the dollar as money, it’s not—it’s a currency. It has been since 1971 when Richard Nixon moved the dollar from the gold standard and made it the reserve currency of the global economy. This is the reason we’ve had so many wild economic swings in the last four decades.

The dollar is no longer an asset that can be considered a safe-haven for investors in times of uncertainty. Because it’s a currency, it’s affected by the wild swings of the market just like any other asset class. In the last year alone, the dollar has swung from $1.51 versus the Euro to it’s recent low against the Euro of $1.23. Because the dollar is a tradable currency, it’s subject to huge gains—and drops—in value based on market whims. As such, it gains and loses value all the time.

Scrambling for Safety?

I was surprised to hear over the weekend on a major radio program a so-called expert on the economy explain how investors spooked by the recent crisis in Greece are “scrambling for safety” into the dollar and into gold. What surprised me was not that people were dumping the Euro for the dollar and gold. I was surprised that gold and the dollar were grouped together as safe assets in times of crisis.

I was even more surprised to hear the analyst quote my good friend, Richard Duncan, saying, “Because governments around the world have run up such large budget deficits, and the central banks have been creating so much paper money, gold very likely will continue to appreciate very substantially over time.”

I couldn’t understand how anyone could consider the dollar a safe asset given this quote by Richard. Yet, in the same radio spot featuring this quote, the dollar was touted as a safe investment in times of crisis.

Why would anyone consider the dollar safe when the Fed has been fighting deflation with inflation, pumping billions upon billions of dollars into the economy? Don’t investors know that each time a new dollar is pumped into the already bloated money supply, existing dollars are devalued, and the bubble gets closer and closer to popping?

Why would anyone bank on the dollar when the US government is running up record debts today even though they have no way to pay for the coming crisis of Social Security and Medicare when the Baby Boomers retire?

The only answer I can think of is financial ignorance.

Borrowed Time

In my last post, “Living on Borrowed Time,” I wrote about the two types of depressions—US-style deflation and German-style hyperinflation. As I wrote in that post, I believe we’re in for both types of depression if things continue as they are. That means the dollar may gain strength for a little while, but ultimately it’s toast.

As the old saying goes, all currencies eventually go to zero.

There is no currency in the history of the world that hasn’t eventually crashed under the burdens of debt that its government heaped upon it. The dollar will be no exception. It’s just a matter of time—and I believe that time will be sooner rather than later. Those who are betting on the dollar are living on borrowed time.

The dollar is not a safe asset. Eventually, once the crisis has seemingly subsided, all those dollars that have been pumped into the economy by the Fed will flood into the market and cause severe inflation. The middle-class will likely be devastated as years and years worth of savings lose value. When that happens, the last thing you want to be holding is dollars.

Precious Time

The good news is that you still have time to protect yourself. And the smart money already is. The smart money is moving into gold and silver—the precious metals. Throughout history, precious metals have saved savvy investors from financial destruction in times of dramatic economic upheaval.

Though you have time, I’d guess you have precious little time. Take advantage of it while you can. Even if you have very little money, you can afford to buy silver. Buy as much as you can. If you’re in the position, buy gold now.

I encourage you to read both Richard Duncan’s and Mike Maloney’s books. They will give you valuable insight into the technical reasons for what I’m writing here today—and at a level everyone can understand.

Don’t bank on the dollar for your future. Get smart with your money, and don’t follow the lemmings off the cliff as they rush into our toxic currency.

Original publish date: May 18, 2010