Three Pillar Savings Strategy to Fight the Collapse of the Dollar

Something has seriously changed!

When times got bad, I mean really bad, investors and the world alike ran to the world’s currency of choice – the U.S. dollar. Foreigners sought safety in a currency that could survive the best and worst of times.

For example:

 When the September 11th terrorist attacks occurred, the dollar rallied by over 8% in just six weeks.

 During the financial crisis that saw Lehman Brothers, AIG, and Merrill Lynch either go belly up or need massive bailouts, the dollar climbed by 10% in just ten weeks.

 Remember the flash crash last year when the Dow dropped 1,000 points then rallied back 15 minutes later? That event sent the dollar 8% higher over the following six weeks.

All around the world you could always count on the dependable greenback. The dollar could always be exchanged for goods and services no matter where in the world you were. But something has seriously changed!

Foreigners no longer want U.S. dollars during crisis. Case in point: During the current crisis in the Middle East where the world’s major supply of oil is at stake, one would assume the dollar would rally like it had done during previous times of crisis.  How about the Japanese crisis?  You would think people would be flocking to the dollar during this crisis, right?  

What’s different this time around?

So the question becomes, ―how did the dollar react during these crosses?  Did it rise a little? Rise a lot? Stay the same? No, no, and triple NO! The dollar actually lost value!

What? How could the world’s reserve currency go down in the time of a MAJOR crisis? This is what we have been talking about at FaithBasedInvestor.com. The world views the dollar MUCH differently. It may technically still be the world’s currency, but the world is telling us – not for long! If the world doesn’t want our dollars during a crisis when will they ever want them?

I mean seriously! If we can’t get foreigners to bid up the U.S. dollar during troubled times can we really expect them to buy them during good times? Think about it. What you do during a crisis is your natural instinct. This hits at the heart of the matter.

With the massive U.S. debt situation, can we really blame foreigners from abandoning the dollar? However, this presents a major problem. We have printed so much money, we need someone to continue subsidizing our debts. If foreigners continue to abandon U.S. dollars by refusing to buy U.S. treasuries, we are all in big trouble as interest rates will skyrocket. Think oil is a major problem? This could make the oil situation look like the tip of the iceberg.

So what does this all mean?

We can view this as an isolated event or look at the deeper significance. The fact that silver and gold are rallying sharply during this crisis only confirms what we have known for quite some time – the world is looking for a place to store value and the dollar is not that place!

I admit I could be reading way too much into this situation. Maybe the world doesn’t view either the Middle East or Japanese crisis as severe and the dollar losing value is irrelevant. Maybe the fact that gold and silver keep rallying is part of the long precious metals bull market. Maybe the world is waiting for a more significant crisis for the dollar to rally. Maybe I’m just crazy for noticing all this...

Or maybe, just maybe I could be right! As I have demonstrated over the past several months, no fiat currency (currency not backed by silver or gold) has EVER survived. The typical shelf life is 30-40 years. With 2011 marking the 40th year since Nixon removed our gold standard – no longer requiring our U.S dollars be backed up by gold, it certainly makes you wonder how much longer the dollar will be around.

How will this impact your net worth?

The dollar’s decline will continue to erode your net worth. This means you will need more and more dollars to buy the same goods and services. We at Faith-Based Investor are recommending a three part savings strategy for your short and intermediate savings.

Pillar One: Liquid Cash Reserves. This is money you can get a hand on in a moment’s notice. Look at savings accounts, money markets, short-term CDs, checking accounts.

Pillar Two: Foreign Currencies. You can look to place your savings in foreign currencies to hedge against the dollar’s decline. You can go to http://www.currencyshares.com for ETFs that track foreign currencies. I like the Swiss Fran FXF and Aussie Dollar FXA. You can trade Forex currencies. You can use an online bank like http://www.everbank.com that opens savings accounts and CDS in foreign currencies.

Pillar Three: Precious Metals. You can look at owning physical gold and silver by calling a precious metals dealer or purchasing SLV  a silver ETF or GLD, a gold ETF.