Why The U.S. Dollar Will Collapse

The US Debt Crisis

The United States, a once prosperous country which was praised all around the globe as being the land of opportunities is now on the brink of bankruptcy with an ever increasing debt and a deficit which the US Congress is failing to reduce even as we are fast approaching what Federal Reserve Chairman Ben Bernanke called the "Fiscal Cliff". The U.S. government has been living way beyond its means:

  • The government spends $1.5 billion more than what it takes in per day.
  • The U.S. debt grew over 10% last year topping $16 trillion in September 2012, which amounts to over $52,000 for every American citizen and the figure keeps increasing exponentially.
  • U.S. deficit spending tops $1 trillion for fourth consecutive year
  • U.S. government unfunded liabilities have surpassed the $100 trillion mark.

After the sub-prime mortgage crisis, which hit not just the US but the whole world, the Federal Reserve was forced to cut interest rates several times to an historic low of 0.25% thereby depreciating the dollar by over 30%.

Both wars and the immigration issues continue to further increase the US debt. The cost of invading Iraq and Afghanistan now amount to over $3 trillion since the start in 2003 and keeps burning $12 billion a month. On top of that, immigration issues cost an estimated $300 billion per year.

With the tensions now going on between the US, Israel and Iran due to the uranium enrichment issue, a conflict scenario with the Arab country is now much more realistic and likely than it used to be a year ago and with people like Obama and Israeli PM Netanyahu in power it shouldn't come as a surprise if this scenario does unfold by the end of this year.

Both Obama and Hillary Clinton have mentioned the issue of Iran during their campaigns with the latter even willing to obliterate the country if they were to attack Israel, not to mention the US. If such a scenario were to occur, the US economy would go bankrupt in a matter of months if not weeks in its current conditions.

The Chinese Threat: Dumping US Treasury Bonds

Here are some figures on China's Foreign Reserves:

  • China holds $3.3 trillion in foreign reserves
  • Reserves are accumulating at more than $20 billion per month
  • China holds about $1.2 trillion in US Treasury Bonds

By looking at the above figures, it is easy to deduce that the Chinese government has an enormous leverage over the U.S. economy, showing the vulnerability of the American country. This also shows the horrible leadership of the present Administration which is not only causing the U.S. economy to weaken but is also downplaying the whole matter, stating that the risk of China selling US assets is absurd as it would result in mutual destruction.

After the sub-prime mortgage crisis, the Chinese Government hinted that it may sell its vast holdings in US Treasury Bonds, which could potentially trigger the collapse of the dollar, if Washington were to impose sanctions to force an evaluation of the Chinese currency, the yuan. Officials from China said that they would be using their large foreign reserve as a political weapon to counter pressure from the US Government. Some went as far as to call this weapon China's "Nuclear Option".

The dumping of such Treasuries would be devastating to the US economy, slamming the dollar and driving up interest rates. It basically means that the dollar will collapse. Of course China is also co-dependent with the US as it needs America as a market to sell its' vast amounts of goods which it produces. Thus this nuclear option seems unlikely at the moment although a further depreciation of the dollar would force China to sell at least part of its US Treasury Bonds resulting in the American currency to collapse.

Is The U.S. Dollar About to Collapse?

On top of the geopolitical tensions, the Federal Reserve has once again enforced its loosening monetary policy by announcing a further round of quantitative easing, known as QE3 or QE open-ended, buying mortgage-backed securities to the sound of $40 billion a month and keeping interest rates low in order to encourage consumer spending.

At this point it seems pretty certain that the US is facing an inflationary depression. The worst thing is that this is actually being done on purpose, by design so to speak. The Federal Reserve seems to prefer saving the banking cartel rather than helping the American citizens.

It is likely that within the next couple of years we are going to witness a hyper-inflationary collapse of the US Dollar and the Euro. This has been mentioned and discussed by many relevant figures in the economic world and is a plausible theory looking at the current trends being pushed by the world's central banks.

The best way to prepare for the coming crisis is to invest in precious metals, gold and silver above all, as well as agricultural commodities as these are solid, consistent assets that will rise in light of the central banks' loosening monetary policies.

Though Real Estate prices would fare better than currency, stocks or bonds, they still won't cope with the hyperinflationary pace. Instead, a good strategy would be to buy property with gold and silver which, during such a scenario, would be at an all-time high compared to all other asset classes.

Please do comment, I'm eager to read your answers and views on this really important and delicate topic, which is going to affect the whole world. You can also read my other article on China's monetary policy strategy:

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Comments 26 comments

Mike46 3 years ago

I hope that the collaspe happens soon.I think that most Americans are stupid when they vote for politicains who don't have our best interest.I believe that America is a morally bankrupt nation and we are going to be wiped out.


Cdt captin (BC) 4 years ago

Now i understand some people believe gold and silver will b worth something, but tell me this .... if if the dollar colapse and gold is the "solid" version of the dollar.Why would i want to save or buy as much as gold as i can. wouldn't it make more cents to buy food water and sulipise then worry bout how to the the dollar or anything else for that matter if u look into it alot like i have (and im only 19 years of age atm)then ui will realize that pelope will go crazy tryin to find where or wat to eat next and looking for someone to blame!


nubian 4 years ago

Its 2012 now....da year of all prophecies, conspiracy theories and NWO to begin.


Corky Watson 4 years ago

yep..all true but wrong party..the dems have ruined America and the head socialist, Obama will finish the job if you fools vote the turd back for round two...


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David Batterson 5 years ago

The dollar is very weak and volatile at the moment. But a total collapse of the dollar is not going to happen. This is a scare tactic that was drummed up after the drastic decline in the economy happened and the housing bubble as well as the failure and mismanagement of AIG, Bayer Stearns, GM & Chrysler and other major companies all needed help to include Fannie Mae and Freddie Mac. The scare tactic was broadened and emphasized by companies who buy gold and can afford to advertise on every radio station, tv station and on every other billboard, newspaper, magazine and online. The facts are clear! Every super-power on earth trades in U.S. dollars. Oil is traded and valued in U.S. dollars. And the United States is one of China and Japan's primary markets. Who the hell else would they sell to? We may very well be in debt, but the collapse of the dollar based upon a total economic downturn isn't imminent. People are using scare tactics to motivate innocent people to sell their gold cheap (gold buyers you see on TV) and the same people who tell you to dump your faith in U.S. dollars and turn towards gold and silver. The reason this is a stupid move for anyone is that "IF" the dollar did in fact collapse, who the hell are you going to sell your gold to? What would it be worth? With the dollar alive it is worth around $1400.00 per ounce. But it wouldn't be worth squat without a currency to buy it with if the dollar did in fact collapse. Why? Because the U.S. government would rush in and put a value (drastically devalued) on privately held gold if the dollar failed. Now your precious gold isn't worth its weight anymore! And the only thing you can do with your high priced bling when there is NO currency to buy and sell it with would be to trade it for food and services. So you'd go broke overnight. So stop listening to all of these idiots who keep telling you that we are all going to be in line at a damn soup kitchen next week. It isn't going to happen. I am not saying that we aren't in a financial mess, but I am saying that there is a lot of noise out there on the radio, tv and online that is in fact "just noise".


bowlan 5 years ago

the sad fact is the economy is going to collapse.

to much damage has already been done to stop it.

u.s.manufacturing was basically destroyed back when bill Clinton signed in the china free trade bill that allows overseas manufactures to flood the u.s.with cheap imports.

now with 18 million jobs gone the u.s.dolar value is dropping fast.

down to 72.2 cents.

this will cause inflation meaning every thing we buy will cost more.

18 million people whose unemployment will run out by mid 2011

this will drive all 18 million to state aid.

states will go broke paying the massive fees in state aid.

the fed may bail each state out again as it did in 09 but that is doubtful

states go deep in the red thus another wave of state and government layoffs is coming.

when the dollar is devalued past 20 cents the economy will collapse.

predicted to take place on a Sunday night.

the following Monday banks will be closed.

checks wont be cashed,credit cards will be frozen,you will be basically up the creak.

this is expected to happen by mid 2011.

and the sad part is it doent matter is we replace the presedent now because the damage is already done.


nedzad 6 years ago

I do not agree over the US Dollar collapse. At least I do not agree over its quick collapse.

The following facts are very true:

US milutary engagement overseas costs the USA a fartune a day.

China holds a large amount in US treasury bonds.

Internal debt is way too high at this time.

However, the following facts are also very true:

US Dollar weakened vs. Euro and other currencies, but the prices in the US market went down as well, which triggered foreign buyers to spend their money in the US market, which returned the dollar value "back home". If that would not have been the case, devaluation rate would be higher.

Health care bill that was just addopted by the US is not only a measure to help out ordinary citizens, but also a way in which the government is going to put more control into that sector, as well as many others. Does anyone think that for instance, the government is not going to take control over the energy sources such as power generated by hydro and termo power plants, or eventually make significant profit over capacity development in sollar energy production or similar.

Just think how much the US dollar depends over oil. By cutting or minimizing such dependence, US currency will have more stability for sure, but that could possibly roll out the dollar from world markets and stop it being a world's currency, which most probably will be taken over by the Euro.

Just look at the collapse of USSR. What has actually made such giant to collapse? Economical crisis. It collapsed from within, not from outside, meaning it was an implosion. I think the US Government learned that lesson very well and will not take the same bite for sure. On the other hand, the USA is still not populated as Europe for instance. Change in immigration policies will legalize stay of millions of illegal immigrants and possibly convert the same into, if not the US citizens, then at least the tax payers. Further change of immigration policies, for instance toward attracting and allowing more people to win the green lottery then the US Govt. does now might have the same effect as the aforementioned legailzation of illegal immigrnats stay.

On the top of it, many would like to see the USA down on its knees, but such case scenario requires something to happen, and for sure bigger then local wars in iraq or Afganisthan. Collapse of US market is in nobody's interest, except perhaps those isolated nations such as Iran or N. Korea, but their wishes do not represent any relevant facts.

Furthermore, in case of Iran, I do not think of it as a nuclear threat only, and rather opt to think that something else is there, perhaps China's holdings in Iran's treasury bonds or other China's interests in Iran. Otherwise, I do not see any reason for such a big Iran's arogancy vs. the rest of the world.

To return to the topic, for as long as the USA has got clear policies and does not weaken in terms of military power and influence, the US Dollar will remain efficient and unaffected.


lol 6 years ago

monopoly money looks like US money because monopoly was a game made in the US. idiot rofl.


aftab 6 years ago

Hi Estess,

Thanks for nice information, i am strongly agree what you are writing. Future currency will be Gold and Silver only and US Dollar will colapes soon.

We must buy Gold and Silver for future needs. US Army expenditure are main reason for Dollar colapes. Also i beleive that jews are controling American banking system are American public is Victim !!!

Pity for Americans


Obama Hope 6 years ago

LOL! Now I know why my U.S. paper currency actually LOOKS like Monopoly money! (Hmmm. I wonder where I can get lots of Monopoly money, cheap?)


David Reischer 7 years ago

This system is so plauged with fraud that I for one am actually looking forward to the coming collapse. Though the collapse will be extremely chaotic and painful, real Capitalism will finally have a fighting chance. This crony capitalism must end immediately.


Ramakrishnan 7 years ago

No one can predict the exact time when this will happen.But certainly in the next few years. If China is able to find new markets elsewhere ( Particularly other asian countries) then a dollar sell off by China is imminent. But probably will be done gradually over many years. US has to revive itself. Increase domestic production , increase the exports rather than just relying on imports and simply eating out more than what they earn.


linjingjing profile image

linjingjing 7 years ago

Why The Dollar Will Collapse

This is a good idea


Mahesh Manjarekar 7 years ago

Hi,

You have rightly depicted the situation. US economy will collapse.

Mahesh


Johnny 7 years ago

How will this amero affect the dollar and the U.S. economy?


fahad wahid 7 years ago

will this 900b$ stimulus plan will help in the dollar collapse.and when this eu and uk and others will come out of the resession.


Estess profile image

Estess 7 years ago from London Author


John Muny 7 years ago

I'd like to know what you think is the reason the dollar is going up now. With all this turmoil and the reserve expending all this money you would think it would go down.

Is it because the crisis is worldwide and relatively speaking the dollar seems like the safest place to be? Or is it perhaps certain obligations relating to the crisis had to be paid in dollars. Will the bubble burst and the dollar suddenly plung anytime soon?

Thanks


success_89 7 years ago

Now you know this is very informative. It really baffles me as to how quickly we took a turn for these economical problems. At this point in time things are just going to get harder and harder from here on out


Estess profile image

Estess 8 years ago from London Author

^Well it really depends on the amount of cash you are saving; if I were you I wouldn't rely much on the dollar. Gold and Silver are the only true currencies which don't devalue in time, you can always barter them with any world currency at any time. You should have a look at this website for a better insight on the solid currencies and the coming collapse of the dollar.http://www.small-business-goldmine.com/small-busin...

Use the dollar for every day life but don't save any of it for the long run because by the end of 2010 it will be worthless and the Amero will be put in place.


Steve L 8 years ago

I will always defer to the "experts" and thank you for your insights. I own a failing Internet business. It began it's decline in early May. People are beginning to pull back so much of their discretionary spending; that's the main cause of the failure. We have purchased silver in anticipation of the fall. If you can please respond to this question: If I maintain a certain amount of cash will it become absolutely worthless in time? and if so, will silver be used for barter? Again thank you, and your reply would be appreciated.


pgrundy 8 years ago

Yes it seems if its Bear Stearns, a bail out is no problem, if it's 3 million ordinary people (the number of homes in foreclosure right now and headed toward 5 million shortly) then it's a 'moral hazard' and these people must be taught the hard way to manage their money better. Insane and corrupt, it's sickening. At this point the 'moral hazard' argument is way past useful. Cities are already out of money for basic services because they are losing their tax base.

I don't think the dollar will collapse any time soon but it could, as the main reason China doesn't call in their excessive loans to us is that we are their major market. We need a plan though, since soon they will be their major market. US auto manufacturers already prefer to sell THEM cars. So they no longer need us to buy their lead toys, then...uh oh.


8 years ago

Excellent article.

A dollar collapse means much higher oil prices and a possible return to the gold standard


memaskman 8 years ago

This is a very important issue you have pointed out. Who knows what the dollar collapse will lead to? The sad thing is people are living as if nothing is gonna happen.

http://squidoo.com/dollarcollapsediscussion


Dan Varella profile image

Dan Varella 8 years ago from Groves, TX

Estess-

Tremendous truth in what you are saying. For many here in the United States they do not want to face a truth like this. It is important for people to hear and realize how real this is, thanks.

Dan

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