Is The U.S. Dollar Heading for Trouble?

BOCA RATON, FL, December 13, 2012 (Press-News.org) The United States once stood as a dominant country with a concrete money system, which inspired other countries to believe in and invest in our currency. Prior to 1971, the U.S. dollar was long recognized as an extremely valuable currency and was exchangeable for gold as part of the gold standard. However, people outside of the U.S. who had in their possession U.S. bills began taking advantage of their option to exchange the bills for gold. This was extremely dangerous for the economic stability of our country.

Realizing the vulnerability of the United State's monetary influence, President Nixon stopped the gold convertibility of the U.S. dollar (in addition to other dollar reserves) by taking it off the gold standard during his presidency. Foreigners holding U.S. currency felt betrayed by Nixon's decision. From that point on, the U.S. Dollar has been what is known as fiat currency (money valued only by government regulation) and began losing its luster within the foreign exchange.

Looking back to the eighteenth century, during the Revolutionary War, our country's currency was also based on a fiat money system without gold, silver, or any other nonfinancial asset to back up its worth. The currency drastically lost its value after too many bills were printed and distributed simultaneously along side a slew of counterfeit dollar bills circulated by the British as an attempt to destroy the new country's economy. Any type of fiat currency only holds value based on a financial structure organized by law and/or regulation.

After the U.S. dollar was removed from the gold standard, The United State's supply of money had gotten out of hand in much the same way as during the American Revolution. Without gold to hold accountability to the U.S. dollar, money has been printed in record high amounts. Today, the quantity of dollar bills wandering the Earth has expanded so widely its value has been compromised considerably.

Historically, over printing of currency bills would promote an extremely high rate of inflation for the average nation. What truly has saved the United States from a more rapid doomsday has been the fact that the world's reserve currency has relied on the U.S. dollar. Outsiders have had to accept our shortcomings by converting the bills they have possessed, or by paying more for the goods that we supply.

A primary reserve currency is selected from an influential monetary system with a large supply and utilized by numerous governments and financial institutions as part of foreign exchange reserves. The reserve currency also serves as the pricing currency for products traded globally, such as oil, gold and silver. As the issuing country of the primary reserve, the United States has greatly benefited materially. We have had the opportunity to purchase commodities and borrow money at significantly lower rates than other countries due to costs involved with exchanging currencies and a higher demand for the U.S. dollar.

Many Americans in the U.S. have no idea how our monetary system truly works, or why the U.S. dollar has been such a driving force throughout the last century within the world's financial exchange system. A large percentage of our country's fallen economy stems from Americans' love for getting merchandise for cheap. In order for manufacturers to meet Americans' fetish for affordable products, jobs have been taken from the U.S. and replaced by cheaper labor overseas. Free trade agreements with countries like China and India have greatly improved their economies, while literally ruining our own.

The average U.S. citizen does not realize that every time they purchase a product manufactured overseas (primarily China), he or she is actually aiding to the United State's financial woes by putting the U.S. dollar more at risk of losing its dominance within the foreign currency exchange rate. How will a country that owes trillions of dollars between at least ten other nations remain on top? As of December 2 of this year, the United State's current outstanding public debt totaled more than $16 Trillion. Approximately $5 Trillion is owed to Intra-governmental Holdings. However, the Public Debt, which amounts to just under $12 Billion is owed to various foreign governments, but led by China.

Banks, for the most part, are the primary influence in selecting a top reserve currency throughout the world. If the country leading the reserve continually shows on-going signs of weakness and economic depression, eventually the banking community will begin looking for a more stable currency to serve as the primary reserve. Although this process is usually a slow one, if the top reserve's economy continues to fail, it is inevitable the world reference currency will sooner or later be modified and led by a more dominant currency system.

It seems China has been anticipating the United State's financial doom since the beginning of our free trade relationship. A good example had shown itself back in 2009. While giving a speech regarding the financial crisis of 2007-2008 to The International Monetary Fund (IMF), the governor of the People's Bank of China, Zhou Ziaochuan, referred to the Triffin Dilemma as the cause for the world's current economic disorder. The Triffin Dilemma is a theory, which was originated in 1961 by Robert Triffin, a Belgian-American economist. This comment essentially suggested the importance to quickly remove the U.S. dollar as the primary reserve and opt for a more stable global currency to accommodate the world's financial burdens.

Today, China has blossomed into the 2nd largest economy and one of the most powerful countries in the world at the United State's expense. Without the United State's free trade agreements, China, India and several other nations would still be struggling as before. Nonetheless, with our help, China's currency could very likely become the new primary reserve.

Smart investors are moving more towards non-financial assets, such as gold, silver, diamonds, oil and other investments offering more stability. Anyone who has in their possession precious metals, fine jewelry, luxury watches, diamonds or other high-ticket items should hold onto these valuable assets. Predictions assume those types of assets will hold their value much longer than any form of financial currency and may also be used repeatedly as loan leverage for private asset-based loans. To learn more about using an asset as collateral for a short-term loan, visit http://www.chapesjpl.com.

If you would like more information about this topic, or would like to schedule a meeting with Jeff Zager or another representative from Chapes-JPL, please contact Peggy DiPirro by phone at (561) 416-8485, or email at peggy@chapesjpl.com.