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    The Little Book of the Shrinking Dollar: What You Can Do to Protect Your Money Now
    The Little Book of the Shrinking Dollar: What You Can Do to Protect Your Money Now
    The Little Book of the Shrinking Dollar: What You Can Do to Protect Your Money Now
    Ebook220 pages4 hours

    The Little Book of the Shrinking Dollar: What You Can Do to Protect Your Money Now

    By Addison Wiggin

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    With the weakening dollar a hot topic for retirees, savers, and investors, this Little Book delves into the economic turmoil in the U.S. and shows how to survive it

    The United States dollar is losing value at an alarming rate. According to the Organisation for Economic Co-operation and Development (OECD) index, the U.S. currency is 37 percent below fair value against the Australian dollar and 20 percent versus the Canadian dollar. The decline of the U.S. dollar is one of the biggest threats facing American investors today, but with the Little Book of the Shrinking Dollar: What You Can do to Protect Your Money Now in hand, you have the knowledge and the expertise you need to fight back.

    Written by New York Times bestselling author Addison Wiggin, a leading economic forecaster, the book explores the reasons for the dollar's decline, and its precarious relationship to other currencies around the world. Filled with invaluable strategies for retirees, savers, and investors who want to keep their money safe no matter what lies ahead, the book is your one-stop guide to weathering the storm.

    • Covers strategies for safeguarding your wealth, including safer havens for money, alternative investments, and other opportunities
    • Written by Addison Wiggin, a three-time New York Times bestselling author and leading economic forecaster
    • Wiggin's predictions about the decline of the dollar have proven true time and again, making him the right man for the job when it comes to predicting what lies ahead

    The U.S. dollar is no longer the secure and stable currency that most Americans grew up believing in. Even after recent gains, the dollar remains weak. But with the Little Book of the Shrinking Dollar you have a concise guide to what's driving its demise and everything you need to protect your money today and in the years to come.

    LanguageEnglish
    PublisherWiley
    Release dateApr 11, 2012
    ISBN9781118283172

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      Book preview

      The Little Book of the Shrinking Dollar - Addison Wiggin

      Introduction

      What If the Power of Money Were in Your Hands?

      Sounding the Alarm about the U.S. Dollar

      If you picked up this book, you realize the dollar isn’t worth what it used to be. It’s not just your Great Depression–era relatives saying it. If we go back just to the 1970s (when I was but a humble toddler), the dollar was worth a lot more.

      What happened? Well, that’s what this Little Book will tell you, with plenty of ways you can save the value of what you earn, and even profit, from the upheaval that dollar decline promises ahead.

      Why am I so sure of the ultimate fate of the U.S. dollar? One simple fact: It’s just paper.

      Every paper currency in the history of civilization has eventually lost its entire value.

      That’s not to say that there won’t be many stops along the way, pauses where the dollar rises against major currencies. However, today’s situation is more urgent than ever because a paper currency that doesn’t pay its holders a positive real interest rate tends to lose value at an accelerating rate. That describes the U.S. dollar (and most other currencies today).

      The velocity of dollar-shrinkage has all the hallmarks of going into hyperdrive, but we won’t know for sure the hour or the time. We don’t know who will be in the White House when it happens, or who will be the Fed Reserve chair. But when the powers that be kick the final legs out from the stool propping up the dollar, the crash will be rapid.

      That’s why I’m writing this book, to prepare you for whatever lies ahead. There are moves you can put in place right now that can turn a profit in a week, some in six months, some in three years, and some are plain, good, long-term insurance that you can pass on to your children.

      Here’s How It Begins . . .

      The whole basis for money itself—currency as a means of commerce—is based on tangible value. In other words, money is not the greenbacks we carry around. It is supposed to be the gold or other metal backing it up. The dollar is a promissory note. Check what it says at the top of the bill itself: Federal Reserve Note.

      Today, the American dollars in circulation are just a bunch of IOUs. That would be fine if the gold reserves were sitting in Fort Knox to back up those IOUs, but they are not. The Fed just keeps printing more and more money, and it will eventually catch up with us. The day will come when we will have to pay off those IOUs, not only domestically but to our ever-expanding foreign investors, too.

      The Funny Money Game

      History shows that money—official money printed by the government—has been known to lose value and become virtually worthless. Think back—50-million-mark bills from 1920s Germany, Russian rubles from pre-Revolution days, or Cuban pesos pre-Castro. In all these times and places, jarring political and economic changes destroyed currency values—suddenly, completely, and permanently.

      We are not as insulated as many Americans believe. What kinds of events could do the same thing to the U.S. dollar? What can you do today to position yourself strategically? There’s plenty, which we’ll explore in this book. In fact, the potential fall of the dollar can be good news—if you know what steps to take today.

      Remember, a riverboat gambler who keeps asking for ever-higher markers will eventually run out of credit. At some point, the casino boss will realize that the gambler’s ability to repay is questionable. Maybe those markers are just a heap of IOUs that can never be cashed in.

      It All Began for Us in 1971

      When the United States removed its currency from the gold standard, it seemed to make economic sense at the time. President Nixon saw this as the solution to a range of economic problems, and, combined with wage and price freezes, printing as much money as desired looked like a good idea. Unfortunately, most of the world’s currencies followed suit. The world economy now runs primarily on a fiat money system, backed by nothing but air.

      Fiat money is so-called because it is not backed by any tangible asset. That would be gold or silver. Heck, even seashells would be a better backing than the government’s word for it. Instead, we must rely on the government’s decree that this money is a legal exchange medium, and it is worth what we say.

      So, lacking a gold backing or backing of some other precious metal, what gives the currency value? Is there a special reserve somewhere? No. Some economists have tried to explain away the problems of fiat money by pointing to the vast wealth of the United States in terms of productivity, natural resources, and land. But even if those assets are counted, they’re not liquid. They’re not part of the system of exchange.

      Here’s a simple rule: Fiat money holds its value only as long as the people using that money continue to believe it has value—and as long as they continue to find people who will accept the currency in exchange for goods and services. The value of fiat money relies on confidence and expectation. So as we continue to increase our deficit bubbles and as long as consumer debt keeps rising, our fiat money will eventually lose value. Gold, in comparison, has tangible value based on real market forces of supply and demand.

      The short-term effect of converting from the gold standard to fiat money has been widespread prosperity. So the overall impression is that U.S. monetary policy has created and sustained this prosperity. Why abandon the dollar when times are so good? Yet, things aren’t as good right now.

      This is where the great monetary trap is found. If we study the many economic bubbles in effect today, we know we eventually have to face up to the excesses, and that a big correction will occur. That means the dollar will fall and gold’s value will rise as a direct result.

      The sad lesson of economic history will be that when the gold standard is abandoned, and when governments can print too much money, they will. That tendency is a disaster for any economic system, because excess money in circulation (too much debt, in other words) only encourages consumer behavior mirroring that policy.

      Thus, we find ourselves in record-high levels of credit card debt, refinanced mortgages, and personal bankruptcies—all connected to that supposed prosperity based on printing far too much currency: the fiat system.

      Whenever governments are granted the power to purchase their own debt, they never fail to do so, eventually destroying the value of the currency. Political money always fails because free people eventually reject it.

      —Dr. Ron Paul, The Case for Gold

      We can see where this overprinting will lead. Like a Tiananmen Square Rolex watch deal, the value simply isn’t there.

      In case you don’t believe me, consider history.

      Emperor Augustus started taking Rome down the slippery slope of decline back in 20 B.C. He started printing money faster than the gold could be produced to back it. He had the mines running 24 hours a day at the edges of the empire. Every emperor after followed suit. Nero wanted to continue the spending parade, mounting ever-larger trade deficits between Rome and its colonies and trading partners.

      About 1,100 years ago, China began the paper money experiment. They called it flying money because a breeze could blow it out of a holder’s hand. It was supposed to be a temporary fix during a copper shortage, but the paper money system got out of control. You see it was all too easy to just keep printing, which led to uncontrolled inflation. As bad an idea as it was, Marco Polo took some paper money back to Europe, where few people believed his tall tales of Chinese paper money, but a few hundred years later, the Europeans were ready to try their own paper money experiment.

      When Spain found gold in Mexico in the sixteenth century, it became the world’s richest nation. The Spanish used the gold to buy, buy, buy, and to expand their military influence. But the wars eventually used up their wealth, so Spain began issuing debt to pay the bills, leading to loss of its economic and military power. The French went through a similar period in the eighteenth century, printing way too much paper money and suffering unbelievable levels of inflation. That’s thanks to excessive debt and a national bankruptcy.

      I’m sure you’re starting to sense a pattern. Runaway money printing leads to massive inflation and worthless currency. Perhaps the worst monetary collapse of the twentieth century was the so-called Weimar Republic. To handle post-World War I war reparations, the temporary government began printing massive amounts of currency to make payments. The currency became worthless. The resulting devastation paved the way for the Nazi movement and ushered in World War II.

      The Last Time Money Was Worth Something

      The year was 1944. For the first time in modern history, an international agreement was reached to govern monetary policy among nations. It was, significantly, a chance to create a stabilizing international currency and ensure monetary stability once and for all. In total, 730 delegates from 44 nations met for three weeks in July that year at a hotel resort in Bretton Woods, New Hampshire.

      It was a significant opportunity, but it fell short of what could have been achieved. It was a turning point in monetary history, however.

      The result of this international meeting, the Bretton Woods Accord, had the original purpose of rebuilding after World War II through a series of currency stabilization programs and infrastructure loans to war-ravaged nations. By 1946, the system was in full operation through the newly established International Bank for Reconstruction and Development (IBRD, the World Bank) and the International Monetary Fund (IMF).

      What makes the Bretton Woods Accord so interesting to us today is the fact that the whole plan for international monetary policy was based on nations agreeing to adhere to a global gold standard. Each country signing the agreement promised to maintain its currency at values within a narrow margin to the value of gold. The IMF was established to facilitate payment imbalances on a temporary basis.

      This system worked for 25 years. But it was flawed in its underlying assumptions. By pegging international currency to gold at $35 an ounce, it failed to take into consideration the change in gold’s actual value since 1934, when the $35 level had been set. The dollar had lost substantial purchasing power during and after World War II, and as European economies built back up, the ever-growing drain on U.S. gold reserves doomed the Bretton Woods Accord’s chances as a permanent, working system.

      Now keep in mind that the United States owned 80 percent of the world’s gold reserves at the time! So the United States had every motive to agree to the use of the gold standard to organize world currencies and to create and encourage free trade. The gold standard evolved over a period of hundreds of years, planned by a central bank, government, or committee of business leaders.

      The concept was a good one. However, in practice the international currency naturally became the U.S. dollar, and other nations pegged their currencies to the dollar rather than to the value of gold. The actual outcome of Bretton Woods was to replace the gold standard with the dollar standard. Once the United States linked the dollar to gold at a value of $35 per ounce, the whole system fell into place, at least for a while. Since the dollar was convertible to gold and other nations pegged their currencies to the dollar, it created a pseudo–gold standard.

      But that’s where the trouble starts.

      How the Dollar Really Works

      How do you define the worth of any commodity? Supply and demand. As demand increases, the price rises. That’s efficiency.

      But when paper money comes into use, the whole efficiency of the economic system goes out the window. That’s because the government can print money (with a few keystrokes) out of thin air. So the money supply can continue to expand regardless of the real demand. It can do so even under a gold standard system, disregarding the supply of gold itself.

      That’s how paper money undoes itself and becomes worthless. We’ve seen it happen time and again, from ancient Rome, to China, to colonial Spain, to Germany, and now the United States.

      Perhaps a paper money system pegged specifically to commodity reserves would give the currency the stability it needs and rein in government spending. The bottom line here is that the government is like a hungry fat man at an all-you-can-eat buffet—only with less discipline. They are simply going to print, print, print, until the system fails.

      Never before in human history has the reserve currency of the world been so burdened with debt. (I write this knowing I said the same thing in 2008. It’s only gotten worse.)

      And never has the transfer of one international currency to another been peaceful. In 2008 we wondered, could the euro unseat the dollar? As we’ll see further on, that’s becoming increasingly unlikely—for the same reasons that the dollar can’t hold its value.

      There’s just as much a chance that the new world reserve currency will be the Chinese yuan. But as we pointed out above, a government-controlled currency is as good as dead. It’s just a matter of time.

      Statist governments love to interfere and control the market. They found it necessary to eliminate the gold standard. They’ll refuse to return to that kind of stability as long as they think they can get away with it.

      So we soldier on under the price controls on the very symbol of our economic freedom—the U.S. dollar itself.

      —Addison Wiggin

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