It’s common knowledge that the value of the U.S. dollar has fluctuated throughout the years. But now, it seems the dollar could be in serious trouble. This could be especially problematic for people who are trying to save money, or who have most of their assets in cash.
A recent post on Rich Dad, which is part of Robert Kiyosaki’s “Rich Dad Company,” details just why the dollar is in trouble, what this could mean for your money, and what to do about it. Here’s the gist of it.
The Gold Standard
Simply put, the gold standard is a system in which a country ties the value of its physical money directly to gold. While it’s no longer implemented in any country today, the U.S. dollar was tied to the gold standard for many years — all the way until 1933. However, it wasn’t until the early 1970s when Richard Nixon was in office that the U.S. dollar fully went off the gold standard.
Once that happened, the dollar was no longer backed by something substantial — in this case, gold. Instead, it became what Kiyosaki called “fake money” or an “IOU.” It also began to lose its value compared to gold. This is also true for the Euro and Japanese Yen.
It’s no secret that Robert Kiyosaki has continued to invest in both gold and silver. Because these resources exist in a finite amount, their perceived value is higher than that of fiat currencies, like the U.S. dollar.
The Dollar: Inflation and Recession
According to Kiyosaki, the dollar’s purchasing power has diminished by almost 95% since 1996 as a result of inflation. Despite slowing demand, the Federal Reserve continues to print more paper money.
The reason why this is problematic for the value of the dollar is simple. With greater supply and less demand, anything is bound to lose value — the dollar included.
Kiyosaki noted that this particular dollar-related trouble began when Ben Bernanke, the previous Chairman of the Federal Reserve, made a choice to try to combat the Great Recession. Bernanke could have chosen to up the production of paper money, which would lead to increased inflation rates and potentially cause the dollar to collapse. Or he could have increased interest rates to try to slow inflation, which could have led to a recession.
In either case, it spells trouble for the U.S. dollar.
The U.S. Dollar Has Limited Time
Many Americans are caught up in trying to save as much money as possible, especially when dealing with the increased cost of living. But if the dollar is already losing value at an alarming rate, this could be disastrous for anyone who’s relying on it to get them through financially.
And, as Robert Kiyosaki pointed out, the U.S. dollar is already “living on borrowed time.”
Some people believe that the value of gold is only as much as the market’s perception of it. But as Kiyosaki noted, the same can be said for fiat monies like the dollar. The U.S. dollar only holds value because people have decided it does. Once people no longer view the dollar as valuable, it will cease to be so.
Gold, on the other hand, will continue to hold value as it exists in a finite state. History has illustrated this very thing with many societies turning back to gold once their fiat currencies failed them.
The U.S. Is in a Lot of Debt
The United States owes a lot of money. But while the amount owed was once somewhat reasonable compared to the U.S. Gross Domestic Product, the country’s debt load has increased significantly. It’s even predicted that the U.S. will soon owe more than it actually makes.
Kiyosaki’s concern is that the U.S. will eventually default on its debts. And once that happens, the dollar will no longer be valuable and anyone who’s spent so long saving up will lose. In contrast, people who’ve invested in gold and other assets with growth potential will be much better off.
Another thing Kiyosaki’s article noted is that if other countries decide the mismanagement of the U.S. dollar is too problematic, they might not accept its value anymore either. If this occurs, paper assets will also likely drop.
Stay Alert for Value
There is good news, though. As Kiyosaki’s article also noted, wealth doesn’t simply disappear. It gets transferred. And the U.S. is set to receive a massive wealth transfer — perhaps the biggest in a long time. When this happens, people will either lose or gain it all.
One way to make sure you’re on the receiving end is to keep an eye out for deals when asset prices crash. This could include physical commodities like silver, gold, and real estate, among other things. By investing in these commodities now, you may be able to help combat the devaluation of the dollar.
The Dollar Still Has Its Place
Interestingly, the article also noted that the U.S. dollar does have a place in society still. Saving up for the purpose of investing in more lucrative assets or commodities can be a smart strategy to build or maintain wealth. But so can doing your due diligence, calculating risks, and making investments that can combat the effects of inflation.
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