People have inquired what will happen if the dollar collapses. They want to know will the FDIC be able to reimburse victims of bank failures? Will consumers be able to buy imported goods? Will the government be able to pay police and fire department members to maintain order? Will basic necessities be available in grocery stores? Will the government confiscate wealth as was done in the Great Depression when gold was outlawed?
These questions are topics that people are asking with increasing frequency. The very fact that people are getting anxious is good because it means that people are becoming aware of the shaky financial health of the government and that means people will be motivated to study, research and organize a plan of action.
Every family should have awareness of this matter and a contingency plan.
- Reduce your debt
- Avoid high risk investments
- Invest in high quality investments
- Invest in liquid things that are easy to sell
- Avoid illiquid things like real estate, rare art
- Diversify internationally into countries with the best economic health
- Learn to think creatively and be adaptive about survival
- Develop portable career skills that will be marketable if living in different countries
- Develop foreign language and cultural skills to be able to live abroad
- Don’t worship your employer and assume they will never go out of business
- Be mentally prepared for career changes as the economy evolves
- Drive cars powered by natural gas or electricity made from natural gas or coal-avoid imported oil
If the government became bankrupt they could refuse to pay bondholders and would use income from taxes to pay modest salaries to public safety employees to keep order. There was a book by economist Anatole Kaletsky that said that governments that default manage to eventually return to normal.
If the dollar collapsed it is possible that many things would continue as before except that:
- People would not be able to afford a foreign vacation
- People could not afford imported goods
- Many people would sell their homes to foreign investors to get foreign currency and rent their house back.
- Many businesses would be acquired by foreigners and your ability to speak their language and dine with them and eat their native foods will help your career.
- Some areas in America could become special enterprise zones with special rules where foreigners might have a lot of “persuasion” over how the local government operates in return for increased creation of jobs by foreign companies. The constitution says that if the Senate approves a treaty then that overrides the constitution. So imagine a treaty with a foreign country creating a special enterprise zone for the foreign investors who protect their property rights with special courts and police that are not governed by the U.S. constitution.
- There would a huge amount of foreign tourism in the U.S. as they seek to benefit from a low cost dollar. Yosemite National Park and other popular places would cost $1,000 per day to visit for foreigners with subsidized rates for U.S. citizens. To encourage more visitors visa rules would be relaxed to the standard of “if you are rich come anytime”.
- Americans will gladly accept jobs from foreign employers who will pay them in foreign currency. They will rent an apartment from a foreign landlord and pay them in foreign currency through payroll withholding.
Of course, this does not need to happen because now that people are aware of it they can take steps to prevent a dollar collapse by urging the government to support a sound dollar, a government budget that leads to solvency, and a healthy economy.
i remember as a child in the 1960’s doing “drop drills” at school where we hid under our flimsy desks when a siren sounded so that we could prepare for nuclear war. It was important to cover our head with our arms, we were told, in case we got hit with an atomic bomb. Fortunately the Cold War ended peacefully. Let’s hope that our government’s leaders can arrange for a peaceful end to the fiscal irresponsibility that has made the topic of a dollar collapse worth worrying about.
Regarding your own personal finances, you should seek independent financial advice. I have written about “investments for a dollar collapse“.