In the 1970’s U.S. Treasury Secretary John Connolley said to foreigners in regards to the risk of a dollar devaluation that it is “our dollar and your problem”. Well now the problem is that of investors, both foreign and domestic. If a devaluation occurs then our money will be worth less than before and imports will cost more. This could lead to inflation which leads to higher interest rates which in turn hurts the value of stocks, bonds and real estate, making most investments go down in value.

It would increase exports and corporate profits of domestic manufacturers but some corporate profits would be reduced by the high cost of imported materials.

Investors should consider the alternatives to the dollar. In general I believe the U.S. economy is the world’s best and the dollar will perform well. However, investors should be aware of other viewpoints and keep an open mind.

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