U.S. Dollar In Long Term Decline
Key Investment Principle #3
- U.S. investors must think and invest globally to avoid losing purchasing power as the U.S. dollar declines against other major currencies.
- Purchasing power of the U.S. consumer’s dollar has fallen from $1 in 1914 to just 5 cents today.
- An ounce of gold would buy a gentlemen’s wool suit in the 1920’s and will still buy a wool suit today.
- The U.S. dollars used to buy a wool suit in the 1920’s will not even buy a handkerchief today!
- The U.S. dollar is in a long-term declining trend due to the following:
- Unprecedented trade deficit and high levels of fiscal and public debt.
- Un-funded government entitlement liabilities.
- U.S. government and banks increasing the supply of U.S. dollars to cover these debts in a scheme called “monetization of the debt”. This simply means inflating our way out of debt.
- Investors need to have portfolio allocations of real assets (for example gold) and international stocks to hedge against the devaluation of the U.S. dollar.
