G&G Associates Tax & Financial Consulting
3 Easy Ways to Protect Your Savings From a Falling Dollar
Alafia (Peace & Blessings) G&G Readers,
At the beginning of the summer I told readers the price of Gold will hit $1300 and Silver $25 by the end of the year. Well…Gold has gone as high as $1383 and silver $24.64 and still climbing.
The Fed (which is not a Government Organization for those of you who don’t know this) is killing the Dollar – Here’s What to Do
"We're in the midst of an international currency war. This threatens us because it takes away our competitiveness. Advanced countries are seeking to devalue their currencies."
- Brazil’s finance minister Guido Mantega
Mantega’s right. This is war. Central banks are locked into a desperate struggle right now to devalue their currencies.
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Only in this war the casualties won’t be soldiers on the frontline. They will be middle-class earners and savers.
The combatants are some of the world’s biggest economies.
China has been keeping its currency artificially low for years. Just yesterday, the Bank of Japan announced aggressive new measures to keep the yen from rising further against the dollar. And Switzerland has been busy recently trying to keep the Swiss franc from rising against the euro.
This only scratches the surface. Brazil, Mexico, Peru, Colombia, South Korea, Taiwan, South Africa, Russia and Poland are all either directly intervening to stop their currencies rising…or examining ways to do so.
These countries are attacking their own currencies to protect their export industries. And to keep already Depression-like unemployment rates from going through the roof.
Here’s how it works…
Global demand is shrinking. So competition between exporters is becoming more ruthless. The country with the lowest currency relative to others will be the most competitive—and therefore the most successful in keeping growth rates high.
At the same time, a weaker currency means imports become more expensive. So people tend to buy more stuff made in their home country. This keeps more jobs at home.
One of the most aggressive players in this currency war is the Federal Reserve of the United States of America. The Fed under Ben Bernanke is deliberately trying to devalue the dollar through a combination of ultra-low interest rates and so-called “quantitative easing” (Fed speak for money creation on the backs of the taxpayer).
Not only does it want U.S. exports to become more competitive. It also wants to inflate away America’s sky-high national debt. By running the dollar down, the government can pay back its debt in ever more worthless dollars.
The Fed’s doing a good job at pushing the dollar lower relative to other nations’ currencies. In fact, the dollar has lost over 12% since June.
Why should you care? Because it’s an extra tax on your savings if they’re denominated in dollars. Same goes for dollar-denominated earnings.
So far, the Fed’s efforts haven’t managed to produce much consumer price inflation—the cost of goods and services in the U.S. hasn’t risen much.
But if you live overseas and have saved or earn dollars, it’s disastrous. With the dollar falling against the world’s major currencies…the buying power of each of your dollars falls relative to your day-to-day currency.
3 Easy Ways to Fight Back and Protect Your Savings
1. Buy gold and silver – I know you’ve heard me say this before, but holding a significant portion of your savings in gold and silver is the single best way to protect against a dying dollar. Gold and silver is honest money. That means the world’s smart money is buying tons of the yellow and silver metal right now in anticipation of a lower dollar down the line.
Gold and Silver are looking toppy now. Last week it reached a new record high of $1,383 and Silver $24.64. My advice: Hold your fire. Gold and Silver are likely to correct soon. Buy on the dips.
2. Diversify. Diversify. Diversify – Too many investors fail to diversify their portfolio outside the U.S. They see emerging markets stocks, funds and ETFs as “risky.” And they see their U.S. counterparts as “safe.”
Over the last 10 years, the MSCI United States Index of stocks has lost about 24%. Meanwhile, the MSCI Emerging Markets Index of stocks has gained over 134%. It’s U.S. stock markets that are risky—investors who’ve put their faith in U.S. stocks and their greedy Brokers have lost big time.
3. Consider a Currency ETF – One simple way of protecting your savings from a falling dollar is to place some of your savings in a currency ETF or a number of different currency ETFs. I like ETFs that track the performance of the so-called “commodity currencies.”
These are currencies of countries that depend heavily on the export of commodities. These currencies tend to rise in a weak dollar environment. Because a weak dollar generally leads to high commodity prices. Become a GGIS subscriber and I’ll show you some picks that right now have double digit gains and as the dollar continues fall the gains will continue to rise.
With the falling dollar and the explosion in gold, silver, oil and other natural resource prices, you need to stay on top of your game and manage your “OWN Finances.”
Become a GGIS subscriber now and you’ll be sure that we make sure you stay on top of your Tax and Financial Future to make sure your BUSINESS … AT HOME is protected. Remember…most people look after their bosses business, but fail to look after their own business at home.
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Until the next time!
Ankh Uja Snb (Life, Health, Strength),
Tax & Financial Consultant, RFC
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LEGAL NOTICE: This work is based on SEC filings, current events, interviews, corporate press releases and what I've learned as a financial consultant. Nothing herein should be considered personalized investment advice. It may contain errors and you shouldn't make any investment decision based solely on what you read here. It's your money and your responsibility.