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How to Hedge US Dollar Exposure

By Edited May 29, 2015 1 0

Speculation is running high that the US Dollar will take a real beating as the effects of Obama's massive creation of new debt takes hold. More cash money in the economy will eventually lead to inflation (loss of purchasing power) which is effectively a tax on all assets. With the governments already having forced interest rates into historic lows, there are very few remaining politically acceptable options to control inflation. With the traditional inflation control tools exhasted there is little left for governments to do except watch inflation take hold, maybe even hyperinflation.

Knowing the state of the economy and the prospect of the USD moving toward hyperinflation, many investors are looking for ways to hedge their US dollar exposure. While it is impossible for Americans to fully protect themselves against US Dollar inflation while continuing to live in the United States, these general strategies should help protect the American investor and provide some helpful diversity in any investor's portfolio.

Invest in some precious metals - Gold or Silver being the most popular precious metals but platinum and other rare metals are suitable alternatives. As the US dollar drops in value through hyperinflation generally Gold and Silver rise in value effectively protecting purchasing power. Effectively Silver and Gold remain somewhat stable in purchasing power of perishable commodities like wheat and cotton.

Physical Gold and Silver is better investments for many reasons, including portability and confidentiality. However, some investors like the ability to trade paper Gold and Silver online, often through ETFs. A good compromise is Bullionvault because they hold physical gold for the owner but allow purchases and sales to occur online instantly.

Buy bonds denominated in stronger currencies. It is hard for the typical investor to buy international bonds because of the required research. Fortunately, international bond funds provide currency hedging and income. Check with any registered securities dealer or through your online trading account to access bond instriments denominated in more stable currencies than the USD.

Buy, save and hold other harder currencies like the Canadian Dollar. You can take physical possession of the currency and stick it in a safe, or open a bank account denominated in the alternative currency. If you live in the USA, check with the US branches of Canadian banks like BMO Harris, HSBC, and TD for easy access to Canadian dollar accounts. An added bonus is that these big Canadian banks are financially sound and have not required government intervention to ensure their health. Canadian banks just don't fail due to the more stringent government regulations they must work under.

For international currency investing try HSBC for access to international currency denominated accounts. As the world's local bank, HSBC one of the worlds largest and most stable banks and a leader in cross border banking.

Buy international stocks, or funds of international stocks to reduce exposure to the US economy. Just like domestic investment, careful research is required when you start investing internationally. However it is also possible to invest in American based companies with substantial international operations.

This articles is not intended to provide investment advise, just throw out some options to consider as you plan to hedge against potential hyperinflation. Do your own research and make your own educated decisions. Article copyright 2010 by Jade Dragon. Please do not copy it.

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