The first question should be is there really a dollar collapse scenario? Most financial and economic experts agree that there is nothing for us to fear. A total collapse of the dollar currency is far from happening in the near future. Fear mongers however, point out imminent signs proving that a dollar collapse is due to happen soon. For the sake of discussion, these signs are listed below.
ReservCredit: Image: digitalart / FreeDigitalPhotos.net | http://www.freedigitalphotos.net/images/view_photog.php?photogid=2280es from other countries amount to over $2 trillion. Asian countries China and Japan hold the highest percentage of shares. China owns over $1 trillion in U.S. reserves while Japan has over $800 billion. Although about 90% of reserves from other nations are held in the dollar, if any of the major holders such as China and Japan release their reserves, it will cause a greater dollar decline in the already declining dollar value.
Japan can actually be removed from the picture as the whole nation is still recuperating from national disasters it had suffered from during the onslaught of the earthquake and tsunami tragedy in March of this year. China’s economy on the other hand, relies heavily on products and services rendered for the U.S., particularly in exporting goods and materials. Causing anything that will hamper a healthy business relationship will also affect their economy.
Debt and Liabilities
In the past decade, the national debt had increased by twice as much as it was before. At the end of 2010, U.S. federal debt is as high as $14 trillion. When distributed among the current population, every American now owes about $50,000 each.
Aside from the amount of tremendous debt, liabilities are also recorded to be at such as high rate. The latest reports show over around $54 trillion in liabilities. The U.S. government spends more than $1 billion every day. This is clearly more than what the U.S.A. money supply is earning.
Military Threats and Related Expenses
The U.S. government spends over $600 billion in military related projects yearly. These types of expenditures are relevant to national security and public safety. But in relation to the fact which was pointed out earlier about expenses being greater than earnings, then overall military budget can be considered as one of the reasons behind beliefs on the imminent dollar collapse.
Terrorism and Retaliation to Democracy
The U.S. is relatively safer now from threats by international terrorist groups. In order to keep this level of protection though, billions of dollars have to be spent. These expenditures are not only allotted to the military and intelligence forces but to other agencies as well.
The health bureaus are also receiving funding in relation to terrorism. In the wake of the Anthrax scare a few years ago, security is not dependent on the military alone. It also depends on what health experts have to say about it. Foreign affairs officers and offices in and outside the U.S. have doubled up counter measures against terrorism too. All these of course add up to the government’s expenses in dollar.
Going back to military defense and offense in relation to terrorism, which still comprises a larger part of the budget deficit, the 9/11 attacks was just commemorated for its 10th year anniversary last year. That tragic event was one of the main reasons behind the recession which the nation had suffered from over the past few years. The United States economy had suffered enormous losses due to the attack. It affected local and international trade and business from the moment it happened up until today despite efforts for rehabilitation.
In defense of its freedom, the U.S. had switched from a democratic side to a more aggressive status. A series of military offensive moves had been launched against individuals, groups, and nations which attacked the country due to the democracy and freedom of speech and expression that it is famous for. These moves had cost billions of dollars and may cause a dollar collapse as most scaremongers point out.
These are the signs to watch out. There are actually improvements seen in the economy since last year and these past few months. Although these may not be remarkable, they still count against any fear of the dollar collapsing any time soon.