With talks on the economic fragileness of the U.S. found all over trade and business pages, sites, and blogs – there is no better response than to prepare for the worse. But for the sake of balanced and unbiased discussion, let’s find out if a dollar collapse scenario is indeed for real or not.
In relatCredit: Image: scottchan / FreeDigitalPhotos.net | http://www.freedigitalphotos.net/images/view_photog.php?photogid=1701ion to the national debt of the United States, a potential collapse may be nearly possible as the government’s debt had been recorded to reach as high as $14 trillion by the end of 2010. This number is twice as much as how it was about a decade ago.
Aside from overall debt, the decline of the dollar is also attributed to federal liabilities amounting to over $54 trillion. Daily expenditures beyond what the nation is earning does not help either. The U.S. spends approximately $1.5 billion every day. In other words, the government is spending more than what it is able to earn.
Dollar reserves owned by other countries also contribute to the speculation about the collapse of the dollar. Over $2.4 trillion in reserves are owned by foreign nations. About $1 trillion of this belongs to China and $800 billion is held by Japan.
These foreign reserves are pulling the dollar away from itself. A scenario of a sleeping giant China arming for military causes due to a coming dollar collapse is an idea to be fearful about. It is highly doubtful though unless the Chinese economy finds an alternative for its exporting business. A majority of its products are actually produced for U.S. consumers.
Japan is certainly not going to join the band wagon especially because of natural calamities which it had suffered from during the first quarter of last year. Also, it had kept its currency – the yen lower than the dollar’s value to maintain higher export gains over the past 15 years. A dollar collapse scenario is unlikely going to be initiated by either one of these countries because both their economies depend highly upon the U.S.
There were those who pointed out potential major threats from terrorism. With news about the economy of the United States failing, a series of terrorist attacks may occur again. The death of Osama bin Laden and the possession of his body in a military assault in Abbottabad, Pakistan last May 2011 can either fan the flames or completely obliterate it.
In relation to terrorist threats and preserving freedom, expenses for military and intelligence causes contribute to a point presented earlier. Expenditures are greater than what the national budget can afford.
The Public Opinion
In relevant discussions among financial and economic experts, business professionals, and common citizens in forums and sites such as Linkedin, most agree that a complete dollar collapse is not probable. Here, the concept of a collapsing currency pertains to the dollar being reduced to an utter zero value. A greater number does agree that a decline in value may actually happen but a collapse based on the definition mentioned above is unlikely to occur. Most predictions about its demise are thought of by many as merely exaggerated. Even if those thoughts are that of politicians or popular personalities.
On a Personal Note
Whether a dollar collapse scenario is real or not, there is no harm in preparing for it by investing in stable forms of trade and by practicing practical means of saving money.