Sometimes we get occasional reminders as to why we need some assets outside of the U.S. dollar. This past weekend was one of those “wake-up calls.”
Our government almost shut down again. Democrats and Republicans were jousting until the last possible minute. They finally came to an agreement. The Republicans got $38.5 billion of the cuts they wanted but didn’t get $23 billion more they wanted.
As usual, the Dems didn’t want to cut much at all. However, they feel like they got something out of it since they didn’t have to give up as much as the Republicans originally wanted. But at least the Republicans are starting to get the message of the people.
Join the 3.5% of Americans who are truly wealthy and financially secure.
But this heated budget debate is only one reminder of how much we need to get some assets out of the ailing dollar.
The other “reminder” is the debt ceiling that we are pushing up against again. The government estimates that we will hit the $14.3 trillion debt ceiling by May 16. That’s just around the corner.
Of course that will cause another fight in Congress. The Republicans will likely balk at raising the debt ceiling unless the Democrats agree to more cuts in the debt-load our country is carrying. And someone does need the hold their feet to the fire to help to rein in spending.
If you’ve ever overextended yourself in your own finances and then had to do some belt-tightening, you probably remember that it wasn’t all that fun because there was so many things that you had to cut out or cut down on in order to get things back in line. Yet that’s what was required and you sucked it up in the near-term for the long-term good of your personal finances.
Well, that’s what America is going to have to face sooner or later. Right now, we live like a spoiled young adult that lives beyond their means on their credit cards. For a while, the creditors will extend your credit limits. But sooner or later there’s a day of reckoning.
We will come to one of those days too in America. We will have to cut back on some government-funded programs. Unfortunately, higher taxation will be a part of the “American way of life” too.
Also, there will come a day when foreigners won’t want to buy our debt. Even if they did, they would demand such high interest rates that it would threaten our ability to repay it. Either way, the default rate risk would be huge at that point.
Long before all of this comes to a head, you want to have some of your money out of U.S. dollars and into currencies that have more stable fundamentals.
Most people at some point should have some foreign currency CDs or own some foreign currency ETFs — or do what I do and trade foreign currencies through the spot forex market through U.S. brokers in a U.S. dollar denominated account. That’s one of the simpler ways to do it.
The dollars that are being used to trade in foreign currencies have their values linked to those foreign currencies and gain as the foreign currencies gain in value.
But whatever you do, use these financial “reminders” that we’re going through as a nation to prod you into getting some assets out of the dollar and into foreign currencies.
My Money Matrix Insider members haven’t experienced the dollar slide-off that most of America has felt. I hope you’ll come join us.
About the Author: Sean Hyman
Sean Hyman is a member of the Moneynews Financial Brain Trust. Click Here
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