Marketplace

Would investing in international stocks provide a defense against a dollar collapse? No fancy currency plays--I'm thinking Vanguard Total International fund and the like.
--JWF

I fall somewhere on the middle of expecting the Fed to clean up the mess and total economic collapse.

The Fed has doubled the size of the money supply. Most of that has gone into running up the stock market, buying up home loans to keep rates down, and buying dodgy assets from insolvent banks who are practically required to deposit the money at the Fed who pays them interest at our expense.

So simply stated, if the Fed doesn't "burn" half the doubled money supply, over time the value of the dollar will decrease by half. Given the Fed's unwillingness to recognize the abuse of our currency in international investment and stock inflation, I doubt the fed will adequately reign in the money supply and we will face inflation. In an inflationary period, owning dollars and bonds is less desirable than owning real assets, owning stocks and being slightly in debt (I don't like debt. Debt should be used for leverage rather than mere excessive consumption and you better have means to cover it, negating some of debts value).

Even if total economic collapse did come, gold certificates, foreign assets and reserves only would help you if the we or the foreign countries still have the rule of law to let you claim them. The safety of assets in the BRIC countries is commonly distrusted and these countries would suffer along with us.

If you're worried about a total collapse of the economy, a natural disaster, or just the loss of your job, owning life sustaining assets is advantageous. Water purification and storage, 72-hour kits, Food storage, medical supplies, etc. will have the greatest value in a short term crisis of any kind.

I personally believe we will face moderate inflation over the long term, so prudent diversification in all asset classes (domestic and international), real assets, extra personal goods and your own skills will help you weather any storm.

I fall somewhere on the middle of expecting the Fed to clean up the mess and total economic collapse.

The Fed has doubled the size of the money supply ( http://research.stlouisfed.org/fred2/graph/?s[1][id]=AMBNS ). Most of that has gone into running up the stock market, buying up home loans to keep rates down, and buying dodgy assets from insolvent banks who are practically required to deposit the money at the Fed who pays them interest at our expense.

So simply stated, if the Fed doesn't "burn" half the doubled money supply, over time the value of the dollar will decrease by half. Given the Fed's unwillingness to recognize the abuse of our currency in international investment and stock inflation, I doubt the fed will adequately reign in the money supply and we will face inflation. In an inflationary period, owning dollars and bonds is less desirable than owning real assets, owning stocks and being slightly in debt (I don't like debt. Debt should be used for leverage rather than mere excessive consumption and you better have means to cover it, negating some of debts value).

Even if total economic collapse did come, gold certificates, foreign assets and reserves only would help you if we or the foreign countries still have the rule of law to let you claim them. The safety of assets in the BRIC countries is commonly distrusted and these countries would suffer along with us.

If you're worried about a total collapse of the economy, a natural disaster, or just the loss of your job, owning life sustaining assets is advantageous. Water purification and storage, 72-hour kits, Food storage, medical supplies, etc. will have the greatest value in a short term crisis of any kind.

I personally believe we will face moderate inflation over the long term, so prudent diversification in all asset classes (domestic and international), real assets, extra personal goods and your own skills will help you weather any storm.