By now we all have been acquainted with the decreasing value of the US dollar. What you don’t know about this situation could hurt you. Learn why this is happening, what the implications are for your retirement portfolios, and what you can do today to safeguard investment assets you have spent a lifetime creating. How much are you willing to pay for a tank of gas? 80 to fill up an economy car.
No, this isn’t some future doomsday projection of oil prices. This scenario happened to a colleague on business in Europe lately. Youre not planning a trip to Europe, which means you ask, Who cares? Well, the consequences of a weakening dollar are not limited to abroad transactions. Its important that you can know how the declining US currency impacts Americans state-side exactly. Exactly what does this mean to you?
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The US money is considered the world trading money. Which means that most goods and services are costed in US dollars. Any prolonged weakness will cause countries trading with the united states to raise their prices in anticipation of further decline. Many commodities such as, oil, espresso, chromium, copper, and iron have set record prices due to the decrease in the buck already.
As the prices for foreign imported goods increase, so do the prices for the raw parts and materials utilized by US businesses. As a result, the purchase price will can also increase on all goods produced within the united states. In short, Americans can pay more and receive less. This economic effect is recognized as inflation and its impact is specially devastating to retirement and savings portfolios. This drop in the US dollar means a decrease in the purchasing power of the money and a related reduction in the typical of living for individuals who earn, spend and save US dollars.
In short, a weaker money means that Americans will continue to work harder for less. The Euro isnt the only currency rising against a falling dollar. The Australian money is trading at six month highs and the Japanese Yen is near its highest trading rate in 8 months. The Canadian Dollar has just relocated to multiyear highs against the united states money.
Foreign investors are closely viewing the huge US deficits in the federal budget and trade accounts. A significant cause of the existing deficit is the consequence of increased development rates in the U.S. When the U.S. develops faster than other world economies, we eat far more goods and services from overseas than they consume from us.
This creates the imbalance inside our trade accounts that people are experiencing today. We should also be mindful of the effects that the movement of international investment dollars into the US has on our economy. THE UNITED STATES markets experienced a more substantial come back on capital than Europe or Japan going back 20 years. Foreign governments such as China and Japan have also purchased large amounts folks Treasury securities as a reserve, to be able to back their own currencies and protect from the dollar from falling too fast and hurting their economy. Worldwide money traders recognize these styles.