Regardless of what media sources you follow you are likely being inundated with information about rising debt levels in the United States and the threat of the US Dollar losing value, potentially even its status as the world reserve currency. On the surface we know that these things are “bad”, but what do they mean for your money at the end of the day?
Rising Debt Levels:
There is no doubt that rising debt levels are not good when you look at the debt levels by themselves and without the context of how they work in the larger picture of US growth. Unfortunately, in our world today, we do not get exposure to much of the good news out there, nor do we get the full story many times. The graph below demonstrates that the US economy is doing better than other countries:
How does our economy (GDP in this instance) relate to rising debt levels? Simple. See the following:
- US debt has steadily risen since the country was founded.
- Some may see this trend as a negative sign to be regretted, but one of the founding fathers and first treasury secretary of the United States, Alexander Hamilton, designed it this way.
- A steady market for federal debt has been a blessing for the United States as it enables the country to raise money when needed.
- Throughout the 20th and 21st centuries, despite rising debt levels, the United States has grown dramatically more prosperous.
- This prosperity has underpinned the serviceability and sustainability of US debt. It allows the United States unrivaled flexibility today to meet challenges, like stimulus during the Coronavirus crisis to help citizens and businesses.
- While high, by historical standards, federal debt as a percent of GDP is still very, very manageable.
- This means that the US can easily pay its debt level service requirements despite the big numbers shown in the news.
There is a great deal of noise right now concerning a currency reset and digital currencies that could hypothetically devalue not only the US dollar, which is currently the world reserve currency, but many primary currencies around the world.
If you peel back the layers, you will likely find that the global currency reset is comprised of many theories blended to make an overall belief system. Part of this belief system says that there is a coming overnight crash to the US dollar. According to the theory, this crash will be felt on a global level and many currency values will change.
As a result, many people are enticing others into doing something different with their money. On the far side of the scale are outright scams. On the more moderate side of the scale, there are investment strategies based on protecting yourself from the impending crash or even profiting from it. Several strategies are being promoted that range from buying gold and silver to purchasing crypto and even Iraqi and Vietnamese currencies.
All of these strategies have one thing in common. They are based on creating fear and uncertainty so you will do something with your money. An important consideration, when someone is trying to get you to do something with your money, is to “follow the money”. How does the promoter profit from what you do?
We may indeed have a reset of some sort, as the world reserve currency has changed many times throughout history as shown below:
- 1450-1530: Portuguese Real
- 1530-1640: Spanish Real
- 1640-1720: Dutch Guilder
- 1720-1815: French Franc
- 1815-1920: British Pound
- 1920-2024: US Dollar
Source: Personal Finance Club
Throughout the many world reserve changes one theme has remained consistent: rich people stay rich, regardless of what currency their wealth is valued in. This is especially true for people who have their money invested in assets such as stocks, bonds, and real estate. Assets like these have gone up in value over time whether they have been measured in US Dollars, Pounds, Francs, etc.
Troubling news will always make headlines because it grabs our attention, and in turn, is great business for the newspapers and media outlets. Instead of focusing on the doom and gloom in the world and attempting to time the market, history suggests that the #1 thing you can do to secure your financial future is to block out the media and stay invested in a well-diversified portfolio. Your future (and perhaps wealthier) self may thank you!
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