In our last piece, we touched upon some of the history of currency volatility and how in certain cases, like the Weimar Republican economic collapse in the 1920s, a form of money can become virtually unusable. While the U.S. dollar holds a different position than the German mark once did in the global marketplace, there are some potential threats to the American currency that could create problems for both investors and average citizens.
A policy paper published by the U.S. Federal Reserve in January 2010 acknowledged that the dollar’s role in worldwide finance is shifting. The central bank highlighted the ascendancy of the euro and the Chinese yuan during the past 15 years as forces that could replace the dollar as the most widely used currency. Additionally, economic pressures related to the 2007-2008 financial panic and subsequent global recession have increased the likelihood that the dollar could lose its status as the world’s reserve currency.
“As the size and structure of the global economy change, international currency use may change as well. Despite evidence of the dollar’s vitality, the currency’s preeminence could diminish in the future. Indeed, historical precedent exists for the rise and fall of the international status of currencies,” Linda Goldberg, a vice president for the Federal Reserve Bank of New York, wrote in the study.
Domestic concerns could also imperil the dollar’s value and prevalence of use. A trend began in 2012 in conservative-leaning legislatures around the United States to propose giving local governments permission to issue new currencies in the form of metal-based coins. States like Iowa and Tennessee, according to CNN Money, have begun deliberating bills that would create the authority to mint alternatives to the dollar and pay off liabilities with these funds.
While currencies have historically evolved and changed over time, volatility in the value and use of the dollar could pose significant issues for investors. As such, those who have a stake in the global economy should undertake wealth preservation methods to protect their finances from any potential turbulence. Interested folks should visit GreatWealthStrategies.com today and download a “Free Game Plan Report” to learn more.