The Tipping Point

5 Is the Dollar Facing a Tipping Point? How a competing gold-backed currency could hurt American savers It is fairly safe to say that if the BRICS countries can figure out a way 7 to make a BRICS gold-backed currency happen, it eventually will. It may not dethrone the dollar completely, but many experts are saying it could split the global economy into a more bi-polar structure rather than a U.S. dollar centric one. Will it happen or not? That remains to be seen but the efforts are not going away, so it is worthwhile to consider the potential implications for savers and retirees here in the U.S., and they could be quite serious. 1. Sovereign wealth transfer: Real tangible wealth in the form of gold could begin to flow out of this country in exchange for consumable and depreciating goods. 7 Over time, this could be devastating and extremely difficult to reverse. They would end up with all the gold, and we’d be left with broken down washing machines and obsolete computers to show for it. 7 2. Price Inflation: First and foremost, if the level of international demand for U.S. dollars declines precipitously, but our politicians keep churning them out – or worse: accelerate the churn - they are likely to stay here and chase goods here at home, increasing prices . 3. Dollar Repatriation: Dollars already abroad could flow back to the U.S. exacerbating the problem, chasing goods here at home, increasing prices . 7 4. Trade deficits widen: There will be less incentive for the manufacturers of the world to produce goods for U.S. dollars, leaving us with fewer imported goods to buy, which would likely increase prices. 5. Wage adjustment lag: In theory, wages and yields are supposed to adjust with inflation, but it always lags and it never seems to keep up with rapidly increasing prices. This will impact retirees living on investment income, social security payments and other fixed income sources the most and they will have the least flexibility in devising alternate streams of income. 6. Savings could quickly evaporate: With all the price increases, savers could see their nest eggs quickly absorbed at the grocery stores, just paying for normal day-to-day items. Can you imagine 3 times as much for a gallon of milk? How long could anyone’s savings hold out after significant price increases like that? 7. Gold demand: If there was an actual gold-backed currency again, gold prices might be one of the bright spots, and one of the most practical assets able to keep up with inflation and likely surpass. Gold would probably be one strong defensive holding that would greatly soften the blow during a chaotic adjustment period. Sound like a nightmare scenario? It could be, and that is why many experts, like Robert Kiyosaki 9 , are jumping up and down sounding the alarm bells about this. Will the U.S. look like a third world country in 20 years because of events unfolding today? Only time will tell, but owning precious metals now could be your best defense against these anti-dollar moves coming down the pike. www.LearCapital.com