Ken's Weblog

People should not fear their governments; governments should fear their people.

Tag: dollar

  • How safe is the dollar?

    I’ve observed that some people have the idea that the US dollar is a safe store of value, and that if you buy $10 million worth of US treasuries, “you can assume that the money you put into the US is going to still be there when you need it.” I couldn’t reconcile this idea with my own memory of changing exchange rates, so I decided to do a bit of digging into historical exchange rates.

    Suppose a hypothetical rich European has €10 million that he wants to keep safe as of July 31st, 2001. He puts it all into Dollars, which at the time gives him $8,752,050. Now, ten years later, he decides to convert his dollars back into Euros, and he gets €6,137,480.09.

    If our hypothetical European had instead decided to store his money in Swiss Francs (given their reputation as the least worthless fiat currency), his €10 million would have gotten him 15,127,900 Swiss Francs ten years ago. Converting those Francs back into Euros today gets him €13,249,166.10.

    Finally, let’s suppose I had €10 million on July 31st, 2001. I had to look elsewhere for the gold price in Euros ten years ago, but found that this would have gotten 32,559.71 ounces of gold. Today, that would convert back to €52,544,860.

    I think it’s pretty obvious that if you’re looking for a safe place to store your wealth, the US Dollar is emphatically not it. In fact, attempting to safely store wealth in anything other than gold is a good indicator that someone either knows nothing at all about economics (which is actually the norm for Americans) or else is profoundly stupid.

  • The state of the dollar, in simple terms

    The Imminent Dollar Collapse, Explained To An 8-Year-Old. It’s the elephant in the room. The United States is utterly bankrupt and has been living off of borrowed money since 1971, when it defaulted on its loans — though of course, it wasn’t worded like that. Not even an income tax of 100% is enough to cover the expenses, and the US is about to go the way of the Soviet Union. [Falkvinge on Infopolicy]

    I came across this nice simplified explanation of the current state of the US Dollar a while back. It was originally written in Swedish, so it doesn’t have the “Amerika über alles” viewpoint that pretty much anything written in the US does. I thought it was relevant today given the current fuss in the mainstream media about whether the government will have to “default” if they can’t borrow yet more money.