The USDs’ Reserve Currency Continues To Erode: Retired Investors Should Prepare Now
It is likely that the Chinese Yuan will be awarded reserve currency status by the IMF (International Monetary Fund) by this time next year. The IMF recognizes the Euro, Japanese Yen, British Pound Sterling, and U.S. dollar as having reserve currency status. Based on reports from Bloomberg today, it is likely that Yuan will be added to that basket in late 2015 (http://www.bloomberg.com/news/2014-12-11/yuan-has-real-shot-at-imf-blessing-on-reserve-status.html)
The inclusion of the Yuan as a reserve currency will degrade the status of the United States Dollar because as more and more trade occurs in non-USD currencies, the less demand there is for U.S. dollars. That could result in the US needing to pay a higher interest rate on its debt in order to continue to attract buyers. It is possible that interest rates may have to increase several percentage points over time.
Low interest rates have allowed the U.S. Government to run deficits with impunity. With $18 Trillion of national debt (not included unfunded liabilities like Medicare and Social Security), an increase of 3% in the interest rate would result in $540 billion in additional annual interest.
In 2014, the total budget was a little over $3 trillion so the additional interest would consume 18% of our current budget.
The U.S. Government will either have to drastically cut services and promises (like Medicare and Social Security) and/or raise taxes to exorbitant levels.
Either way, it is imperative for those who are retired or near retirement to recognize the seriousness of the situation and to begin formulating a plan of how they will be able to function in such a ‘New World Order’ where the United States isn’t as dominant as she currently is. There is one thing for sure, any transition away from the USD as the primary global currency will roil markets and economies.
These are just some of the threats that are followed by the National Security Investment Consultant Institute and those of us who were part of its Founder’s Class. I have spent years developing patented systems and processes that are designed to help me safely navigate my clients through major market events. It is a duty that I take very seriously.
I still believe that the United States is the best country in the world. As a nation, we enjoy freedoms, opportunities and advantage that most around the world only dream of. There may be difficult times ahead, but I remain convinced of our ability to overcome and to prosper.
One nation under God…
Here are some other articles on this topic that you might find of interest:
The dollar’s 70-year dominance is coming to an end (http://www.telegraph.co.uk/finance/comment/liamhalligan/10978178/The-dollars-70-year-dominance-is-coming-to-an-end.html)
International Monetary Fund Special Drawing Rights (http://www.imf.org/external/np/exr/facts/sdr.htm)
US Debt Clock (http://www.usdebtclock.org/)
Putin Took Another Sharp Turn Away From The West
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