Will The Dollar Collapse?

In order to pay for the stimulus programs the United States has to issue over $1 trillion in new bonds.  They sell the bonds at auctions mainly to overseas investors.  Each treasury holds the risk of failure.  The dollar could plumet if investors feel U.S. bonds have gone beyond their capacity.

It’s a very frightening prospect.  The dollar has been known as the world’s reserve currency.  Other countries would keep their savings there with low risk and a low return rate.  Even though we’ve had budget problems in the U.S. we are still considered to be a low risk investment.  The only reason the U.S. dollar is a low risk investment is because they don’t expect us to default on our debt.

The risk that investors face with U.S. currency is that their returns cannot keep up with the inflation.  Still many investors feel it is a safe investment.  Status of the dollar seems to protect it and keep the value up.  China having trillions invested in the U.S. dollar would not benefit if the dollar collapsed.

All currencies are traded just as easily as stocks and therefore the dollar can fluctuate with and against gold and the other world currencies.  Many investors rely on gold as a safe investment against the possibility of the dollar collapsing.

The dollar should maintain it’s currency status so there should be no fear of it collapsing.  Many people would lead you to believe you should be fearful of investing in the U.S. dollar.  The only competition that the dollar has is the euro which has not proven to be reliable.  Investors should be more concerned about what the dollar vallication means to the businesses and the profits or losses the businesses have.