What Will Happen To You When The Dollar Collapses?

Tyler Durden's picture

Submitted by Jeff Thomas via Doug Casey's International Man blog,

?Historically, when a nation’s debt exceeds its ability to repay even the interest, it can be assumed that the currency will collapse. Typically, governments exacerbate the situation by printing large amounts of currency notes in an effort to inflate the problem away, or at least postpone it.
 
The greater the level of debt, the more dramatic the inflation must be to counter it. The more dramatic the inflation, the greater the danger that hyperinflation will take place. No government has ever been able to control hyperinflation. If it occurs, it does so quickly and always ends with a crash.
 
Although there are observers (myself included) who frequently discuss what a reserve-currency crash would mean to the world, there is little or no discussion as to how this would impact people on the street level, and perhaps that discussion should begin.
 
When currencies crash, the state often tries to float a new currency. Sometimes, it’s accepted, sometimes not. Generally, the people of the country (and those trading within the country) move immediately to “the next best thing.” In 2009, when the Zimbabwe dollar crashed, several currencies were used, but the US dollar was the clear favourite, as it was the world’s reserve currency and therefore the most “spendable” currency.
 
Not surprisingly, the Zimbabwean government fought the use of the dollar, as they wanted to retain control of the economy and the people. People were therefore penalised for using the US dollar and other currencies.
 
And that’s what most governments do, but here’s where that idea usually falls down: First, the “black-market” currency is so desired by the now-jaded citizens that they do all they can to avoid the new official currency. Soon, most transactions, although illegal, are undertaken in the black-market currency. Second, since no one really wants the new currency, even the political leaders are soon using the black-market currency.
 
Ultimately, the black-market currency is legalised (since it’s the only truly workable solution), and it often becomes the unofficial currency, if not actually the official one.

First, the Euro Crash

It’s safe to say that the EU, the US, and quite a few other jurisdictions are nearing currency crashes, and in all likelihood, the euro will go before the dollar. So, unless the EU has already prearranged a new euro, the US dollar might well be chosen as an immediate solution to the problem, as the US dollar is presently recognised and traded throughout Europe. Therefore, a relatively painless transfer could be made.

Then, the Dollar Crash

However, the dollar, which is presently praised as being a sound currency, is really only sound in relation to the euro (and some other lesser currencies). Once its less stable brother, the euro, collapses, the dollar will be exposed.

As the US dollar is a fiat currency and is on the ropes, the US (and any other country that is using the dollar as its primary currency when the time comes) will experience a currency emergency at the street level that will be unprecedented.

The big question that is generally not being discussed is: The day after the crash (and thereafter), what will be the currency that is used to buy a bag of groceries, a tank of petrol, a meal at a restaurant? Certainly, the need will be immediate and will be on a national level in each impacted country, affecting everyone.

And Then…

I have discussed for some time that the US will be prepared ahead of time with a new, electronic currency. This will serve three purposes:

  1. It will allow the US government to blame paper currencies for the crash, in order to distract the public from recognising that the government itself is the culprit.
  1. It will allow the US government to create a currency system that disallows the holding of tradable currency by the population—that is, a debit card would be created by banks through which all transactions must pass, assuring that all transactions are processed by (and thereby subject to the control of) a bank.
  1. It will allow the US government to have knowledge of every penny earned and spent by any individual or organization, allowing for direct-debit income taxation.

If the US does institute such a system, US citizens will then become the most economically controlled people in the world, overnight.

It’s likely that a black-market system would spontaneously be created by US citizens in order to bypass the new government system. A portion of daily trade would occur under the table. It would unquestionably be made illegal, and we can only speculate as to how prevalent it would become: 10% of all transactions? 30%? Anyone’s guess. Certainly, the government would crack down, and penalties might become severe.

Elsewhere in the world, there would be greater freedom, but what would their currencies be? There are many countries that presently use the US dollar as one of their official currencies. After a crash, the greater the link to the US dollar, the greater the loss of economic freedom, although, in most such countries, the government is likely to be less efficient than in the US, which would work in favour of the individual.

Such countries would also have the option of switching from the dollar to another dominant currency. With the euro and dollar gone, that currency might be the Chinese yuan. The difficulty with this possibility is that, presently, the yuan is not in common use on the street.

Adoption of a currency such as the yuan would require a sudden switch in monetary policy, complete with teething problems. However, recent developments amongst the BRICS and others indicate that many countries are already seeing the writing on the wall and are readying themselves for the use of the yuan as an alternate.

A Return to Precious Metals as Currency?

A further possibility is taking place in Mexico today. Mexico is remonetising silver. A one-ounce pure silver Libertad coin will function in parallel to (and be interchangeable with) the existing paper peso. Banks will value the Libertad daily, based upon the silver price. Thus, Mexico will create a legal way for its citizens to protect themselves against devaluation of the peso, whilst creating an internal protection against currency crashes in other countries.

If the Mexican government remains consistent in its plan, it will do more than simply help stabilise Mexico economically; it will serve as an example to other countries that when the Goliaths of the euro and US dollar fall, there is a very sound alternative.

Further, the more countries that follow this policy, the more silver (and for that matter, gold) would become an international currency. It would matter little to a petrol station owner in Canada, Australia, or Chile whether his till was filled with coins marked, “Mexico,” or whether they said “Iceland,” “New Zealand,” or “South Africa.” After all, an ounce of silver is an ounce of silver, no matter what the issuing country is.

As the Great Unravelling proceeds, we would be wise to monitor what happens with the Libertad in Mexico and watch for a similar return to precious metals in other jurisdictions. As this development progresses, we might wish to consider that, whatever jurisdictions are the most forceful in demanding the continued use of doomed paper currencies (or, worse, transferring into electronic currencies), we may choose to store our wealth, no matter how great or small, in a safer jurisdiction. Further, we may choose to reside in a jurisdiction where a currency crisis will be less likely to occur; to live under a government that does not seek to monitor and tax our every economic transaction.

*  *  *

Editor's note: To help you protect your life savings from a drop in the dollar, and depending on one currency and the whims of one government, we've prepared a free, in-depth video presentation called, "Internationalizing Your Assets." 

You'll discover how easy, and essential, it is to move a portion of your savings overseas and protect yourself from rising taxes, capital controls, asset forfeiture, and even predatory lawsuits. Doug Casey and Peter Schiff round out our all-star panel of experts. Click here to watch this insightful webinar, it's completely free.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Zirpedge's picture

Won't happen in my lifetime. The dollar is backed by the full faith and credit of US Citizens.

Zirpedge's picture

It's all about cash flow. The American public are the smartest, strongest and most disciplined people is recorded history. Their institutions are superior to everything that came before them. The author of this article is obviously a communist/terrorist sympathizer.

UncleChopChop's picture

and handsome. the american people are handsome. the men all have big muscles and the women all look great in bikinis. don't forget that. 

Billy the Poet's picture

 

 

 

American boy, American girl,
Most beautiful people in the world.
Son of a frontier, Indian swirl,
Dancing through the midnight whirl-pool,
Formless. Hope it can continue a little while longer.

johngaltfla's picture

I do remember writing a blovel about this. And yup, a lot of us die.

remain calm's picture

THE SDR is Next

We are not Mexico

TahoeBilly2012's picture

At what point do people finally rebel? I mean, if Casey's scenario were to unfold, that is forcing people onto a new and digital currency, is that not a massive red line being crossed? At what point does the average Joe take up arms over the clear and utter destruction of any basic freedoms left? I really wonder. In all reality no one has done jack shit about anything YET, just grumble at the TSA at best...if they can really get away with that type of tyranny, they can get away with anything. 

I need Another Beer's picture

At what point do people finally rebel?

 

starvation   disease   finally death in that order. However it will take months for the majority of americans to die from starvation as we have months and years of internal storage .

Haus-Targaryen's picture

I like the thesis of the article, but I disagree with one of your points that your conclusion about Europe is based upon - what steps in after a EUR collapse.  

We all know the EUR collapse is coming, and I myself am actually quite surprised how long the EUR has endured.  I think it has to do with fanatics running the show, but that's just a guess.  

What I can promise you is that when it comes Germany will not get caught with its pants down.  I guarantee you the most infiltrated government in the world right now by foreign spies is not the US or Russia but Greece'S finance ministry.  I guarantee you, that as these people's salaries get cut, slashed, and their pensions destroyed, those who work there, be it a secretary, the mail boy, or Varoufakis' Thai sex slave have sold out to some foreign government or another, be it the French, the Germans, the Americans, the Russians, etc., etc., etc.,  

Europe has had its own "reserve" currency before -- it was the DM.  IF the DM comes back it will most definitely assume this role almost immediately as everyone is clamoring for them to prevent the destruction of their savings in whatever shithhole Mediterranean currency their government employes.  I think a NEURO would be better, but we'll see how that works out.  

I think that if the Germans could bring a lot of the countries ordering the Baltic and North Sea into a currency, and the countries bordering the Med got their own currency one would have many of the benefits of the single currency without the "oh fuck maybe the Greeks and the Germans look at money differently" that the continent is experiencing right now.  

I'd also be interested to see a Slavic based currency, but this configuration would put the Polish in a really weird spot.  The Polish are ethnically Slavic and culturally Slavic, but Religiouslly & Monetarily very western.  They are essentially the French of the Slavic world.  

Max Steel's picture

yeah i would like to see on what basis youre guaranteeing that most spied country is greece finance ministry because i got an article showing russian spies are at much large in usa . not even during cold war they had such reach .

mkkby's picture

This article makes the point that I've been saying now for years.  Before the USD loses reserve status, we will first see the yen, pound and euro collapse. 

The euro is your 18 month warning.  I don't know or care what replaces it -- maybe german DM.  The US dollar is the flight to safety, UNTIL someone comes out with a stable alternative.  Once flight to safety changes to something new, the dollar is on it's last leg. 

Your 18 month warning is the time to get into hard assets before you lose any savings held in fiat.

readmylips's picture

when the belly aches from hunger.

 

and maybe when they see their children crushed by tanks in the street.

Sages wife's picture

When there is food on the table, there are many problems. When there is no food on the table, there is only one problem.

The four horsemen; war, conquest, famine, and death.

James_Cole's picture

A further possibility is taking place in Mexico today. Mexico is remonetising silver...If the Mexican government remains consistent in its plan, it will do more than simply help stabilise Mexico economically; it will serve as an example to other countries that when the Goliaths of the euro and US dollar fall, there is a very sound alternative.

Lol oh gawd that's good.

hobopants's picture

Only saturday night could produce a dollar collapse article of such brilliance.

remain calm's picture

Please read the Death of Money, by Jim Rickards. The SDR has been in the works for years. The US, Europe and China arel all be big players in the new currency. Read the book, its well research and foot noted.

 

USisCorrupt's picture

Rickards is nothing but a Mole and not to be trusted.

Oldwood's picture

No one is to be trusted...not even you.

petkovplamen's picture

and superheroes! Dont forget the superheroes! Americans are superheroes!

TheGreatRecovery's picture

And Americans are the best-smelling people in the world.

And Americans are not as obese as some people are, mainly people in the South Pacific and in Kuwait and Saudi Arabia, who don't have to work, and so they just sit and watch American TV all day.

TruthInSunshine's picture

Blah, blah, blah, blah...USD currency collapse preached forever while people all over the globe can't literally get enough USD.

If anything is in a secular bull market, about to break out to the upside, it's USD.

Short Japanese Yen, Chinese Yuan, Euros, Mexican Pesos, Russian Rubles, Indian Rupees, etc.

The stock & bond markets are going to get insanely volatile no matter what the global central banks do or don't do - and there's going to be a literal flight to USD and all of its forms (e.g. Treasuries).

dirtscratcher's picture

@ Zirpedge. I appears that some folks don't recognize sarcasm. You might want to exclude them from your opinion that the American public is the smartest etc...

Savyindallas's picture

"US Institutions" are owned and controlled by a degernerate elte that views 98% of humanity as ants  -ready to be squashed and exterminated at their convenience. Do you actually think the US Supreme Court gives a shit about the Constitution? Do you actually believe US presidents like Obama, Clinton, Bush serve the people? Or Congress? There are but a handful of US representatrives who do not deserve to be shot for treason. They are corrupt  -they are owned. Do you actually believe the US mainstream media -owned lock, stock and barrell by 6 criminal corporations  -actually tell the truth and report real news -rather than reading the script that the Ministry of Truth gives them daily? If you really believe all this (which I believe you know to be untrue) -you are deluded and ignorant. The good news is that you have lots of company - you are part of the ignorant, immoral majority. 

Zirpedge's picture

So much misplaced anger and resentment can't be good for you. Why do you imagine that "The Elite" want to crush humanity like ants? Maybe if you practiced a positive outlook and surrounded yourself with success, some of it might rub off. Would you be so angry if you lived comfortably? (Frankly, if you are an American citizen I have a hard time imagining that you don't live comfortably. Count your blessings your not a Palestinian or Iranian, I hear those places are terrible to live in) 

Renfield's picture

MBD, is that you? Upvoted for making me giggle. (Either you or the whiskey, but the night is young so I think it's you.) I LIKE being angry. But yeah I have not tried that comfy living thing yet. I will head out to the pub soon and see if I can find me some success to surround and rub off with.

Savyindallas's picture

I see what's coming. You don't have enough fingers and toes to count all the countries with "comfortable" people who had their lives destroyed due to the actions of the elites who decided they were ants who needed to be crushed due to the power and greed - and that's just in your lifetime. I just see that what goes around comes around  -the elites who have used the USA as their engine that drives globalism - have pretty much sucked us dry. America is now the most hated, despised country in the history of humanity -by "friend" and foe alike-  and they have pretty much sucked the lifeblood out of us. Our turn is coming soon  -very soon. Live in your fantasy world of ignorance  -you will never see what is coming until it is too late. 

TheGreatRecovery's picture

Some other terrible places to live are Cuba, Venezuela, Russia, China, North Korea, Africa, the entire Muslim world, the entire Buddhist world, and maybe the entire Greek Orthodox and Russian Orthodox world.  And wherever there are Mormons and Scientologists and Atheists and Agnostics.  And California.  The best place to live is Rome.  Second best is Jerusalem.  Third best are Manhattan, upper Long Island, south Miami Beach.  Havana will be good after we get the Mafia back in there, but first we have to decide how to bulldoze Las Vegas?

P.S.  Many terrible place to live are also great places to visit.  For example, some say the BEST hookers are in Russia, the BEST cigars in Cuba, the BEST coke in Colombia, etc.  If you live a boring comfortable life, why not take your vacation in a place that is great to visit and terrible to live in?

drendebe10's picture

"...smartest..."    LMAO...  that-s Y the sheeple elected the fudgepacker twice...

stuman's picture

I love the smell of sarcasm in the morning ;)

Lynn Trainor's picture

Delusions of grandeur.

 

 

Fukushima Fricassee's picture

"King Dollar" Is that Obama's pet name for Reggie's dick?

serotonindumptruck's picture

I admire your optimism.

Unless the negative, detrimental consequences of a "dollar collapse" have an immediate effect upon my lifestyle, I couldn't give a rat's ass.

Bring on the Apocalypse already. This shit is getting old.

cornflakesdisease's picture

and a plethora of aircraft carriers . . .

Nexus789's picture

Yes, 300 or so million when there 6Billion other people on the planet with divergent ideas about what should be the 'currency' the world should us.

TheGreatRecovery's picture

Most US citizens have lost faith-and-credit in Congress, the Presidency, and the Supreme Court, i.e., the entire swindling oligarchical USA government, i.e., the USA. 

So... WHO SAYS that US citizens "back" the USA dollar with their full faith-and-credit?

Heck, the USA government doesn't even back the USA dollar any more, since the USA government isn't doing anything about corporations, including banks, who are more and more saying, "our corporation does not allow any transactions using actual USA paper dollars; our corporation only allows electronic transactions using no actual money."

One might expect the President to step up and tell the Secretary of the Treasury to take action against such banks, and one might expect Congress to write a new law taking action against such banks, but I have not heard of either doing anything.

The USA might as well go back to using the UK Pound, for all the difference it would make in anything that is happening these days in the USA.  In fact, the USA might as well go to the Queen and ask if the 50 States could have 50 seats in Parliament, and the 50 States would then give up their Statehood.

drendebe10's picture

"..most US citizens..."    LMAO.....  if that were true they wouldn't havr reelected the fudgepacker twice....  "most" are completely oblivious as to what is really going on....'

TheGreatRecovery's picture

I agree. 

But was Romney any better?  (I'll never know.)

Was McCain any better?  (I'll never know.) 

That's why I keeps saying, "vote in the Primary elections". 

Also, I BELIEVE that most US citizens don't vote, or at least, don't vote in most Primary elections, when their vote is most important.

Winston Churchill's picture

Hope you are enjoying your last few months on earth.

Cancer or syphillis  ?

P'Od_Accountant's picture

You are a fucking retard.  it could happen next week. 

A Lunatic's picture

I'm not going to cry over the remaining three cents......

cpnscarlet's picture

1) Silver monetization - if it happens in Mexico like the man wrote, and the COMEX continues to be the silver price benchmark. Physical silver will run out of the banks FAST. ...won't work. Only an unrigged MEXICAN silver exchange could realistically set the price of silver in pesos.

2) The man talks about "severe" government penalties on black market commerce after a dollar collapse. It's pretty obvious this man's not an American. After a dollar collapse, there will be many (most) places in America where government attempts to stop "black" market transactions will be met with severe citizen penalties (bird shot to hollow point - you name it). The New Tea Parties will begin.

3) This reads like the Stansberry Research reports from 2011-2012 about the "coming collapse". Those weren't right either.

Nice Try.

sunnyside's picture

Yes the dollar will crash, yes an electronic currency will be implemented by the fuckers, yes a black market barter/trade system will spread (it might even use old greenbacks or gold or silver).  If it hits 30 % or so of the real economy, then the people win.

Bring it on.  What was that line in Star Wars, "The tighter you grip, the more star sytems/planets slip through your fingers"

keremetski's picture

Blythe Masters marrying Fart Chilton.
Give my Silver back.

Silver_K-9's picture

Man, how would everyone else get a hold of Precious Metals at that point... Coin shops, mints ect would sell out over minutes right?

It would be Chaos/Jade Hlem/Mad Max fairly quickly...

MonetaryApostate's picture

Maximum Chaos coming to a city near you....

In case you missed the warning....  http://www.imdb.com/title/tt0116629/  (Alien Invasion has already happened)