The U.S. dollar is unique among other currencies, and a collapse of this currency would have dire consequences for the U.S. economy. The currency is used globally in trade and finance, and its failure to remain strong in the global economy would cause a chain reaction of events that could ultimately lead to an utter collapse of the US dollar. Moreover, the lack of trust in the USD will affect foreign investments in the US, which would create a domino effect that will be felt worldwide.
Money Supply Increase- Not a Good Thing!
In recent years, the US dollar has been inflating despite the fact that consumer prices are rising. This increase in the money supply has outpaced the rate of economic growth, which means more dollars in the system, which makes the cost of goods higher. This is likely due to a higher velocity of money, a measure of how fast the currency moves. Besides, the velocity of money is at an all-time high, which indicates that politicians are getting out of line.
Rise of Interest Rates
While there are several factors that can lead to a collapse of the US dollar, the most likely scenario is a dual-threat scenario. The rise in consumer prices could force the Fed to raise interest rates. Because much of the national debt is short-term in nature, this spike in interest rates would act as an adjustable-rate mortgage once the teaser period expires. In addition, if the Fed fails to raise interest rates, foreign creditors may dump the dollar.
US Dollar Becoming Obsolete as the Global Currency
In other scenarios, the US dollar will eventually become obsolete as the global currency. Instead, digital currencies will be the norm. The US dollar will soon be dead in the water. The US government is largely responsible for this situation, but they aren’t the only ones to blame.
The Federal Reserve has failed to keep the economy going and is accumulating enormous debt. This increases the country’s debt to GDP.
Despite this, experts believe that a collapse of the US dollar is unlikely, but it is important to remain vigilant. While the US government has been introducing quantitative easing in its currency, it has not been completely eliminated yet. As a result, it is now the dominant currency in the world. A major concern is that the US will not take action to resolve the problem. If the world sees a rise in inflation, they will also cut off their own exports.
The US dollar has already lost 97% of its purchasing power in 100 years. Many experts also believe that the US dollar’s failure is just the beginning. The central bank has been printing unlimited amounts of money and accruing huge debts. With the US government soaring in debt, the collapse of the dollar is inevitable. The US economy has been unable to keep pace with the world’s growing debt.