This article will talk about the US dollar and inflation, which is subject to this popular world currency. Its growth rates, risks associated with accumulations in this currency will be considered. In addition, mechanisms have been proposed that make it possible to secure own investments from dollar inflation.
Cheaper American Money
Many people adhere to the erroneous opinion that if you convert the national currency into American dollars, this will allow you to reliably and reliably protect yourself from inflation. But this is far from the case. The US currency is also subject to this phenomenon. Of course, the inflation rate of the dollar is much lower than that of other monetary units. Especially if you compare with the currencies of developing countries, which include Russia (and Ukraine).
Over the past ten years, dollar inflation has been around 15%. In addition, there is a risk that inflation processes relative to the US currency may accelerate. The following is an analysis of these probabilities.
The role of American currency in the world
Dollar inflation also occurs for the same reasons as any other currency. The US Federal Reserve has been criticized for many years for creating a “soap bubble, ” which has led to a drop in the real value of the US currency. America issues a huge amount of dollars using a low discount rate and a bank multiplier. But at the same time, this state of affairs does not lead to hyperinflation in the USA, which causes bewilderment and questions among ordinary people.
And the chest opens simply. The American currency is the main reserve currency unit of many states of the world. The dollar is a hegemon that is used in most international financial transactions, and therefore enjoys certain advantages.
Dollar Reliability Factors
Firstly, it should be noted the tremendous trust that the American currency has throughout the world. The dollar in the United States and outside of America are two different currency units. In the domestic market, this currency costs much less than abroad. The same goods and services in the USA and outside the country have different prices. How much is a dollar? In America, of course, less than in the rest of the world.
Secondly, it is necessary to emphasize the great demand for American currency around the world. The population of different countries uses the dollar as a tool for calculating goods and services and as a way to accumulate cash. In this case, we can draw an analogy with Bitcoin, which has no material value whatsoever, is not supported by gold and foreign exchange reserves, trade balance, GDP and other classic “muscles” of currencies. But people trust him, and there is a high demand for him. And this, in turn, is the basis of the hardness of the monetary unit. The situation is similar with the US dollar.
In addition, the third aspect should be highlighted. This is the export of inflation from America to other countries of the world. The fact is that the United States, when buying goods and services abroad, pays exactly in dollars. So, for example, oil is purchased in the Arab countries, and electronics and components in China. Thus, inflation is stimulated in these states, and in the USA the dollar remains in its position, still characterized by reliability and stability.
But despite these factors, as noted above, the US currency is also prone to fall in price in the region of 1.5% per year. This is especially noticeable over a long distance. What is dollar inflation by year? For example, one thousand dollars in 1950 is equivalent to 50 thousand US dollars today.
Methods of dealing with inflation of the American currency
Is there a mechanism to protect their savings from US dollar inflation? Of course. There are several tactical maneuvers that you can use. First, the diversification of savings by redistributing savings between other currencies. You can divide your money into several equal parts and purchase them in euros, Chinese yuan and the Japanese yen. This will redistribute the risks of economic and financial crises between different parts of the world. In this case: Europe, Asia and America.
In addition, it is possible to prevent a possible acceleration in the inflation rate of the dollar by investing savings in real assets. For example, real estate. This will protect savings by investing in a real good, the price of which will not collapse, regardless of how much the US dollar is worth. After normalizing the economic situation and climbing to Olympus a new world currency, the investor will always be able to sell his asset for the same equivalent that was spent on its acquisition.
