USD days are already numbered, and being cut short too by the recent fiscal disasters.
And I can tell you that the bond markets are not going to tolerate this situation
with the US fiscal deficits for long - in fact they may not even have the money to carry 2 or 3 $trillion a year of US T issuance alone.
So, in spite of the fact there is this USD deleveraging going on now that is strengthening the USD, let's be objective/honest and realize we are very near the end of the present world financial structure - and anyway we already see it in a shambles now. And this shambles is probably merely a secondary effect of the USD entering its final days.
I think we have 2 to 4 years left max before a major USD devaluation appears, probably rather suddenly.
Some things that will happen when the USD goes bye bye
What you can expect in the US and probably every other country over the
next several years:
Huge tax deficits from a weak economy - higher taxes and likely
targeting the huge pool of tax deferred accounts for revenue. Even
possible nationalization of retirement funds - IE being forced to hold US
T bonds. All it takes is an economic emergency for Congress to do all this
- or a Presidential executive order. In other countries, just substitute
your own country's Treasury bonds for the US T bonds. Probably all the
same things will happen in your country.
After that happens in the initial Bond market heart attack for US Ts,
we get to phase two - effects on the USD and USD system...
This phase begins with a bond revolt and will either be an immediate
cause of instant emergency tax hikes, and likely government
nationalization or at least big tax hikes on tax deferred account
withdrawals. The government does all this rapidly with little debate, as
in last Fall 08, rapidly pushing through emergency measures.
The USD likely will start devaluing immediately if there is a bond
revolt. Depending on when this bond revolt comes, the USD can devalue
either orderly or rapidly and chaotically. Hopefully it is orderly. Think
of an initial halving of your purchasing power, say over a period of a
Prices double or triple on everything essential in a year.
(Remember, we mentioned this is possibly going to happen in a few
years, I am not talking in ten or twenty).
If the US bond market rebels on US Ts, expect foreign exchange
restrictions. Expect your retirement accounts to have restrictions placed
on them. On withdrawals, limits put on, etc. You will not be able to
legally take money out of the US (or your own country).
In phase 3, the US fiscal deficits rapidly multiply to $4 or 5
trillion. Now the world holds its breath. Estimated time of this to happen
is 2 years out max.
Phase 3 marks the beginning of the actual end of the USD and final
devaluation of its remaining value. Hopefully, this is an orderly process.
The likelihood is it's not orderly, but chaotic.
OK, if the USD at this point is halving in value, prices doubling or
tripling, we will have shortages. If prices cannot be raised fast enough,
supply lines stop being refilled.
Once the USD starts its final decent, expect severe shortages in
stores and even gas stations.
After all the chaos and so on, a new currency is started, probably one
that is global or has global components.
I hate to say this but a typical revaluation of a totally collapsed
currency will drop two to three zeroes off its denomination - devaluing
your money by a factor of 1000 in purchasing power.
If the revaluation number is two zeroes, then if you have 10,000 USD
today, when the new currency comes in - call it NewDollar - you will
receive $100 in new dollars, 100 ND for your $10,000.
If you have not already put your wealth into paid off real things, and
not relying only on financial accounts, you will lose your savings either
through taxation or devaluations.
None of us in the West have seen anything like this, although there
are a few older people who lived through the Depression who saw it, but
then the USD did not collapse. This time it is going to collapse. Hard to
say just when, but it's already baked into the mix.
So we are not going to list all the outcomes. But you get the idea. Any moves you make need to start being done now, not at the time of crisis.
Most of the people in the US/West have no idea of just how fragile the USD really is, and will just take the hits to their accounts. I estimate that less than 1 in 100 people will make any preparations or moves at all. The problems I outlined above will likely happen all over the world, not just to the US.
China already anticipating trouble
Which is why China is already making moves, big ones and rather quickly too, to position the Yuan to take over if necessary (in Asia or the China trade sphere).
Commenting on my 2 to 4 year estimate of life for the USD from now, remember I stated that the Chinese move in advance, and are NOT only reactive like the US is. The preparations the Chinese are making now just reinforce my 2 to 4 year USD estimate - as the Chinese are already making significant preparations for a post USD dominated world.