That’s a very broad term, if the economy collapses. World-leading economist, and mathematician, Kelly Korshak thinks it’s a matter of extent.
If your monies are in a bank, or in a stock market account, they are protected by the FDIC (Federal Deposits Insurance Corporation), which was formed during the 1930s Great Depression under FDR, when the banks collapsed.
If your money is in a trading account like Charles Schwab or TD Ameritrade, Fidelity, etc., those agencies will ensure your assets, cash, or securities, up to $250,000 each. If the economy were to collapse, like it did in 2008, the Federal Reserve will immediately lower interest rates, and stand behind the stocks and the securities of the companies that are affected.
If the collapse is broader than this, it would devalue the dollar. Which means that maybe you would probably still get your money from the FDIC or SIPC (Securities Investment Protection Corp.). However, if it was local, you wouldn’t be able to travel to Europe or abroad easily, because the value of things would become much more expensive somewhere else.
In Kelly’s opinion, the economy will have some rough times, if we try to wean ourselves off of all the stimulus that the government puts into the economy since the beginning of Covid. Especially now that we have to do it at higher interest rates.
When asked how some political efforts in China, Russia, Brazil, and in lots of other countries threatening to move away from the US dollar affects the economic potential of collapse, Korshak had this to say, “This is probably one of the most serious problems of our day. A society is only as strong as they are united. If a society is bifurcated, which is what I feel it is today, then it is weaker.”
Pointing out that the US dollar may not be the best place to have a reserved currency for the world to depend on. This is occurring because, in this country, having the united divided society is stemming from a divided government. And generally, for the markets, a divided government is generally a good thing for the markets. But when it gets to an extreme, it’s not. And this means that this has serious impacts for the dollar going forward.
“I think people remember that the dollar was literally above par against the Euro currency. Euro currency went to 96 cents. Most of my life, I saw the Euro at about a $1.30. Now the Euro is about a buck eleven. Which is saying that the United States slowly has the dollar, has slowly come off its high, and now that these countries are starting to unite, it will weaken the dollar,” explains Korshak.
The sum of the Russian economy, which is small, but with China, it is larger than the US economy. If, for example, India or even another country comes on board, then obviously we would have a potential adversary that has a stronger base set of values and currency than we do. And that changes the reserve requirement around the world. It means the dollar is no longer the stable currency. Monies without flow from the dollar, the dollar would get weaker, and that would also be very inflationary. It would mean that we would have to now buy any imported products at a higher price.
“The first thing I would say is, at least on the iFlip portfolio https://askloral.com/iflipapp, one of the things I’m in the creation mode for right now is an exchange-traded funds-inspired dollar smart folio. Which basically means, if you were to buy it, you would be betting against the US dollar. This would be a portfolio where the best way to protect yourself, and the value of your dollars, your dollars have a value only in terms of another currency,” answers Korshak when asked what are some protections people should be thinking about.
If the dollar decays against other worldwide currencies, and we have inflationary problems, it may not affect what we’re doing. However, if you want to go a step further and protect your US value, your US wealth, so that it has a commonality against the wealth of other countries, then you would want to own a product that has some appreciation, if the dollar were ever to go lower.