The Little Book of the Shrinking Dollar: What You Can Do to Protect Your Money Now

Dollar’s Popularity Doesn’t Protect It

The U.S. Continental Congress created the U.S. dollar by an act of its own power in 1785. They hoped it would compete with the Spanish currency, which was the popular legal tender at the time.

Sure enough, here we are in 2012, and the U.S. dollar is now a victim of its own success. It’s America’s most successful export ever—more successful than Levi’s, chewing gum, or Coca-Cola. No export is more popular. Let’s look at the hard numbers.

Approximately two-thirds of U.S. dollars are held outside of the United States: 85 percent of global trade is made with the U.S. dollar. But all that stands to change.

I think the role of the U.S. dollar as the world’s primary reserve currency will be gone in a decade. The foundation of our financial franchise, the US$ brand is trust. That’s trust in our determination not to debase the world’s primary exchange mechanism—the world’s primary store of liquid wealth. We no longer deserve the trust, and are rapidly debasing the brand.

—Rick Rule, Sprott Asset Management

The euro is the second most popular currency in the world’s beauty pageant, although it’s taking a pretty ugly beating as we enter 2012. Still, about 26 percent of the world’s monetary reserves holdings are denominated in this 17-nation currency.

We’ll cover the details in later chapters, but for now, let’s look at a few tremors we’ve tracked that predict an earthquake ahead for the U.S. dollar.