What to do as the dollar drops?

[TNDemo]

I have been thinking in recent months about the falling dollar and trying to consider what I should do on a personal level, but I'm rather stuck in inertia. About the only thing that comes to mind is to buy necessities and stockpile them but can't really come up with much of an overall plan. Should I worry about money in the bank? I kinda feel like worse times are impending but I am pretty much clueless as to what I should do to prepare. Selling my house is obviously not an option since you can't give a house away here anymore (which is a first and very strange after how houses sold before a sign ever hit the yard in previous years). Should I just continue to be an ostrich and pretend nothing is happening or should I actually be doing something?

[cornermouse]

1. Necessities for life.

Shelter
Water
Fire
Food

Your house provides the shelter and, as long as your water bill is paid, water. I wouldn't get rid of the house. You might want to plant a garden next summer though.

[lonestarnot]

2. Wipe our asses and move along.

Whatcha gona do?

[Wcross]

3. Buy gold or keep your savings in "real money" (euro's).

I put 50% of my 401k into gold mining stocks, 30% into energy & 20% into foreign stocks. Although I still have exposure to the risk, gold will continue to rise relative to the dollar. Energy prices will continue to rise in relation to the dollar. It may not be the very best thing to do but this Friday I came out pretty good despite the 360+ drop in the Dow.

I suppose you could buy necessities you will need in the future but buying gold would be a good option. http://www.kitco.com/market/

ON Edit;- The LAST thing you should do is pay off the house & credit cards. With every passing day you owe them less due to the declining dollar.

[ret5hd]

9. Euros (or yen, or remnibis, or any others) are no more "real" than dollars.

They are all decreasiing in value, they are all fiat currencies, they are all only backed by "faith".

[MadHound]

12. Yeah, but there's a lot more faith in the Euro than the dollar

In addition, it is looking increasingly like the Euro is becoming the petro-currency of choice, so it should survive an economic downturn a hell of lot better than the dollar.

[Bigmack]

4. Us, too.....

"I have been thinking in recent months about the falling dollar and trying to consider what I should do on a personal level, but I'm rather stuck in inertia..."

Me too!! I think too much about this. Not so much "inertia" as "Don't know what to do."

I've moved some money to Canada, paid off bills, and have cut spending, but I think we're gonna need to do more.

Two retired teachers on fixed incomes are pretty vulnerable.

[ixion]

5. I bought raw land out in the middle nowhere

this will (hopefully) accomplish two things:

a) It puts my money in a commodity (something real) that is currently not over-valued and will hence hold its value, because it is a resource.

and;

b) Give me a place to live that will allow me to provide the basics: food/water/shelter.


Just my two cents. :hi:

[no_hypocrisy]

19. If I were to buy land, I'd check out the prospects for water now that

there's no assumption of guaranteed water indefinitely.

[ixion]

21. absolutely... arable land is better...

all three of them that I bought are very near water. One, in fact, sits on top of a huge aquifer.

[Turbineguy]

6. I have this discussion with my wife a lot

Since one currency valued against another is a proxy for the economies at large, the situation will probably start to resolve its self as soon as Bush and his buddies leave office. When Clinton was in office a Euro was $0.75 US. The US dollar is a commodity who's attractiveness is now in an ebb. What we need is an economy based less on borrowing and fake statistics. In the early 90's after the heavy borrowing of 12 years of a Republican president my friends and I were worried that the US economy would collapse under the debt. We seemed to only have two choices, default or monetize by inflation. As it turned out, neither happened. The one saving grace in this country is that when things get tough, Americans get to work. I am not saying that as some sort of shallow patriotic utterance, it's simply true.

In the mean time what can you expect to see happen? European and Japanese (and possibly Korean) cars and other products will rise in price in the US but not as much as the dollar will drop. Most of the effect of the dropping dollar will be felt by people while on vacation where the prices are set by the local economy but the exchange rate is not. Oil prices will likely continue up as a result of the US currency drop so you can hedge by buying dividend paying oil stocks or simply driving less (which is probably a better idea in any case). Buying gold might seem like an attractive idea but I'm not sure. Gold, like jewelry removes productive wealth from the economy. If you really get into a jam, you have try and sell it along with everybody else who bought gold.

The best way to deal with a dropping currency value is to spend your money more wisely on better quality goods and services.

[skids]

7. One idea I have yet to implement myself...

...on the "stocking up" front: buy a whole lot of canned goods that are good for at least a year.

Put them in the basement and hopefully never use them.

At the end of the year, that is your holiday season charity gift -- buy new canned goods and give the old ones to a homeless shelter while they are still good to use.

Not really a good hedge against the dollar, just against disasters (flu, natural disasters, or sudden, runaway inflation.)

(EDIT to add: one thing that doesn't go bad and can work as a dollar hedge is pills -- many medicines and vitamins are good for a lot longer than it says on the package -- years. Though not B vitamins, those get pretty mangy.)

[gateley]

8. I've thought about this as well and it's disturbing. I keep harkening back to

a cartoon in my grade school history book showing a German citizen pushing a wheel barrow full of cash to the store to buy one loaf of bread. I wonder if our dollar will become worthless as well.

If I had money to invest I'd go gold and Euros, or whichever currency was the strongest.

But beyond that, I worry about how the environment will have an effect. If the changes continue to occur as rapidly as they are now, I worry that we may be fighting in the streets for food - can't eat gold or euros. I wonder if Soylent Green was more prophetic than we imagined...


There have been some good suggestions here which I think are doable and not alarmist. I don't want to go over the edge and hoard food or be afraid to buy a new pair of shoes. If it comes to that, then I'll have to adjust.

[Turbineguy]

14. And when the guy came out of the

bakery his wheel barrow had been stolen and the cash dumped on the sidewalk.

I don't think that will happen here. There are other avenues. Even though the reparations for 8 years of Bush governance will be enormous, they will be within our control unlike what happened to Germany in the 1920's.

[gateley]

15. Thanks for the calming words - they give me hope! nt

[mmonk]

10. Look for a hedge. I bought euro shares when everyone told me

not too, that the dollar would rebound. You need to find something that increases in value when the dollar declines. When the dollar rebounds, you really haven't lost anything but maintained some worth during a difficult time.

[happyslug]

11. First, look at HOW the drop in the Dollar will affect YOU.

Fuel will go up. In the 1970s the price of oil was priced in Dollars. Technically that is still true, but in reality it looks like oil is now priced in Euros AND just invoiced in Dollars. If you can buy fuel you will need TODAY and store (if possible). This is difficult for most people, but if you can do so.

Second, look at how to reduce fuel usage. Buying a smaller car, if possible, is one thing but for most people they need the size car they have at present AND to trade it in will produce a HUGE loss. My recommendation is buy a Bicycle with decent Components (I recommend Cannondales with Shimano XT components, through I do like Sram components for they are made in the USA, if you go with Sram buy at least 7.0 level, 8.0 and 9.0 would be better., In the Sram system th higher the number the better the components). Get yourself a trailer for the bike, I like my Cycletote, for hauling items around.

A second thing I would do (and have done) is look into getting a Motor Scooter. In my home state of Pennsylvania if the Scooter is below 50 cc you do NOT need a Motorcycle License. My is 80 cc, which gets 90 mpg (Through it goes up Allegheny Mountain at 20mph, but on flats it does 40-15 mpg). For trips to long for a bicycle a Scooter is a good way to reduce fuel usage.

Buying Food is another way, moving closer to work is a third, but you need to see what you can do to reduce fuel usage, for that will go up the most.



Cycletote Trailers:
http://www.cycletote.com/

[Mojorabbit]

13. I bought a lot of food

with far out expiration dates. I have already saved money on it as the price of groceries has risen. I also have a lot of raised garden beds.

[CK_John]

16. Understand bank fed insurance protection. All your accounts in a bank

should be under the limit. Different branches of the same bank do not provide separate coverage. So if you have cd's, savings, checking, Christmas club, etc., keep the total amount in any one bank below or at the limit.

Any amount over the limit needs to be in a different bank to get fed insurance protection.

[TNDemo]

17. I'm just wondering how much protection the fed can give us.

I am just wondering what bank failures on a big scale would do as far as FDIC protection. It hasn't worried me enough to pull my money (not that I would have anywhere near the limit) but does cross my mind occasionally.

[gateley]

18. But what if there isn't the money available to pay off? These days I don't have

a lot of confidence in "federal insurance". Plus, it would just be paid out of my taxes so I'd essentially be bailing myself out. Or something.

[CK_John]

20. Fica is paid by the banks into a fund. You may not like it but this is very important info

that people need to understand. They are only insured up to a limit. All the accounts in a bank are added together to determine that limit. Many do not realize this and are putting their lifesavings at risk.

Also another important tip, stock brokerage accounts are only insured that your stocks will be replaced if stolen or the brokerage goes belly up etc.,(NOT THE PRICE OF THE STOCK).

[gateley]

22. I didn't know that about FICA - thanks. I DO know there is a limit to the

amount that's covered. When I was younger the limit was $10,000!

[CK_John]

23. The limit now is 100,000. Correction I should have put FDIC as the ins for banks.