You can buy gold online easily and cheaply from Kitco or U.S.A Gold.

Both of these
firms have been around awhile and are reputable. Gold is sold in any amount you
would like, even less than one ounce. You can trust these dealers to give you the
current market price for the gold you buy, plus a very nominal mark up for them of
$10 or less per ounce depending on how much you are buying. A basket of gold
mining stocks can be easily bought through a fund that trades on the New York
Stock Exchange, SPDR Gold Trust, symbol GLD. Another fund that holds gold shares,
Gold Bullion Securities, symbol GOLD, is traded on the American Stock Exchange.
Firstly, people should always diversify. There is no point in putting all your savings
into one thing. Its a golden rule to spread out your money to protect it from bad
luck or a single bad call. So where can you hide from high inflation?
1. Gold
This is a no brainer. Everyone knows gold is good in inflationary times, however
many dont know that gold was confiscated during the great depression, so that the
key to holding gold is to hold it in coin. Paper gold, like ETFs like SPDR Gold (GLD)
and other such undertakings are to be avoided, because promises in times of crisis
tend to vanish a blaze of rule books shredded when the going gets rocky. The
downside of gold is it is hard to store safely, so before you buy you should know
where and how you are going to secure it.
2. Property
Property has several things going for it. You can short money with it, that is to say
you can borrow to buy. This is especially good if you can fix the interest rate.
Property is also getting cheap these days after years of falling prices. Property also
has an income stream attached to it if you rent it out, though in really bad times
this can go south if rent controls raise their ugly heads.
3. Stocks
Equities shoot up in periods of high inflation. This makes for a volatile ride for
investors, but stocks are one of the few liquid places to hedge capital when money
supply is eroding the value of cash. The fact cash can be drawn down in small sizes
for short term needs is also very useful, as is the insured nature of brokerage
accounts.
4. Foreign Currency
The U.S. has a massive trade deficit, so it doesnt take a genius to figure that the
only way to sort that is via a much weaker dollar. That isnt supposed to happen
with the U.S. dollar as the center piece of the world financial system. The dollar is
the reserve currency of the world; it needs to be, to support its vast borrowings.

Yet unless the economy can get back into equilibrium, where fiscal and trade
balances resemble something recognizable, it is only a matter of time before the
world looks to hedge its dollar reliance and terminate its reliance on U.S. money.
This means a weaker dollar and investors will have to look hard to find people who
think the long term future of the dollar is strong.
To protect your capital from this, you can simply buy a basket of currencies from the
pound, euro, yen and Norwegian Krona and know that on balance, your money will
hold its value if and when the dollar dives.
5. Alternative Assets
Always wanted a 57 Chevy? You can rest assured that it wont lose its value if
inflation starts to motor. Is Shaker furniture your kind of thing? Thats just the sort of
object to sit out a financial meltdown on. Real things have intrinsic value and
inflation doesnt hurt them. Paintings, coins and stamps are all places to stash cash
when inflation is due to roar ahead. Many think alternative investments have gone
up in value, when in fact it is money that has fallen in value. People who hold assets
dont get richer when those assets go up, the people that dont own them are just
getting poorer. Inflation is the way broken economies rebase themselves and if this
spiral begins it will be protracted. There isnt a rush to protect yourself, you will be
able to gauge with your own eyes whether it has arrived or not, then move away
from cash into money hedges if inflation begins to accelerate.
The only mistake is to ignore the possibility and believe it could never happen.
Our strategy involves asset allocation, position sizing, and exit strategies. For the
purpose of simplicity, think of it as a three-legged stool of safety.
1st Leg: Asset Allocation
The most important risk-reduction strategy is diversification by asset allocation. By
that, we mean dividing your investment capital into different asset classes. This
way, if one asset class tumbles, you have additional money invested in other
classes that may not drop as fast. Or that may hold strong. Or that may even
increase in value. To show you how important asset allocation is, lets look at what
would have happened to three different investors in 2008. Well assume each used
a different allocation strategy. First, lets look at what happened to Joe. Like Toms
dad, Joe invested 100% of his money in the stock market in 2008lets say
$100,000. In other words, Joe had no diversified asset allocation plan. That meant
his money was wide open to stock market volatility. So when the S&P 500 dropped
37% that year, Joe lost $37,000.
Our second investor, Nancy, also invested $100,000. But she took a more
conservative approach. She followed the traditional Wall Street asset allocation
model60% in stocks and 40% in bonds. Lets look at the difference it made. Like

Joe, Nancy lost some money when the S&P 500 dropped 37%. But she had fewer of
her dollars in the stock market. Therefore, she lost less than Joe did. That alone
makes her strategy superior. But it gets better
Bonds are typically inversely correlated to stocks. So in 2008, when the stock
market was plummeting, bonds actually rose 5%. So while 60% of Nancys money
dropped 37% (the stock market losses), the other 40% of her money actually rose
5% (the bond gains). This means Nancy actually lost only 20% of her money in 2008
or $20,000.
This is a better result. Had you invested your money with the average financial
planner in 2009, this would have likely been your outcome. But we have a far better
way.
In our view, the two-asset class Wall Street model is far from optimal. We prefer to
diversify over five additional asset classes. Our official Palm Beach Letter Asset
Allocation Model includes the following seven asset classes:
Cash
Bonds
Precious Metals
Rental Real Estate (C. A. P. Strategy)
Options (Palm Beach Current Income)
Stocks: shorter-term (Performance Portfolio)
Stocks: longer-term (Legacy Portfolio)
Had you diversified your portfolio this way in 2008, you would have had the best
results of all our three scenarios.
Lets look at our third investor, Jane. To make it simple, lets say Jane spread her
$100,000 equally between the above seven asset classesabout 14% in each
category.
Note: Our official asset allocation model does not weight each asset class equally.
Instead, we weight the asset classes based on what counts: how much money you
have available to invest and how many years you have left before you want to
retire. We provide different categories to fit the wide scope of our many readers
financial and retirement situations. But for simplicity in this example, were
assuming an equal weighting in each asset class.
For cash, the average money market fund was up 2% in 2008.
For our bond asset class, well use the same return from earlier5%.

For our precious metals/gold allocation, the price of gold rose 4% in 2008.

For rental real estate, had you followed the strategies my brother Justin and I use
the ones Justin teaches in his C.A.P Cash Flow Courseyou would have fared well. In
2008, Justin generated a 15% cash return. My own experience says thats a fair
estimate.

Palm Beach Current Income is our options asset class. In 2008, we would have had
some losses. However, those losses would have been offset with the greater
premium incomeand actually enjoyed heightened market volatility. Here again,
Tom would have had stop losses in place to minimize any losses. So in a worst-case
scenario, lets assume this asset class lost 15% for 2008.
Our asset allocation model divides the stock asset class into two categories:
shorter- and longer-term stocks. These returns are harder to quantifyour portfolios
didnt exist in 2008. And it wouldnt be accurate to back-test them since Tom may
have chosen different stocks given the market conditions in 2008. So instead, Im
going to make a few assumptions
In 2008, the S&P 500 fell 37% and the Dow fell 32%. But Tom fills his portfolios (the
Performance Portfolio and the Legacy Portfolio) with only high-quality, safe
companies. These stocks can outperform in good markets. Yet they retain their
value better in down markets. He also uses stop losses (which well discuss more in
a moment).
Lets assume worst-case scenario. With the safety of Toms picks and proper use of
stop losses, our two stock asset classes would have held up better than the stock
market. We think we wouldnt have lost more than 25% overall in 2008 (and likely
far less).

Add up the returns of these seven different asset classes. And youll find Jane lost
only 8% on her entire portfolio, or $8,000, in 2008. Thats almost 80% less than she
would have lost with 100% invested in stocks. And 60% less than the Wall Street
model (stocks and bonds).
The main advantage of our expanded asset-allocation strategy is obvious from this
example: less downside risk.
These seven asset classes are not correlated. That is a good thing. It means less
volatility and less damage when things get crazy.

Our asset allocation strategy is unique. But having seven asset classes is only one
component. We also provide guidelines as to how much of your money you should
have in each class which well discuss in tomorrows essay. Stay tuned.
This Investment Will Pay Off for Years to Come
A core tenet of crisis investing is that stuff maintains real value while everything
else goes down. What do I mean by stuff? Commodities, precious metals, and prime
real estate bought on the cheap, for example... These have real value independent
of the currency in which their price is denominated.
It doesnt matter whether you denominate them in dollars, euro, rubles, renminbi,
or seashells... A bushel of corn, a tank of gas, and an acre of farmland all maintain
real and usable value that doesnt depend on the currency you use to buy it. But
even then, some stuff investments pay off better than others in crisis.Looking
back in history, one such investment has made more tycoons than any other, in
both good times and bad.
Energy.
Since the Industrial Revolution, the world has run on oil. Our modern world was built
on black gold, and those who discovered it and brought it to market struck it rich.
Yet this trend is far from over. Even as the West gets greener, China, India, and
other growing markets are consuming oil at a faster pace than ever. Chinas oil
consumption, for example, more than doubled between 1998 and 2009 from 4,105
barrels per day to more than 8,300. All of this while worldwide production has been
stagnant for much of the last decade. Despite Al Gores arm-waving, the world is
still addicted to oil and theres not enough to go around. Increasing demand and
constrained supply will lead to higher prices, even without inflation and political
instability in oil-producing nations also pushing prices up.
In The Casey Report portfolio, we have an oil-and energy-related fund we
recommend because:
It has among the lowest expense ratio of funds with similar holdings
It gives you exposure to high-quality oil producers with more upside than oil itself
And it gives you critical diversification in an industry constantly under fire from
environmentalists and politicians (you saw what this did to BP)
Whether you choose our recommendation or find your own, putting at least one
well-selected oil investment in your portfolio is a smart way to stay ahead of the
crisis.But oil is only part of the total energy picture. Some of the best profits in
energy in the next few years are likely to come from one of todays most overlooked
forms of energy available: natural gas. Natural gas is so overlooked because new
technologies like hydraulic fracturing (fracking) have opened up gas deposits in

the United States that were previously hard or impossible to get to. The result: a
supply glut of natural gas that led to the bargain-basement prices we see today.
While the current low prices are keeping many investors away, we see a buying
opportunity. Natural gas is currently discounted by 75% compared to oil when
measured by heat generation. Prices are bound to go up. In fact, natural gas is so
underpriced it could go up by 300% and still be on par with todays oil prices. This is
the type of market anomaly where profits are less a matter of how much, but
rather when.
This opportunity is much like uranium in October 1998, when Doug Casey was the
only analyst with a contrarian enough bent to cover it. At the time, the other yellow
metal was selling at just $9.50 per pound a price Doug recognized was bound to
go up due to a number of converging factors. Over the next nine years it took a
trajectory to the moon, eventually topping out at $136 per pound in 2007. Along the
way, Doug recommended a number of uranium stocks that handed readers
exceptionally large gains, including International Uranium (now Denison Mines) and
Paladin Resources, which both gained more than 2,000%.

One rather low-risk way to get strong upside exposure to what we see as an
inevitable upshot in natural gas prices is through utility companies. Theyre
relatively safe plays because utility companies have strong cash flow even during
a crisis, customers will pay to keep the heat and lights on. Utilities often pay strong
dividends. And there are additional opportunities to profit above and beyond price
increases in natural gas itself.
Our favorite is a large, financially strong natural gas utility:
It has a sizeable customer base spread across the mid-Atlantic and Southeast
Even with low natural gas prices, it maintains high profit margins and a healthy
dividend greater than 5%
And its undergoing a promising merger to nearly double its customer base plus
acquire an additional profit center that also gives it a power position in the natural
gas storage industry. This company will continue to be profitable whether or not the
price of natural gas goes up in the short term. In fact, they have profit strategies in
place whether gas goes up, down, or sideways.Again, like our oil-market pick, this
play wont make you rich overnight but it has strong upside potential with little
risk. And its a stuff play to protect your portfolio in the crisis, with additional
profit potential based on smart business practices. In The American Debt Crisis, this
is exactly the type of investment youll want in your portfolio to protect yourself...
and collect solid profits, too.
Investment #2

Gold for Protection and Profit

Ben Bernanke says, Gold is not money. Yet for thousands of years cultures across
the globe have used gold as a means of exchange and store of wealth. Not one
government-backed currency has endured like gold.Doug Casey often refers back to
Aristotles criteria for sound money as to why gold maintains this status. In Dougs
words:
It should be durable (which is why, say, wheat isnt a good money it rots)
It should be divisible (which is why artwork isnt a good money you cant cut up
the Mona Lisa for change)
It should be convenient (which is why lead isnt a good money it just takes too
much to be of value)
It should be consistent (which is one reason why land cant be money each piece
is different)
And it should have value in itself (which is why paper money leads to trouble)

You dont buy gold to get rich. You buy it because it purchases the same amount of
stuff now as it did 100 years ago... while the purchasing power of the dollar has
fallen by 98%. You buy gold because Bernanke and friends have proven theyll do
anything to keep interest rates low and fight off the debt crisis even if it means
complete debasement of the dollar. Gold Maintains Purchasing Power. In 1935, when
an ounce of gold was worth $35, you could buy:
A high-quality tailored suit for $19.75
or 0.56 ounces of gold
A family car for $500
or 14.3 ounces of gold
A house for $7,150
or 204.2 ounces of gold

With today's prices around $1,800 per ounce, let's see what that same gold would
buy you today:
0.56 ounces of gold is now worth $1,008 about the price of a Signature Gold suit
from JoS. A. Bank

14.3 ounces is worth $25,740

enough to drive home a Toyota Camry
And 204.2 ounces is now worth $367,560
which gets you an above-average home in all but the most expensive areas of the
country
The purchasing power of the dollar has dropped like a stone but gold has endured
and still buys you today about what it always has. Of course, you can profit from
gold, too. And thats why we recommend a three-pronged approach to investing in
gold in this stage of The American Debt Crisis:
Invest in Gold, Part 1: Get Physical
Putting a portion of your savings in physical gold protects you from the song and
dance of negative real interest rates, as the Fed devalues the dollar to help
Washington manage its debt. Store your gold somewhere safe, and history has
proven it should buy about as much when you take it out of storage as it did when
you put it in no matter what happens to the dollar between now and then. For
physical gold, we recommend most investors start with the most popular forms
available: Eagles, Maple Leafs, and similarly mainstream bullion coins. They have
established market value, and because theyre so widely known they should be
easiest to sell if you ever need to do so.
Invest in Gold, Part 2: Pad Your Portfolio
In The Casey Report, we follow a select gold fund that allows you to buy gold from
within your IRA and other retirement or investment accounts. This is quick and easy,
so you can get invested in gold right away, to begin padding your portfolio against
inflation. This type of fund shouldnt be your only gold strategy, mind you because
there are many benefits to having the metal in hand when you need it. But it can be
an important part of your gold holdings.
This investment has had a lot of upside recently golds been on a ten-year winning
streak that Casey readers have profited from tremendously. But thats not the only
reason to hold it in your portfolio. Think of a gold fund as an alternative place to
stash your cash between investments when you cant stay ahead of inflation by
holding cash in money market funds.
Invest in Gold, Part 3: Profit Opportunities
Its one thing to invest in the metal itself either directly by buying physical gold or
by proxy through the gold funds. But the current gold bull market will also make a
lot of people far wealthier by the time its done. The key is to invest in gold mining
and exploration companies. Put very simply, if a company is able to produce gold at

$400 per ounce which many do and the price of gold goes from $800 to $1,600
or $2,600 per ounce, its profit goes through the roof. Share prices tend to follow in
kind. For investors who want to invest in this trend without maintaining an active
portfolio of gold mining and exploration companies, there are a number of ETFs
available. But even in a bull market there are downside risks, especially in smaller
companies without active projects. Whether via direct investment or ETFs, you only
want to invest in high-quality gold companies and we have a favorite fund that will
help you do just that.
But is it still a good time to get into gold?
We know gold is a popular investment today. Many analysts are recommending it
because, well, its on a ten-year winning streak. When Doug was recommending it in
the late 1990s, it was for the exact opposite reason the price had simply been too
low for too long. Sure, todays popularity makes us cautious... but no matter how we
cut the deck, the big picture still points us strongly toward gold. The US continues to
debase its currency, as does just about every other government on the planet. They
have to, in order to pay for decades of debt and overpromising. Their only way out
of years of mismanagement is to destroy the currency in which debts are
denominated. As currencies go down, the price of stuff goes up. And gold is the
most enduring stuff to hold for folks who want to maintain their wealth. So even
with todays record-high prices of gold, we still see it going considerably higher as
paper currencies continue their downward spiral. Besides, golds recent run has not
generated anywhere near the mania you see at the end of most bubbles. Around
2005, everybody and their brother was flipping houses on the weekend to get in on
the record-high prices. We know what came of that. Until you cant open Newsweek
or turn on Good Morning America without hearing about how everyone must buy
gold now and until you see pawn shops with signs that say We Sell Gold instead
of We Buy Gold were not in a mania... And gold still has room to run.And as long
as The American Debt Crisis endures, this three-pronged approach to investing in
gold should be a critical part of your saving and investing strategy... both for the
protection it provides against bad monetary policies, and for the profit potential it
gives you thanks to golds ongoing historic bull market. Once you subscribe to The
Casey Report, youll get instant access to our portfolio and the gold
recommendations it includes.

Investment #3
The Only Way to Make Money in Bonds for the Next Few Years
As I mentioned above, some of the biggest players in the US Treasury bond market
have been selling for months some even building substantial short positions in
treasuries.Yes, its still the largest, most liquid investment market in the world... and
still holds sway in the establishment as the safe haven investment. But heres the

thing what Bill Gross from PIMCO and others like him realized months ago...Even if
the US government doesnt overtly default on these debt obligations, theyre still
playing a dirty game of soft default. As long as their printing presses keep
inflating away the value of the dollar faster than you can make money with the
interest rates offered on treasuries...Bonds are the safest way to lose 1%, 2%, 3% or
more of your purchasing power every year. These negative real interest rates can
wreak havoc on your retirement plans. Lets say, for example, you retire today at 65
and buy 20-year bonds, hoping to maintain purchasing power until youre 85. Losing
3% of your purchasing power every year doesnt seem like that much until you
calculate it out over the life of the bond and realize that by the time the bond hits
maturity it can only buy you 56% of what it could have bought you the day you
purchased the bond. This simply cant go on for long. Interest rates are at 50-year
lows. Using the last crisis as an excuse, Washington has been able to force the cost
of its new debt down to simply unsustainable levels: Yes, the Fed has used
quantitative easing (QE) to act as a buyer of last resort to ensure that even at
these low rates the Treasuries are scooped up every time theyre offered. But this
stimulus just drives real and expected price inflation. Which means all the other
buyers in the market will want higher interest on their investments especially as
Washington struggles to keep up in the debt crisis. And even though the Fed has
been able to control short-term rates with QE, long-term rates are far less
controllable and could rise quickly.If youre buying bonds at todays low rates, this is
bad for you, because as rates go up, the value of your bonds go down. So you lose
two ways first, from negative real interest rates; and second, from the
depreciating value of your investment as market conditions change.Short-term
upticks may look good, but historically speaking todays bond market is headed for
a major swing in the other direction.Which leads to the only way to make money in
bonds in the next few years.Put simply: You dont want to bet on bonds, you want
to bet against them. But shorting bonds can become expensive, because unlike
shorting stocks you are required to make the interest payments on the bond for as
long as you hold the short position.Weve uncovered a couple of unique investment
vehicles that allow you to short bonds while avoiding interest rate payments... and
take advantage of the large upside we see in the coming months and years as
interest rates swing back upwards toward a more historically normal level (with
the added benefit that if interest rates take off due to inflation like they did in the
1970s, youll be looking at even bigger gains). Weve already seen it throughout
Europe: When a sovereign debt crisis hits, theres little the borrower can do to
control interest rates. Lenders simply want more for their money. Before The
American Debt Crisis is over, we expect to see much higher rates. And this is simply
one way to shield yourself and profit.
Investment #4
Become a Global Investor - Without Leaving the US

If you want to protect yourself and your money from the coming crisis, you need to
get one foot over the border. For some, that includes offshore trusts and other
similar investment vehicles. For others, that includes purchasing property overseas,
such as at Doug Caseys La Estancia de Cafayate in Salta, Argentina. And it can
even mean getting citizenship in multiple countries. Most peoples first reaction is,
But thats for people who have a lot more money than me! And thats
understandable although it may be much easier and more affordable than you
might expect. Yet with just a few thousand dollars to invest you can start to get one
foot over the border financially to insulate yourself from the US markets volatility
in the crisis. And you can do it from within your IRA and other retirement or
investment accounts. How? Simple. You can get quick global diversification by
buying one of hundreds of funds traded openly on the New York Stock Exchange.
These funds typically follow an index of companies in one or more countries, and
often have a specific focus such as industry or company size.
For example, a single investment in the BKF ETF gives you exposure across the BRIC
countries Brazil, Russia, India, and China with investments in a number of large
companies in each country, representing a number of different sectors. Or with SCJ
you can invest just in Japanese small-cap stocks.
Of course, without thorough research into the countries, economies, political
situations, and companies in question, this can be tricky. After all, most of the
worlds economy is tied in directly to the US economy. In The American Debt Crisis,
much of the world will suffer. Thats why we prefer resource-rich countries, insulated
to some degree from the US economy, that also have low political risk. For example,
our first global diversification recommendation: Outperformed the S&P 500 by
many multiples since the 2008 crash, showing it moves independent of the US
marketsHas tight monetary policy, a growing economy, and a strong pro-business
climateAnd is rich in resources the stuff investments that perform well in crisis
And our second: Has high labor immigration, enabling fast economic growth
without fueling price and wage pressures (an anomaly among similar mature
economies)Gives you exposure to a country that runs budget surpluses instead of
deficitsAnd is also resource rich, with a heavy concentration in energy
This type of one foot over the border investment is easy to make, and is a nobrainer for investors looking to pad their portfolio against the impact The American
Debt Crisis will have on US investment markets.
Investment #5
The Anti-Bernanke Savings Strategy ,Keeping your savings in US dollars is a losing
proposition. Ben Bernanke and the folks at the Fed are more interested in saving
the American economy with ongoing stimulus than saving the dollar. This means
traditional savings vehicles are toast when it comes to keeping you ahead of
inflation.

But what options do savers in the US have?

Most people simply arent aware that theres a US-based bank named EverBank that
allows you to diversify your savings into foreign currencies, starting with accounts
as small as $2,500. Depending on our preference and account size, you can open a
deposit account, CD, or basket CD in well over a dozen different currencies. Some
even pay much higher interest rates than accounts in US dollars.One important
consideration when saving in foreign currencies: These foreign currency savings
vehicles are subject to normal fluctuations in exchange rates. Thats exactly what
makes them so attractive if you pick the right currencies. If youre saving in a
currency that gains against the dollar, when you convert your savings back you get
more dollars. Of course it works the other way around, too. Yet its worth noting that
in heavy inflation the difference between suffering and staying financially
comfortable can simply be moving some of your assets into another currency. As I
recommend this savings strategy, I also need to share that its our firm belief that
all fiat currencies are eventually headed to zero. Some, however, are headed there
much more quickly than others.So how do you pick which currencies to save in? We
tend to look to resource economies, of course. But thats not enough. On a monthly
basis we closely monitor central bank policy decisions out of a number of countries.
Based on the strength of the economy overall and on their governments
commitment to maintaining a strong currency, we choose our favorites.In The Casey
Report were following two currencies we like best right now. Every month we keep
readers posted on developments related to these currencies... and will also provide
updates in the monthly issue should our recommended currencies change.A brief
note: Many people I speak with initially balk at putting their savings in foreign
currencies. In 1913, before World War I, many Germans felt the same way. At that
point, the German mark, the French franc, and the Italian lira were all worth about
the same. Then the famed Weimar Republic hyperinflation happened. By the end of
1923 the exchange was one franc or lira per one trillion marks. The few Germans
whose savings maintained value through that period were those who put at least
some of their savings in currencies other than the mark.Most people dont think we
could ever see inflation in America anything like that of Weimar Germany. Yet this
illustrates exactly why a savings vehicle like those offered through EverBank is so
important to consider especially when Bernanke and the Fed have shown such a
willingness to prop up every market downturn with more inflationary monetary
policies.
Investment #6
The Single Most Important Investment You Can Make Today
Ive just given you five solid investments to help you weather The American Debt
Crisis, both personally and financially. And frankly, if you do nothing else today for
your financial future, making these five investments will be a smart way to protect
yourself and profit in the crisis.But theres an even more important investment you

can make today... to help you weather The American Debt Crisis, plus come out on
the other side as a more successful investor and economic thinker.
The value of the U.S. dollar is measured in three ways: exchange rates, Treasury
notes and foreign exchange reserves (the amount of dollars held by foreign
countries). The most common is exchange rates, but you should be familiar with all
three to understand where the dollar might be headed next.

Recent Trends

All three measurements show an increase in the dollar's value since 2011. Here's
why:.1. The dollar is a safe haven during any global crisis. That means investors
purchase U.S. Treasuries to avoid risk as the world recovers from the 2008 financial
crisis and recession.
The Dollar And Euro Are Doomed. These 3 Currencies Will Take Over.
Dollar
Foreign Money Exchange
Economy
Trade in Currency
2. The European Union still struggles to resolve the Greece debt crisis. This weakens
demand for the euro, the world's second choice for a global currency.
3. China's attempts to reform its economy slowed growth in 2014, pushing investors
back into the dollar.
4. Despite reforms, both China and Japan continue to purchase dollars to push the
value of their own currencies down. This helps them boost exports by making them
cheaper.
5. The dollar benefited from a temporary flight to safety, as investors worried about
the outcome of the 2012 Presidential campaign, the fiscal cliff in 2012 and the
government shutdown in 2013.

The recent strengthening reversed a downward decline that began in 2002.

However, the following three pressures still exist, and should eventually push the
dollar's value down again in the long term.

.1. The U.S. debt is more than $18 trillion. Foreign holders of this debt are always
uneasy that the Federal Reserve will allow the dollar's value to decline so U.S. debt
repayments will be worth less in their own currency. The Fed's quantitative easing
program monetized the debt, artificially strengthening the dollar to keep interest
rates low. Now that the program has ended, investors are concerned the dollar
could weaken.
2. The large debt puts pressure on the President and Congress to either raise taxes
or slow spending (most recently through sequestration). This dampens economic
growth, sending investors to chase higher returns in other countries.
3. Foreign investors prefer to diversify their portfolios with non-dollar denominated
assets.
The Dollar's Value As Measured by Exchange Rates:The dollar is most commonly
measured by its exchange rate, which compares its value to other currencies.
Currency exchange rates allow you to determine how much of one currency you can
exchange for another. Exchange rates change every day because currencies are
traded on the foreign exchange market. A currency's forex value depends on a lot of
factors, including central bank interest rates, the country's debt levels, and the
strength of its economy. When these are strong, so is the value of the currency. For
more, see How Does the Government Regulate Exchange rates?
Most countries allow their currencies to be determined by the forex market. This is
known as a flexible exchange rate. Find out the dollar's value compared to the
rupee, yen, Canadian dollar, and the pound in U.S. Dollar Rate.
Dollar Value Compared to Euro
2014 - The euro to dollar exchange rate fell to $1.21, thanks to investors fleeing
the euro.. For more, see Euro to Dollar Conversion.
2013 - The dollar lost value against the euro, as it initially appeared the EU was
finally solving the eurozone crisis. By December, the euro was worth $1.3779.
2012 - By the end of 2012, the euro was worth $1.3186 as the dollar weakened.
2011 - The dollar's value against the euro fell 10%, then regained ground. As of
December 30, 2011, the euro was worth $1.2973.
2010 - The Greece debt crisis strengthened the dollar. By year end, the euro was
only worth $1.32.
2009 - The dollar fell 20% thanks to debt fears. By December, the euro was worth
$1.43.
2008 - The dollar strengthened 22% as businesses hoarded dollars during the
global financial crisis. By year end, the euro was worth $1.39.

2002-2007 - The dollar fell 40% as the U.S. debt grew 60%. In 2002, a euro was
worth $.87 vs $1.44 by December 2007. (Source: Federal Reserve, Exchange Rates)
The Dollar's Value As Measured by Treasury Notes
The dollar's value is usually in sync with demand for Treasury notes. The Treasury
Department sells notes for a fixed interest rate and face value. Investors bid at a
Treasury auction for more or less than the face value, and can resell them on a
secondary market. High demand means investors pay more than face value, and
accept a lower yield. Low demand means investors pay less than face value and
receive a higher yield. That's why a high yield means low dollar demand -- until the
yield goes high enough to trigger renewed dollar demand.
2014 - The dollar strengthened through the year, as the yield on the benchmark
10-year Treasury note fell from 3.0% in January to 2.17% by year-end. (Remember,
high yields means a weak demand for Treasuries and dollars.)
2013 - The dollar weakened slightly, as the yield on the 10-year Treasury rose from
1.86% in January to 3.04% by December 31.
2012 - The dollar strengthened significantly, as the yield fell in June to 1.443% -- a
200-year low. The dollar weakened towards the end of the year, as the yield rose to
1.78%.
2011 - The dollar weakened in early spring but rebounded by the end of the year.
The 10-year Treasury note yield was 3.36% in January, rose to 3.75% in February,
then plummeted to 1.89% by December 30.
2010 - The dollar strengthened, as the yield fell from 3.85% to 2.41% (January 1October 10). It then weakened due to inflation fears from the Fed's QE2 strategy.
2009 - The dollar fell as the yield rose from 2.15% to 3.28%.
2008 - The yield dropped from 3.57% to 2.93% (April 2008-March 2009), as the
dollar rose.
Prior to April 2008, the yield stayed in a range of 3.91%-4.23%, indicating a stable
dollar demand as a world currency. (Source: U.S. Treasury, Daily Treasury Yield
Curve Rates)
Value of the Dollar as Measured by Foreign Currency Reserves
The dollar is held by foreign governments in their currency reserves. They wind up
stockpiling dollars because they export more than they import. They receive dollars
in payment. Many of these countries find it's in their best interest to hold onto
dollars because it keeps their currency values lower. Some of the largest holders of
U.S. dollars are Japan and China.As the dollar declines, the value of their reserves
also declines. As a result, they are less willing to hold dollars in reserve. They

diversify into other currencies, such as the euro or even the Chinese yuan. This
reduces demand for the dollar, putting further downward pressure on its value..
As of Q3 2014 (most recent report), there was a record $3.855 trillion in foreign
government reserves held in dollars. However, governments are diversifying, as this
represents only 62% of the total measurable reserves, down from 67% in Q3 2008.
Since the percentage of dollars is slowly declining, this means that foreign
governments are slowly moving their currency reserves out of dollars. In fact, the
value of euros held in reserves increased from $393 billion to $1.398 trillion during
this same time period, despite the eurozone crisis. Nevertheless, holdings in euros
are still less than half the amount held in dollars. (Source: IMF, COFER Table)
How the Value of the Dollar Affects the U.S. Economy-When the dollar strengthens,
it makes American-made goods more expensive and less competitive when
compared to foreign-produced goods. This helps decrease U.S. exports, slowing
economic growth. It also leads to lower oil prices, since oil is priced in dollars.
Whenever the dollar strengthens, oil-producing countries can relax the price of oil,
because their profit margins in their local currency aren't affected.For example, the
dollar is worth 3.75 Saudi riyals. Let's say a barrel of oil is worth $100, which makes
it worth 375 Saudi riyals. If the dollar strengthens 20% against the euro, the value
of the riyal, which is fixed to the dollar, has also risen 20% against the euro. To
purchase French pastries, the Saudis can now pay less than they did before the
dollar got stronger. That's why the Saudis didn't need to limit supply as oil prices fell
to $50 a barrel in 2014. Find out more ways it affects you in The Value of Money.
The Value of the Dollar Over Time-The dollar's value can also be compared to what it
bought in the U.S. in the past. Make some comparisons with the past in Today's
Dollar Value.The growing U.S. debt weighs in the back of the minds of foreign
investors. That's why, long-term, they may continue to gradually move out of dollardenominated investments. It will happen slowly, so they don't diminish the value of
their existing holdings. The best protection for an individual investor is a welldiversified portfolio that includes foreign mutual funds. Article updated January 12,
2015.