Preserving Wealth As US Dollar Becomes Worthless

Paul Volcker, who headed the Federal Reserve from 1979-87, warned in April 2008 that the United States was in a dollar crisis.

As the dollar is dropping, investors look to other non-dollar options. The good news is that investors can gain from a weaker dollar.

The average financial advisor, when asked about precious metals, will give you the conventional standard answer: 

  If precious metals are considered at all then a typical investment  professional may recommend that you should keep a small percentage in gold only as a hedge to offset losses in the other asset-allocation classes.

When your money is locked into cash, bonds and/or stocks when the U.S. Dollar is dropping in value and buying power is eroding, then this traditional asset-allocation strategy becomes highly speculative and risky.

As the U.S. Dollar becomes worth less you are better off having the bulk or your cash in physical gold and most of the rest of your capital in gold and precious metals related investments. 

Depending on your needs, temperament and objectives structuring your portfolio to preserve your wealth can be similar to ordinary investment methods: The more conservative you are, the more you invest in gold and precious metals related vehicles.

When preservation of capital is the goal, owning physical gold for liquidity and shares of unhedged majors or the mutual funds that own them. Moderate risk investors can par take of mining stocks, along with silver, foreign bond funds and mutual funds specializing in U.S. based resource and manufacturing companies.   While the more aggressive type can bulk up on smaller miners, shares of US based manufacturers, gold-based derivatives and short positions in financial stocks.

Keep just enough cash to cover your shorter term obligations, remembering that cash is declining in value. Avoid U.S. bonds and anything else that has a payment stream consisting of U.S. dollars.   With this in mind be wary of having interests in consumer finance companies, home builders and publicly traded companies that have a lot of cash on hand. 

Of course, most financial advisors make their money by keeping control of your money.  These approaches are best suited for the individual investor that feels comfortable directing their own portfolios.