Clark Howard

What Currency Is a Good U.S. Dollar Alternative If the Debt Crisis Causes a Problem?

When it comes to issues such as the future of the U.S. economy, reality often is more nuanced and complex than the headlines.

That’s true of the quickly-growing U.S. national debt. At least according to money expert Clark Howard.

The U.S. government has not run a surplus since 2001. Last year the federal government ran a deficit of $1.4 trillion.

The lasting impacts of COVID-19 (and the government’s attempts to keep the economy going) eventually crescendoed with inflation above 9%. A quickly ballooning national deficit combined with much higher interest rates has challenged the notion that the U.S. can always just print more money.

The U.S. currently spends more to pay interest on its $33.4 trillion in debt than it does on national defense.

Is that great for the U.S. long-term? Probably not, Clark says. Is it the end of the American economy prospering worldwide? Not even close.

Still, the admitted perpetual optimist hopes that the government, irrespective of political parties, can come together and have us “eat our vegetables.” Because the longer we wait to address the issue, the deeper the pain may be.

Should the U.S. Debt Make Me Nervous Enough To Hedge Against the U.S. Dollar?

If you are worried about the U.S. dollar, how can you hedge against it?

That’s what a recent Clark Howard listener asked.

Asked Steve in Florida: "What nation and currency would be a safe alternative to the U.S. and U.S. dollar in the event of U.S. financial collapse because of debt crisis?"

Clark points out that the U.S. dollar remains the only reserve currency in the world. And that it still influences everything else.

But he acknowledges that the budget deficits we’ve been running aren’t at all sustainable.

“In the circus that’s Washington D.C., nobody from either party, other than a very small number of members of both parites who are just crying in the wilderness, are focusing on the danger to our nation’s health and security from running these unconscionable budget deficits,” Clark says.

“Nobody’s telling your fellow American the truth about the consequences of wanting all the candy from the government without paying for that candy.”

Clark Thinks the Current U.S. Deficits Are Reversible

Clark finds it hard to believe that less than 25 years ago we achieved a budget surplus of $236 billion in 2000.

“It is reversible, getting back on a sustainable path. But we need politicians with guts who will speak to the American people honestly,” Clark says.

“My hope is that before we run aground in the United States, that we will sail a new course. And I am an incurable optimist.

“But I am frustrated about the lack of maturity in our politicians and really in us collectively as Americans that we don’t want to face the music that we have to pay for the services and the transfer of payments that we are getting from the federal government that we’re not paying for now. That’s just a fact.”

Clark: Don’t Expect the U.S. Dollar To Collapse

Is the U.S. dollar going to collapse? Generally not likely. Even with a debt crisis, Clark says.

“What happens is the relevance of the U.S. dollar vs. other currencies in the world, the relative position of the U.S. dollar, will move from a position of strength to weakness,” Clark says.

If you do want to hedge against that, there are several ETFs (exchange-traded funds) concentrated on single currencies. There's also gold or cryptocurrencies such as Bitcoin. (Clark thinks it's OK to have a limited percentage of your portfolio in gold but does not like crypto.)

Clark’s preferred hedge, if you’re going to do so?

“A market basket of currencies not including the U.S. dollar,” Clark says. “That is the most efficient way for you to hold positions in currencies of countries that you trust more, that you have more confidence in, the long-term viability and strength of their money.”

Final Thoughts

The U.S. debt, and our budget deficits, are real. And they’re going to impact the strength of the U.S. dollar as well as our country as a whole in the future, Clark says.

However, the financial expert and eternal optimist also hopes that straight-talking politicians unafraid to ask Americans to “eat our vegetables” can reverse the current trend.

He views it as a bipartisan issue that’s important for everyone in the U.S. But he doesn’t think the threat is so great that the U.S. dollar is on a collision course to a collapse.

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