You may not think of the US as being an economy that exports dollars, but it does. Some countries export coffee, like Columbia, and some countries export factory products, like China, and one country exports dollars; the United States. The United States is a dollar based economy. Currently, the United States dollar is the reserve currency of the globe, but that will one day change.
Every now and again, the bottom will fall out of some market and the corresponding country that is overweighted with the production of that market product will be plunged into instant poverty. A current case in point is Venezuela. Venezuela has an oil based economy. Venezuela is oil-rich. Venezuela also has a socialist type of government that used the oil as a financial resource of the people. The cost of living in Venezuela was highly subsidized by government profits from the international sale of Venezuelan oil.
What does a dollar based economy have to do with an oil based economy? One could argue that the US is truly on a “Petrol-dollar” system, so our dollar based economy is really quite heavily tied to oil. The point that I am trying to make in this article is that whatever type of economy you have if there is no demand for your product, your economy crumbles. If you want an insight as to what this might look like, check out present day Venezuela.
Is Our Dollar Based Economy At Risk? No Refrigerators.
In Venezuela, there is government controlled power rationing. Sometimes there is power, sometimes there is not power. Until you experience these conditions, the complete extent of the problems does not become apparent. Shopkeepers can’t keep whatever inventory they have cold, so meat and produce spoil, reducing the already scarce amounts of nourishment available at any price.
But now, there are even fewer refrigerators and freezers than there were. When the electricity comes back on, power surges often blow out the compressors and other components of the refrigeration systems. Shopkeepers that can barely afford to stay open faced with high prices and few paying customers are forced to close when all of the appliances in the shop are blown out and too expensive to repair or replace.
In the United States, our economy is heavily subsidized by government spending and social welfare programs. What would happen if dollar devaluation caused food prices to spike ridiculously? Could our government keep giving away unlimited amounts of money so that everyone could still eat? Does the real world work that way?
Is Our Dollar Based Economy At Risk? No Order.
When currencies begin to fail hard and fast, the government that prints that currency begins to lie in a very similar manner. One of the ways they lie is to give away surplus items at low prices in order to help keep the illusion of governmental prosperity alive.
Currently, in Venezuela long lines form outside of stores. The people in those lines have no idea what they are there to buy. They have no guarantee that they will be able to afford anything with the money in their pockets. They have no way of knowing whether or not there will even be anything left to buy if they do get to the front of the line.
People will only wait so long in uncertain lines, however, and eventually societal rule breaks down. Reports have been made of a crashed truck being looted for dinner rolls, salt, and shampoo. The report says “several hundred” looters participated. Troops were sent and shots and tear gas were fired. This is not ordinary behavior, even for Venezuela, which has been noted as one of the most violent countries on the planet.
“No Hay Comida” Translates Into “There Is No Food”.The targets are not only crashed trucks. Social media posts show riots in markets as well as mobs looting shops. In fact, there have been more than 100 reports of looting or attempted looting in the first 90 days of the fiscal year. A dollar-based economy is not immune from this type of breakdown. Imagine hungry Americans outside of a grocery store being told that there were limits and rations. Images of Black Friday seem to come to mind, except with really mad and hungry people instead of really greedy people.
Is Our Dollar Based Economy At Risk? Overwhelmed Hospitals.
When the economy of a country falters, the fallout is widespread and often times the weakest citizens get the worst of it. With no purchasing power and no way to generate wealth, the Venezuelan government has not been able to meet some of the basic needs of its citizens, much less the advanced medical needs of some of the less fortunate.
While there may be health care for the Venezuelan wealthy, the health care available to the Venezuelan poor is often non-existent. There are reports of O’possums invading a hospital and killing seventeen newborn babies. Children lie in the hospital hallways on and amongst cardboard boxes. Antibiotics are not available. Basic care is not available.
Seven more babies were observed to have died in a single day. There were no full oxygen tanks available to the babies, so the doctors had to pump room air into the babies’ lungs by hand. Another patient died because the blood bank was closed and blood was unavailable. Apparently a spontaneous government holiday was declared in order to save money, and that is why the blood bank was closed. In current day Venezuela, things like this happen all the time.
Is Our Dollar Based Economy At Risk? Do You Buy Gas?
Venezuela is an oil-based economy, no doubt about it. Unfortunately for Venezuelans, their economy cannot exist with these low oil prices. When oil prices are high, Venezuela is a party nation and everyone gets to share in the good times. Whether global oil demand is low or global oil production is high, the effect is the same in Venezuela; times are very tough.
You and I still fuel up our vehicles, however, we just do it for a little less these days. The world still needs oil, it just doesn’t need Venezuela’s oil in particular at the price Venezuela needs to pay its bills and take care of its people. But world markets don’t care. World markets won’t care when dollar demand dries up, either.
Prepare yourself and your financial portfolio for the eventual problems inherent to our dollar based economy. Talk to an ITM Trading professional about using physical gold and physical silver to safeguard your wealth.