If the USD collapses, what will happen to other fiat currencies?

[BRG253]

I have heard people say that if the USD collapses, all other fiat currencies will lose their value as well. Why is this?

[Kludge]

Interdependence & sham monetary policies abroad.

US has a large trade deficit, aside from being a major consumer/producer in the world. Foreign markets will see a large shrink in potential consumers (and producers to a lesser extent), which will hurt their producers, then their banks, and then create uncertainty and mistrust in their economies, which will likely lead to mistrust in their nations´ currency and then an economic depression. A failure of our government (given a collapse of the USD) would also mean a failure of our national banks, which are dependent on the government -- I´m uncertain of what all would happen because of this.

US also has a lot of debt financed - China being in the biggest dollar trap. If the USD collapses, China will take a hit to the tune of at LEAST $500b, and possibly over $750b. Japan will also see a hit of about $500b if the dollar collapses. Of course, the Yuan may actually skyrocket in value if the Chinese lose incentive to try depreciating the value of their money.

A failure of the US economy will send traders world-wide into a panic, which will likely manifest in moves away from governments (esp. given US treasury bonds are considered the safest investment by most... econ. textbook authors) and into producers and commodities.

I´m sure there´s much more to this people smarter than myself will tell you of.

[WaltM]

I have heard people say that if the USD collapses, all other fiat currencies will lose their value as well. Why is this?

i don't believe that's necessarily true, but if it is, it's because lots of countries use ours as their reserve, so they'll be taken down with it.

[hugolp]

I think that originally other fiat currencies will rise because people will leave the dollar for anything, but they will probably loose value against gold. But ultimately the fall of the dollar will really hurt credibility on fiat currencies and mid-long term the other currencies will suffer.

[BRG253]

Interdependence & sham monetary policies abroad.

US has a large trade deficit, aside from being a major consumer/producer in the world. Foreign markets will see a large shrink in potential consumers (and producers to a lesser extent), which will hurt their producers, then their banks, and then create uncertainty and mistrust in their economies, which will likely lead to mistrust in their nations´ currency and then an economic depression. A failure of our government (given a collapse of the USD) would also mean a failure of our national banks, which are dependent on the government -- I´m uncertain of what all would happen because of this.

US also has a lot of debt financed - China being in the biggest dollar trap. If the USD collapses, China will take a hit to the tune of at LEAST $500b, and possibly over $750b. Japan will also see a hit of about $500b if the dollar collapses. Of course, the Yuan may actually skyrocket in value if the Chinese lose incentive to try depreciating the value of their money.

A failure of the US economy will send traders world-wide into a panic, which will likely manifest in moves away from governments (esp. given US treasury bonds are considered the safest investment by most... econ. textbook authors) and into producers and commodities.

I´m sure there´s much more to this people smarter than myself will tell you of.


Schiff's thesis is that our trading partners will benefit from the USD collapse because they will start consuming their own goods instead of shipping them to us.

[hugolp]

Schiff's thesis is that our trading partners will benefit from the USD collapse because they will start consuming their own goods instead of shipping them to us.

Schiff analisys is probably correct mid-long term. In the short term any adjustment is painful.