Every nation around the world views money from two perspectives one except, the United States. You have the local currency and then the global reserve currency as an alternative safe haven to run to in times of trouble.

When one is faltering you run to the other which in relation to the local is considered safe. Currently there are two South American countries that are abandoning their own currency in search of Federal Reserve Notes, or dollars.

The currencies I am referring to are the Argentinean Peso and Venezuelan Bolivar Fuerte.

The approximate population of both countries combined is roughly 70 million and yet they share the same fate.  Government backed paper money or fiat currency that’s failing its citizens. A money supply that’s robbing the nation of purchasing power while destroying their livelihoods.

It’s not a coincidence that they both suffer from incompetent leadership that borrows more than it could ever produce and places the burden to repay on the citizens.

This type of governmental system is what takes place in every country but these two are the most disturbing. In my opinion, they will more likely be the first two countries that start a monetary ripple effect of collapsing paper money systems.

In order to understand how bad the economy is in Argentina just follow the money. The government statistics in regards to the currency exchange rate for the dollar is stated at $1 to 8.43 pesos. While the citizens who are scrambling to get rid of pesos for dollars is willing to pay up to 15+ pesos for a single dollar. That’s almost double the official government number exchangeable for a dollar. The people have no confidence in their own money so they would rather pay almost double to get away from it.

This example clearly shows a disconnect between the governments numbers and the citizens mistrust in the country’s currency.  Venezuela is the exact same but even worse. The government has gone even further by pegging the nation’s money to the dollar at a fixed rate which means they actually determine the price.

Unlike Argentina which fluctuates by consumer confidence amongst other means. The dollar in Venezuela is fixed at $1 to 6.29 Bolivars. So no matter how bad things are or what the citizens have to say about government policy that rate doesn’t change. So out of desperation the citizens are dumping the bolivar at the exchange rate of 102 Bolivars for one single dollar. The citizens’ mistrust their own paper currency so much that they are will to pay almost ten times more for something considered safe.  

In both of these examples the citizens in order to escape complete monetary destruction run towards dollars. It’s the global reserve status of King Dollar that makes these citizens feel safe. This monetary pedestal the dollar sits on is due to the fact that every nation must use the dollars in trade.  So every nation is supposed to have dollars in reserves.  This has been the standard since 1944, the day Bretton Woods became the monetary system of the globe.

Ever since that agreement was put in place the dollar has been a major factor in every nation’s financial affairs. The dollar is the alternative to every nation’s problems and, in my opinion, will one day be a problem for every nation that has them.

The dollar at the end of the day is no different than a peso or a bolivar. They all originate from governments that borrow to exist and allow central banks to print massive quantities to spend. Just like the citizens of the south are experiencing first hand massive inflation and sky high costs of living, so will other countries depending on the dollar.

The only difference the citizens in the United States face is that every other country runs as a safe haven to the dollar. The question is when the dollar suffers the same fate as every other piece of paper what will the United States citizens run to for safety?