The US Dollar vs. Expat Survival

I felt compelled to write this submission after reading several sad stories on this site where folks in Thailand have already taken a severe hit from the decline of the US Dollar. Readers have to understand that every so often the US Dollar suffers a severe correction in relation to other global currencies, because of stupid decisions made by US leadership here. Even if you are not in the US Dollar you may still benefit from not having "all your eggs in one currency" and in high growth currencies instead.

I currently live and work in the US, but I plan to retire in the land of smiles within the next decade. I have a 35 year history of currency trading, and speculation, which has served me very well, maybe just luck, but I prefer to think it is because I take the time to study the global economic trends of nations, and regions. Let’s go back in time for a moment… I still remember the early 70's when the US dollar took a dive because of two dominant main factors:

1. The Vietnam War Debt

2. The Arab Oil Embargo

Now replace Vietnam with Iraq, and add "real" not fabricated high oil prices this time. To illustrate for example the magnitude of the 1970's correction, and the potential historical risk: Before the 1970's correction, the US Dollar to the German mark traded at about 3.6 – 4 Marks for every Dollar, three years later you only got 1.6 Marks!!! If this were the Baht, the bottom would be at about 18 Baht on the Dollar for today’s world for example. This example is only intended to illustrate the possible magnitude of the risk if you are sitting entirely in USD in your savings, and it does not represent a prediction.

The US Federal reserve is predicting an average decline of the US Dollar this year, of about 8%, in relation to global currencies, so the first 8% that you make on your investments will be erased this year if you are in USD and living outside of the US, this is under the assumption that you are even invested at all. As the US continues to move from being a "democracy" to what I call a "corpocracy" or a corporate controlled state the risk is multiplied further, because the corporations can stash their money overseas, and profit from the decline of the dollar.

I could write many pages, and references on the present global fundamentals, and bore most readers into clicking onto the next submission, instead if you are interested in the "meat" I will refer you to the net for some interesting reading. Here, do a Yahoo search for a published thesis: "The Fall and Decline of the US Empire" by Johan Galtung. He is considered the world’s number 1 expert on the subject of global economic systems. After the first couple of pages it becomes comprehensible to the average person like me. His last thesis "The Fall and Decline of the Soviet Empire" happened exactly as he predicted, although he was a year or so off on the predicted date! He predicts a period of serious economic decline in the US over the next 15 – 20 year period, along with many, many prominent other global economic experts, who share his view. So do not be fooled into thinking "Oh the dollar can’t go any lower than this" just because is has not done so before. It can go far lower and in all likelihood will go far lower. Yes the Thais may screw up their currency also, but if you move to high growth currencies, then at that time you will take a big step up in your standard of living if the Thais mess up.

Now on to the survival guide, and my 3 basic rules:

1. Get out of the dollar period.

2. Move into the currencies or economies of the nations or regions with the highest predicted future economic growth.

3. Spread your money out into at least 4 of these currencies, and regions.

There are many ways to do this. My method because I am stuck in the US is to buy into ETF mutual funds which focus on these high growth regions. This way you avoid the risk of individual stocks, but you still reap the benefits of each region’s growth. The minute my dollars drop into these funds, I am effectively in their currency. If you are a conservative cash kind of person, and scared of stock markets, then you can still move your money to Hong Kong for example, and keep your money in Chinese Yuan, and Euros in the form of cash in interest bearing accounts. You may check to see if you can do this direct in Bangkok via a Hang Seng Bank, or Hong Kong Bank branch if there is one in Bangkok. Otherwise any local global brokerage branch in Bangkok can help you.

If you really want control, anyone for example can buy an investment LLC in Hong Kong for less than 800 USD, which allows you to keep, and invest your money in any Hong Kong bank, or stock brokerage. They will issue you a ATM, and debit VISA card for easy access in Bangkok. The best part is Hong Kong does NOT tax investment income. Singapore is another possibility, but to me more risky.

My money is invested via the US, but it is sitting entirely in foreign funds. This is the solution if you are stuck in US based investments like 401K, or IRA retirements. If you get a steady pension from the US, you can often get cashed out and do the same. My investment spread currently is as follows:

1. China, 2. India, 3. Europe and Russia, 4. Brazil and Latin America.

For this year I am up 28% so far, so my profit is 20% after subtracting the predicted 8% decline of the USD which not too shabby. I look at it this way, because I will have to spend the money some day as Baht, not USD!

All my investments in each region are spread out in 25 – 50 companies in the ETF Funds. Look up these symbols for example on Yahoo finance: FXI, EMGIX, LETRX, EWZ, PRIDX and then you will see for yourself what is happening in these regions, and the steady double digit growth available to you. If you are in the US Dollar: The worst, and highest risk thing you can now do, is to simply do nothing.

If you enjoy your retirement and life in Thailand, or are planning on doing so, why not make some adjustments to ensure that it will be there tomorrow. Or you can do nothing and "trust" George Bush, up to you, it’s your money, and your future 🙂

Stickman's thoughts:

I am no expert on the currency markets but a lot of what you say seems to make sense.

The one thing you suggest that would make me nervous is that of investing in a number of different markets. While such an approach minimises risk, a lack of knowledge or understanding about the individual markets would give me a lack of confidence to invest in those markets. And confidence is a big part of investing. If you're nervous about how you're money is doing, you're probably better off keeping it in the bank.