A U.S. dollar collapse refers to a scenario in which the value of the U.S. dollar plunges relative to other currencies. This devaluation can lead to severe inflation, making everyday goods and services far more expensive for American consumers.
Investors may also want to consider increasing exposure to real assets, such as commodities, gold, energy- and power-related infrastructure, and real estate investment trusts (REITs). Also look to international stocks, especially in Japan, India, Mexico and Brazil.
There is absolutely zero chance at the Dollar will be devalued. And it would not impact your mortgage in anyway. You would still have to pay for your house.
In 2024, the U.S. dollar has experienced notable depreciation against many major currencies due to anticipation of the Federal Reserve's first rate cut since the onset of the COVID-19 pandemic (rates were cut by 0.5% in September 2024).
Some say it will be the euro; others, perhaps the Japanese yen or China's renminbi. And some call for a new world reserve currency, possibly based on the IMF's Special Drawing Right or SDR, a reserve asset. None of these candidates, however, is without flaws.
1. Kuwaiti dinar. The Kuwaiti dinar (KWD) is the world's strongest currency, and this is for a number of reasons. For starters, Kuwait has one of the largest oil reserves in the world.
If the dollar collapses, your 401(k) would lose significant value. Exponential inflation would result if the dollar collapsed, decreasing the real value of the dollar compared with other global currencies, which, in effect, would reduce the value of your 401(k).
A U.S. economic collapse would create global panic. Demand for the dollar and U.S. Treasurys would plummet. Interest rates would skyrocket. Investors would rush to other currencies, such as the yuan, euro, or even gold.
Your mortgage payments could change drastically because of a collapsing dollar, especially if you have an adjustable rate. Those interest rates would follow the trend of the economy itself, so if the Fed raises interest rates, mortgage rates will also climb. This would lead to volatility in your mortgage payments.
The US or Canada. Even with the dollar collapsed and a global recession, North America has a self-contained economy and natural resources to export, so would face the least harm.
Purchase Precious Metal Investments
Precious metals, like gold and silver, tend to perform well during market slowdowns. But since the demand for these kinds of commodities often increases during recessions, their prices usually go up, too. You can invest in precious metals in a few different ways.
You can invest directly in the currency, currency baskets, or exchange-traded funds (ETFs). Investing in the stock market indexes of countries that you believe will have appreciating currencies or investing in sovereign wealth funds can be a longer-term strategy and provide exposure to strengthening currencies.
Economists. NO: The dollar is not at risk. International reserves, borrowing, and trade are all primarily in dollars because the dollar is a trusted source of value and U.S. capital markets are deep and open.
Your money is safe in a bank, even during an economic decline like a recession. Up to $250,000 per depositor, per account ownership category, is protected by the FDIC or NCUA at a federally insured financial institution.
In other words, if you have a solid financial plan, and your 401(k) is well-optimized, sometimes the best thing to do in a market downturn is to stay the course, especially if you are a younger investor with years until retirement.
What is the safest currency in the world? The Swiss franc (CHF) is generally considered to be the safest currency in the world and many investors consider it to be a safe-haven asset. This is due to the neutrality of the Swiss nation, along with its strong monetary policies and low debt levels.
CDs insured by the Federal Deposit Insurance Corp. (FDIC) for up to $250,000 cannot lose money even if the bank fails.
The Kuwaiti Dinar is the world's highest-valued currency, reflecting Kuwait's strong economy and abundant oil reserves. Its stability and high exchange rate make it a sought-after currency in international markets. As of January 2025, 1 Kuwaiti Dinar is equal to approximately 279.10 Indian Rupees.
In our view, a gradual move to a global economy with a less-dominant dollar is possible over time, but we don't see the dollar losing its reserve currency status.
Iranian Rial (IRR)
Currently, the Iranian Rial is considered the world's least valuable currency. This is the result of factors like political unrest in the country. The Iran-Iraq war and the nuclear program also played a huge part.
As of July 2024, there was about $2.3 trillion in M0. M1: This includes everything in M0, plus money held in travelers' checks and checking accounts. The total for M1 was around $18.05 trillion. M2: This expands on M1 by adding savings accounts, mutual funds, and other types of deposits.