The Case Against the Collapse of the Dollar

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I have been getting a lot of questions around the dollar in recent weeks. De-dollarization seems to be a thing, as do central bank digital currencies, along with the latest round of worries about what the government is going to do to our savings. There is much to talk about, but the root of most of these questions is this: the notion that sometime soon the value of the dollar will collapse, making our savings valueless.

Simply put, that collapse can’t happen in the short to medium term, for reasons we will discuss. Once we realize that, it will make it easier to deal with the remaining questions. So, let’s start with the dollar today and move on to the other questions in the days ahead.

A Thought Experiment

Let’s start with a thought experiment. Suppose I told you that Amazon would collapse this year and that people would abandon it and flock to other merchants (e.g., Walmart). That argument makes a certain amount of sense, in that Walmart is indeed a valid competitor, is trying very hard and spending a lot of money to take business from Amazon, and has the scale to do so credibly. In that sense, I have a good case that Amazon is going to collapse.

But when you think about it, the idea is kind of silly. Personally, I have an Amazon Prime account, I have multiple orders pre-set, I watch Prime video, and so on. It would be a lot of work and a major inconvenience to switch—even if Walmart offered a full range of competitive services. Walmart may do so, but I haven’t even looked, which kind of proves my point. Unless you believe that tens of millions of people are suddenly going to do the work and endure the inconvenience of switching, then the idea that Amazon will suddenly collapse simply isn’t credible.

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