If the dollar collapses, then what!?

[IRQVET]

Was having this discussion at work today, If the dollar collapses, how do we protect our TSP accounts? This gold and silver run up got me thinking about this today. Not sure if any of the funds are backed by those assets?

[Bubba]

Was having this discussion at work today, If the dollar collapses, how do we protect our TSP accounts? This gold and silver run up got me thinking about this today. Not sure if any of the funds are backed by those assets?

The Dollar collapsing has been a story for a long time. Just assume as long as we have a military that the $ is very unlikely to collapse. Will it lose value? Absolutely? Will it gain value? Of course! This year it's lost enormous amounts of value and last year wasn't that great either. Thankfully that counterbalances some of the pain from the tariffs.

To answer your question, hard assets usually do well when there's a collapse of a currency. I don't see it happening though.

Here is a quick blurb from AI, but it summarizes well what has been the story around the $ collapsing.


Stories about the US dollar collapsing have appeared in waves for over 50 years, largely accelerating after the US detached the dollar from gold in 1971. While predictions of a "collapse" have remained a consistent theme among certain economic commentators, notable surges in this narrative occur during periods of high inflation, massive federal debt increases, or when foreign nations seek to reduce reliance on the dollar ("de-dollarization").

Key Eras of Dollar Collapse Predictions:

The 1970s (The "Nixon Shock" Era): The most foundational shift occurred in August 1971, when President Nixon ended the direct convertibility of the dollar to gold, effectively turning it into a fiat currency. This led to a 10% devaluation and triggered significant concern over the dollar's future as the world's reserve currency, followed by a 30%+ drop in value during that decade.

The 1980s (Plaza Accord): Following a steep drop in the dollar's value relative to other currencies between 1985 and 1987, fears of a currency crisis intensified, resulting in the 1987 stock market crash.

The 2000s (Post-Dotcom & 2008 Crisis): Stories of decline increased during the 2002–2004 period. Further, following the 2008 financial crisis and the subsequent introduction of quantitative easing (money printing), many pundits predicted imminent hyperinflation and a dollar collapse.

2020s–2025 (The "De-Dollarization" & Inflation Surge): In the wake of massive COVID-19 stimulus spending (2020) and Russia-related sanctions (2014, 2022 onwards), headlines about "de-dollarization" (countries moving away from the dollar) have become frequent.

2025–2026 Context: The narrative intensified significantly in 2025, with analysts pointing to a 10% decline in the dollar in the first half of the year—its worst performance since 1973. Reports suggest the dollar’s share of global reserves hit a 30-year low (56.3% in Q2 2025).

Why These Stories Persist:

The narrative generally centers on the consistent erosion of the dollar's purchasing power, which has lost over 95% of its value since 1913, alongside high federal debt levels. However, the US dollar has maintained its status as the primary global reserve currency despite these recurring predictions.

[Aitrus]

...the US dollar has maintained its status as the primary global reserve currency despite these recurring predictions.

IMHO, this is the real threat. Humanity has never had an enduring global reserve currency. Past primary / reserve currencies:

15th - 16th Century: Portuguese escudo
16th - 18th Century: Spanish silver dollar (Pieces of Eight)
17th - 18th Century: Dutch guilders (the world's markets were split between the Spanish and the Dutch for about century)
19th - early 20th Century: British pound
mid 20th - present: the US dollar

Since the Middle Ages, each reserve currency has lasted about 150 years, give or take a few decades. The dollar has been the reserve currency for 80 years, so if the pattern holds the dollar has another 80 years or so left to run.

But that's no guarantee that it will be long or short lifespan as a reserve currency.

On the short end of dominating currencies, the Mongol Empire lasted for 162 years, but the peak period of dominating currency when it was unified under the Khan was only about 50 years.

On the long end, the Roman denarius (a 100% silver coin) was the primary currency for about 500 years. It was gradually reduced in weight from 4.5 grams when it was introduced in 211 BC to 3.4 grams by 37 AD, when it stabilized in value. Then it was replaced by the Roman antoninianus (a silver alloy coin) in the 3rd century AD, but that lasted only about 50 years because it was so quickly debased by rapidly replacing the silver content with bronze. While the denarius was almost always 100% silver (just reduced in size or had some copper content), the antoninianus began as 50% silver / 50% bronze and rapidly devolved to 5% silver, with the mandate that both coins be accepted equally by the government. It's one of the reasons the Roman empire fell: debasement of their money.

The US dollar isn't maintaining its value. Reserve currency duration has always been linked to how well the nation that owns it is able to maintain its value. Debasing the money always leads to collapse.

And that's my biggest fear: that the US dollar won't be regarded as the world's reserve currency. Once that happens, we're in for a very rough time. When the British pound stopped being the reserve currency, it went from being the world's largest empire in the 1920s to near-total dissolution by the mid-1960s.

The biggest difference we have compared to past empires is that the US homeland is geographically self-sustaining. We have the single largest plot of farmable land on the planet (the Midwest) combined with the largest navigable waterway system on the planet (the Mississippi and all of its tributaries) to transport the farmed stuff to markets. We have ocean moats on the east and west, and mountains and deserts to the north and south. We trade internationally for luxury items, but all of our basic needs can be met domestically, and our security situation is very solid.

[Bubba]

...the US dollar has maintained its status as the primary global reserve currency despite these recurring predictions.

IMHO, this is the real threat. Humanity has never had an enduring global reserve currency. Past primary / reserve currencies:

15th - 16th Century: Portuguese escudo
16th - 18th Century: Spanish silver dollar (Pieces of Eight)
17th - 18th Century: Dutch guilders (the world's markets were split between the Spanish and the Dutch for about century)
19th - early 20th Century: British pound
mid 20th - present: the US dollar

Since the Middle Ages, each reserve currency has lasted about 150 years, give or take a few decades. The dollar has been the reserve currency for 80 years, so if the pattern holds the dollar has another 80 years or so left to run.

But that's no guarantee that it will be long or short lifespan as a reserve currency.

On the short end of dominating currencies, the Mongol Empire lasted for 162 years, but the peak period of dominating currency when it was unified under the Khan was only about 50 years.

On the long end, the Roman denarius (a 100% silver coin) was the primary currency for about 500 years. It was gradually reduced in weight from 4.5 grams when it was introduced in 211 BC to 3.4 grams by 37 AD, when it stabilized in value. Then it was replaced by the Roman antoninianus (a silver alloy coin) in the 3rd century AD, but that lasted only about 50 years because it was so quickly debased by rapidly replacing the silver content with bronze. While the denarius was almost always 100% silver (just reduced in size or had some copper content), the antoninianus began as 50% silver / 50% bronze and rapidly devolved to 5% silver, with the mandate that both coins be accepted equally by the government. It's one of the reasons the Roman empire fell: debasement of their money.

The US dollar isn't maintaining its value. Reserve currency duration has always been linked to how well the nation that owns it is able to maintain its value. Debasing the money always leads to collapse.

And that's my biggest fear: that the US dollar won't be regarded as the world's reserve currency. Once that happens, we're in for a very rough time. When the British pound stopped being the reserve currency, it went from being the world's largest empire in the 1920s to near-total dissolution by the mid-1960s.

The biggest difference we have compared to past empires is that the US homeland is geographically self-sustaining. We have the single largest plot of farmable land on the planet (the Midwest) combined with the largest navigable waterway system on the planet (the Mississippi and all of its tributaries) to transport the farmed stuff to markets. We have ocean moats on the east and west, and mountains and deserts to the north and south. We trade internationally for luxury items, but all of our basic needs can be met domestically, and our security situation is very solid.

You hit the nail on the head. The reserve currency status is most important. If we lose it, I think there will be more devaluation, but not a total collapse. The guilder, for example, turned into the Euro and is one of the strongest currencies in the world. Nonetheless, things can go wrong, so this is important to keep in mind.

Quick note here. I've been reading about the rally in silver and gold is strongly connected to China (https://www.bloomberg.com/news/articles ... on-refiner). Some speculate this is because they're hoping to bypass the US $ reserve status. Could that happen? Sure. Is that likely to happen soon? I doubt it. I'll never say never though!

[Aitrus]

My understanding for silver's rise is that it's being sought after for use in chips / data center components because it's a better conductor that other materials traditionally used in these roles. Coupled with the fact that there's no currently operating silver mines in the US, and that explains silver's rise due to limited supply.

Along with this, gold is going up because people see silver going up and are buying both because most people have gold and silver linked in their minds, not because of how the material is used industrially. It's as if gold is rising because silver is rising.

Taken together, my sense is that silver is rising for fundamental / industrial reasons, while gold is rising because of perception / market sentiment.

[Bubba]

My understanding for silver's rise is that it's being sought after for use in chips / data center components because it's a better conductor that other materials traditionally used in these roles. Coupled with the fact that there's no currently operating silver mines in the US, and that explains silver's rise due to limited supply.

Along with this, gold is going up because people see silver going up and are buying both because most people have gold and silver linked in their minds, not because of how the material is used industrially. It's as if gold is rising because silver is rising.

Taken together, my sense is that silver is rising for fundamental / industrial reasons, while gold is rising because of perception / market sentiment.

There is likely tons of speculation going on. I know that COSCO was selling gold last year. There are tons of speculators in China also buying the stuff. Having said that, there are many more things happening. Check this out: https://www.kitco.com/news/article/2025 ... on-bullion. Interestingly, it looks like there are national central banks buying the stuff for a myriad of reasons too. Some are trying to evade US $ investigations or sanctions. Others want to evade US trade problems. Make of it what you like, but likely the mania around gold and silver is likely not going away any time soon.

[jimcasada]

What scares me most is when I see Trump on TV yesterday claiming the drop in the dollar is really a good thing (boosts exports, makes American goods more affordable, etc). What also scares me is when I see other countries like Denmark starting to dump American debt. Although our excessive national debt is generally viewed as a bad thing, it does greatly support the value of the dollar. I'm in Italy right now and the dollar sucks.

[Bubba]

What scares me most is when I see Trump on TV yesterday claiming the drop in the dollar is really a good thing (boosts exports, makes American goods more affordable, etc). What also scares me is when I see other countries like Denmark starting to dump American debt. Although our excessive national debt is generally viewed as a bad thing, it does greatly support the value of the dollar. I'm in Italy right now and the dollar sucks.

Yeah, that's the thing. If you only remain in the US, the feeling of how the globe sees the US is not really present. I've lived over 35 years outside the US (as a child and in service of the US). There were definitely periods where we were disliked (like in 2003) or other times. This time is different. Countries see us as a bully and want to disconnect from us ASAP. That will be very hard, but it will definitely involve the $ changing as a reserve currency and them dumping US treasuries. If both will happen, the fact that many don't look outside the US will change. Nonetheless, I don't expect people to care until it actually impacts them. Oh well.

Having said that, this pic is pretty interesting and might be applicable to this period:
https://pbs.twimg.com/media/G_mTC4jWUAA ... =4096x4096 (note, I got this from a guy called Namzes, so it's not from my own work).

[IRQVET]

Trump's comments the other day regarding the weakening dollar as a good thing, my mind immediately went he wants the dollar to fail because it with strengthen his families position in World Liberty Financial (crypto). Which would make sense if you couple it with his current push to make crypto revenues non taxable.

Not saying I'm right, that's just where I mind went after hearing him say that . . .

[Aitrus]

IRQVET - can you provide more info about a push to make crypto revenues no taxable? This is the first I've heard of it, but I haven't been paying all that much attention to crypto for a while.

That would have heavy implications if TSP decided to start including it in their investment offerings.

[IRQVET]

I heard him say it during a news interview last week I believe. I did deeper dive and and it appears he might have been referring to the de minimis tax exemption for small cryptocurrency transactions between $200- $600.

"Trump administration is pushing for legislation that would introduce a de minimis tax exemption for small cryptocurrency transactions and has floated proposals for potentially eliminating capital gains taxes on specific, U.S.-issued digital assets. Currently, no such comprehensive exemption is law, and all crypto gains remain taxable under existing IRS rules."

http://btcpolicy.org/articles/the-de-mi ... oreign,-NY)%20in%20early%202024.

[Aitrus]

I see. Thank you for the info. Much appreciated.

Seems like this de minimis exemption would serve to encourage using crypto as a means of legal tender. The $200 - $600 range seems really narrow and specific for some reason, but would do for things like monthly vehicle payments, electricity bills, annual subscriptions, etc. Maybe a trial run to see how well (or not) the idea of using crypto for routine / regular purchases is adopted by the public.

[mjedlin66]

IRQVET - can you provide more info about a push to make crypto revenues no taxable? This is the first I've heard of it, but I haven't been paying all that much attention to crypto for a while.

That would have heavy implications if TSP decided to start including it in their investment offerings.

You can't buy bitcoin ETFs but you can buy into a bitcoin futures fund, BTCFX, through the mutual fund window. It did awesome 2023-2025

[Bubba]

IRQVET - can you provide more info about a push to make crypto revenues no taxable? This is the first I've heard of it, but I haven't been paying all that much attention to crypto for a while.

That would have heavy implications if TSP decided to start including it in their investment offerings.

You can't buy bitcoin ETFs but you can buy into a bitcoin futures fund, BTCFX, through the mutual fund window. It did awesome 2023-2025

This is a good find. I'm toying with the idea to jump in (for a short while) after the whole thing bottoms. I've been seeing projections from $50k to $30k. Who knows? Either way, it's a speculative asset and if you pair midterms (historically weak periods), with populist periods (e.g. late 1960s - early 1970s) and all the info we've had on 3M vs. 10YR inversion, unemployment creeping up and gold/lumber ratio, then things make more sense that now's a good time to not be in too much risk.

[Bubba823]

The dollar will NEVER collapse. Next question?