3 Ways to Deal With a Declining US Dollar

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In the cover article of the April 2011 issue of the Sound Mind Investing Newsletter, Austin Pryor shared stats that indicated that the US Dollar has fallen 14% (when compared to some of the major currencies) since the end of April 2009.

You’d think that as a missionary who is paid in US funds I would have already known that, but I guess the PNG Kina hasn’t been hit as hard or I’ve been ignorant to the the changes.

I do know that many people living in the US are afraid of the potential devaluation of the US dollar.  While I am not an economist, here’s what I do know.  The more money the US borrows, the more likely it is that the dollar devalues.  Sorry, but that’s as deep as I can go.

This is a good time for us to stop and remember a couple of general lessons about personal finance.

Lesson #1: Where there is bad news, there is typically good news for those who are resourceful.

The strength of the US dollar is not something in and of itself, but is really only realized in comparison.  Thus, if the US dollar is going down, let’s say against the Canadian dollar, then what does that mean?  It means the Canadian dollar is going up. 

That’s why if I were a Canadian, wait a minute – I am Canadian, I would consider getting some US funds for the next time the Canadian dollar goes down.  I would plan a vacation to the sunny south and enjoy getting value out of my Canadian dollars.

While it might be bad news that the price of gas is up, if you own oil and gas related stocks I’m sure they’ve gone up a lot.   

Bad news is good news if you’re resourceful enough to choose not to join the griping.

Lesson #2: Expect and anticipate swings and fluctuations.

There will be ups.  There will be downs.  Why do we complain when the stock market goes down?  Is that really a surprise to any of us?  The only thing we do know is that it will go up and it will go down.  We just don’t know by how much.

3 Ways to Deal With a Declining Dollar

1.  Buy Gold

The “Gold Revisited” Sound Mind Investing article (mentioned above) has a nice chart that shows the reciprocal relationship between gold and the US dollar.  There is an unmistakable trend that when the dollar goes down then gold goes up. 

I personally don’t own any more gold than the ring on my finger.  The reason?  I haven’t taken the time to really decide for myself if it is a wise strategy.  A few years ago, I owned gold and had it for six months or so and made a decent return on it.  However, I sold it because the only reason I bought it was that there was a buzz around gold.  I don’t for a moment regret selling it because I owned it for the wrong reason.

If you, however, are concerned about the declining US dollar, it’s time to research gold as a possibility.

2.  Buy Foreign Stocks

Companies outside the US earn more returns when the US dollar is declining.  That is because they are invested in foreign currencies and tapping into a diversity of overseas opportunity. 

Obviously, the easiest way to get into foreign stocks is by buying some kind of an index fund or ETF that tracks foreign stocks.

3.  Buy Foreign Currency

You can either purchase (physically) foreign currency or buy an ETF for a foreign currency. 

I tend to do my fair of buying and using foreign currencies since I live in PNG, I’m from Canada, and I get paid in US dollars.  Whenever possible, I keep currencies in all of those places, and when I spot trends, I trade, exchange, or buy more currency.

An appeal to churches:

I’m going to make this pitch, hoping it probably sounds self centered.  Would you be willing to ask your church leaders if they have recently done a foreign currency review with their missionaries?  A 14% salary reduction (due to exchange rates) would probably impact all of us in a severe way.  My church does a currency review once a year so I’m not writing this to get their attention.  Here’s a post that outlines how missionaries are impacted by a declining dollar.

A reminder to missionaries:

Let me remind you that the drop in currency may not be as bad or serious as you think.  Depending on the number of assets you own, you must remember the value of those assets increase every time the dollar drops.  Just keep that in mind.  Still, it really only matters on the day you’re selling your house or vehicle and relocating to North America, but it is something to keep in mind. 

Are you worried about the declining US dollar?  What can be done to minimize the impact?


  1. says

    I own both gold and silver. I also own Silver-Wheaton stock and trade it in my retirement account. At various times over the past decade, I have owned gold miners and energy stocks as well. There are many investments that can at least keep pace with inflation. The key is knowing what companies have some pricing power.

  2. says

    So you just buy foreign currency and keep it around until its worth more? Do you have a particular threshold at which you would cash it in for whatever currency you actually use?

    • says

      I purchase currencies that I plan to use in the future. If I go to use it and the currency isn’t ‘up’ then I hang onto it for longer. I also keep some in a safe just for kicks.

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