Megatrend #4: Watch out for a falling US dollar

The value of the US dollar will continue to be eroded by the continually escalating budget and trade deficits. The US government is spending far more each year that it receives in taxes and has little financial restraint. In addition, millions of baby boomers are getting ready to retire and are living longer, which will strain the US entitlement budget. The trade deficit is a huge threat to the dollar and US economy as all of the wealth in US gets exported abroad. At the same time, the oil exporting countries and China continue to aggregate wealth from the rest of the world.

I am currently reading Senator Byron Dorgan's book, Take This Job and Ship It, and he has a great passage in the first chapter stating that "American consumers watch our Japanese television set, wearing our Chinese T-shirts, Taiwanese trousers, Mexican shorts, and Italian shoes. We drive a Korean car to the store to pick up our Mexican vegetables, Australian beef, and a six-pack of Heineken. And then we wonder what happened to all of the good jobs here at home." If foreigners do not buy US goods and services at the same rate that US citizens purchase foreign goods, then US capital will slowly be eroded and disbursed to the rest of the world, ultimately reducing the value of the US dollar. The US dollar has already declined significantly compared to the Chinese Yuan, Euro, Pound, and Australian dollar over the last 5 years and this trend will most likely continue over the next decade.