From the September 01, 2006 issue of Futures Magazine • Subscribe!

The coming collapse of the dollar and how to profit from it

The Coming Collapse of the Dollar and How to Profit From It

By James Turk and John Rubino

Bantam Dell Pub Group

256 pages, $24.95

Reviewed by Art Collins

Despite issues particular to early 21st century America, including the war on terrorism, we are in a larger sense, facing an all too familiar drama with recurring chapters. Throughout history, two large and opposing groups have faced off — those requiring ever-increasing public services and aid, and those taxed to the limit in order to foot the bills. Pulled and stretched between them are the public officials — presidents, congressmen — who must avoid admitting that “there is no free lunch” if they don’t want to be unseated by anyone willing to lie about it. What to do?

You can continue to have all the programs you want without tax increases. Just spend with abandon and then print more money in an increasingly desperate attempt to cover the debt. Among the resulting scary consequences at hand: a deficit pegged at $37 trillion and a threat of having our crushing markers called in by our overseas financiers/creditors. The fallout is experienced gradually — rates rise a little more, the dollar buys a little less — until a tipping point is hit. Once confidence in the dollar evaporates, society pretty much buckles overnight.

Such are the arguments of The Coming Collapse of the Dollar and How to Profit From It. The authors deftly take us through all facets of the theme, from the historical precedents to the signs of our own impending crisis and the overall societal implications.

Because the overview is presented so effectively, we can readily grasp the logic of subsequent financial strategies. Gold is the one surefire hedge against a collapsing currency followed closely by the other precious metals. Consumer finance companies, including banks, offer stock-shorting opportunities. They’re certain to suffer as the money they lend gets paid back in increasingly worthless dollars. By contrast, companies manufacturing in America (paying small domestic expenses) and selling overseas (profiting from strong foreign currencies) are probable good buys. Bonds are about the worst thing to own because they in effect make you a lender. Your home should be paid off as soon as possible because hard assets will retain relatively high value.

Turk and Rubino make their complex ideas easily understandable, even entertaining. The value of their message may be arguable — after all, market timing is a precariously wide-open variable that can ruin you even if your mentors are ultimately dead-on right. In any case, even detractors will have to admit that this book is a rich source of thought-provoking ideas. Highly recommended.

Art Collins is an active, long-time trader. He is the author of When Supertraders Meet Kryptonite and more recently, Market Beaters. E-mail: artcollins@ameritech.net.

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