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Consequences of Dollar Collapse for Passive Income

Posted on June 3, 2009

A reader asked us:

Since many feel that it would be very easy for that crazy Iranian president to explode a magnetic pulse device over the u.s. and shut down all the electricity for many months afterwards, do you have an offshore passive income opportunity that would work well to guard against forex not being able to function anymore for people who like forex trading to generate passive income? I am looking for something and was wondering if you had anything for your members in the offshore arena that does not depend on trading in the U.S. via the internet?

Here’s our reply:

To answer your question I think if there is no electricity in the US for many months it is a pretty sure bet that there would be very severe commuications disruptions worldwide, so to protect against that contingency you should be looking at non-internet businesses. People will always need a place to live, so real estate is good (so are productive activities like agriculture, but real estate is more passive).

Paraguay is the perfect place to be when things like this happen.

Realistically I don’t believe the USA will lose electricity or be attacked by Iran. That is in the realm of conspiracy theories. But it is not unlikely that the dollar will collapse completely. Consequences of this could be closures of forex and stock markets, collapse of payments systems like credit cards, and more.

Significantly, if the credit card system went down there would be real havoc worldwide. I believe Visa and/or Mastercard going down in a vast cyber hacking attack is infinitely more likely and easier for the USA’s enemies to implement than bothering to create magnetic explosions. All it needs is a small team of talented IT guys with regular PCs and the internet. Why would they need magnetic pulses?

Even a partial collapse of payment systems (including insolvency of banks etc) could well lead to problems with the internet. Due to the nature of the internet, various upstream and downstream providers will resort to disconnecting each other when they don’t get paid. For example, if the dollar collapses and Asian providers demand to be paid in their local currencies, but the US ISPs only have worthless dollars, who is going to pay the bandwidth fees to keep the internet open?

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