The Devaluation Of The US Dollar: Why Investing In Hard Assets Matters

May 1, 2024

In recent years, the topic of the devaluation of the US dollar has become increasingly prevalent in economic discussions.  You may have noticed your money not going as far as it used to. What precipates the dollar devaluation and what can you do to combat it? We’ll look at some underlying causes and suggest where to put your money to best position yourself going forward.

Understanding The Devaluation Of The US Dollar

The devaluation of the US dollar refers to a decline in its purchasing power relative to other currencies or goods and services over time. This phenomenon can be attributed to various factors, however, we will take a look at the most prominent causes.

The US government through their policies and actions has the most influence on the value of the US dollar. It makes sense that a country would have the greatest effect on its own currency, but how does that actually happen. The US government can use two main policy tools to influence the “price” of money.

First is Monetary Policy. Monetary policy is what a central government authority uses to control the money supply. It’s an important tool to bring stability to a currency but it can lead to excess money supply and a devaluation of the dollar if not used prudently. Quantitative easing, where central banks inject liquidity into the financial system by purchasing government securities, is one policy the US government has used in the past. Purchasing these securities injects cash into the financial system. This excess liquidity provides ample dollars for people to borrow which also helps keep interest rates low. Additionally, through the Federal Reserve, the government can just set the fed funds rate to whatever it wants. This rate generally serves as a reference rate for which all borrowing is based off. The US government kept rates artifically low for over a decade. Eventually this loose monetary policy lead to an excess supply of money that had to slowly work its way through the economy, which it is still doing today. Since so many more dollars are in circulation, the overall value becomes lessened.

The second tool is Fiscal Policy which relates to how government spend their money. If a government has a budget deficit, it can negatively impact the dollar's value. In simple terms when a government is running a deficit it needs to borrow money. If it borrows money that means that the demand for that money increases which leads to goods priced in that money being more expensive. So one dollar is still one dollar it just cost more of those dollar to buy something. That devalues the dollar on an absolute basis.

Ultimately both of these tools lead to the devauing of the dollar through inflation. Inflation erodes the value of money over time. If there are more dollars chasing scarce goods the value of those goods will rise and the dollars that you hold will be, itrinsicly, worth less. To combat against inflation you need denominate a portion of your savings in assets that cannot be easily created. This is best done by holding, or investing, in hard assets. Think of hard assets as stocks, real estate, gold, etc. For example land is scarce and cannot be created by some entity. If a government wants to print more currency it can. If a government wants to create new plots of land to build on it can’t. It must buy from someone who holds it. That is why you need to hold assets that must be bought and sold and aren’t trivial to duplicate. We’ll look more deeply into the importance of investing in hard assets. 

The Importance Of Investing In Hard Assets

Hard assets are tangible, physical assets with intrinsic value that tends to withstand economic downturns and preserve wealth over the long term. Here are some compelling reasons why investing in hard assets matters:

Preservation Of Purchasing Power: Hard assets, such as precious metals like gold and silver, real estate, commodities, and even art and collectibles, have historically served as stores of value. Unlike fiat currencies, which can be devalued by inflation, hard assets have inherent value that can help preserve purchasing power over time.

Diversification: Investing in hard assets allows investors to diversify their portfolios and reduce exposure to the risks associated with financial assets like stocks and bonds. Hard assets often have low correlation with traditional financial markets, providing a hedge against market volatility and systemic risks.

Protection Against Inflation: Hard assets have a limited supply and tangible utility, making them resistant to the erosive effects of inflation. As the purchasing power of fiat currencies diminishes, the value of hard assets tends to appreciate, providing investors with a hedge against inflationary pressures.

Long-Term Wealth Preservation: Historically, hard assets have demonstrated resilience and stability over the long term, outperforming financial assets during periods of economic uncertainty and currency devaluation. By allocating a portion of their investment portfolios to hard assets, investors can protect and preserve their wealth for future generations.


The devaluation of the US dollar is a reality that investors cannot afford to ignore. As central banks continue to pursue expansionary monetary policies and fiscal deficits rise, the purchasing power of fiat currencies is at risk of erosion. In this environment, investing in hard assets emerges as a prudent strategy for safeguarding wealth and mitigating the effects of currency depreciation.

Recently investors have turned to bitcoin for protection against a devaluing dollar. Bitcoin is a scarce digital currency with a capped supply that is coded into the protocol. There will only ever be 21 million bitcoins. The supply currently inflates on a set schedule until it is fully distributed in 2140. While the value fluctuates much more than traditional assets, its volatility has had a positive effect on the price over time taking it from a few hundred dollars less than a decade ago to over $60k today. Investing in bitcoin may seem complex to beginners but there are companies out there who can help. Digital Asset Investment Management (DAIM) is one such company, having helped countless individuals invest bitcoin and other scarce digital assets since 2018. They help a wide range of investors plan for an uncertain future by investing in hard digital assets. Whether you are looking to put bitcoin in a trust or a retirement account they have the expertise to make sure you are creating the optimal path to your financial goals.

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