Mailbag: What to Do When the Dollar Dies

Andy Snyder|October 31, 2022

We’ve got an old quote on our mind as we do something we haven’t done nearly enough of in recent weeks.

As we loosen the frayed ties of our mailbag to share what your fellow readers are saying and asking, we’re pondering a fond, old quote from Francis Bacon…

A prudent question is one half of wisdom.

We like that idea.

And it fits our column today… because our answers scarcely contain the other half.

No promises, dear reader.

Caveat Emptor

We received some wise questions in the mailbag this week. Perhaps our answers to them will lead to even wiser inquiries.

We’ll start where so many readers say we belong… in the world of money – not in politics, legal matters or love advice (sorry about that last one).

I would like to know what to purchase before the U.S. dollar becomes worthless? – Reader P.T.

Oh boy… that’s a big question.

Looking at the chart below, we see that the dollar is anything but worthless these days. Friends and foes continue to kill (sadly, we’re being literal) for the stuff.

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Clearly, the greenback won’t be worthless anytime soon.

But some day… certainly.

“What about inflation, Andy? Aren’t my dollars worth 9% less this year than last?”

They sure are, buckaroo.

That’s where some market wisdom comes in.

The chart shows the dollar versus the world’s other currencies. It takes far fewer of Uncle Sam’s funny little IOUs to buy a handful of euros these days. And it seems just about anybody would take a dollar instead of a yen.

As we’ve said for so long, in the race to the bottom, the dollar is the loser.

Or is it the winner?

Either way… because of America’s remaining economic strength – and, now, her high interest rates – the dollar is the best option for anybody looking to keep what they’ve got.

Inflation, of course, eats away at that idea. But the surging prices Washington created aren’t as bad as what we’re seeing elsewhere in the world. The poor folks (again, we’re being literal) in Europe are paying through their cold, little noses.

So while your dollars can buy more euros… they can buy fewer chickens at the grocery store… and less fuel at the gas pump… and less energy to heat your home.

That’s where we get into trouble. That’s why the dollar is worth less – and why it will someday be worthless.

But that “someday,” we wisely reckon, won’t come this year or next – and likely not in our lifetimes.

Investing based on such an idea would be reckless.

Insuring against the idea, though, is much more prudent. That’s where things like gold, crypto and real assetscome into play.

We’ve long said gold should make up 10% of your portfolio. It paid off this year.

Add in the others above, and you should have close to 25% of your wealth in dollar-proof assets.

Investing, then, with a “worth less” dollar – aka one weakened by inflation – in mind is much smarter. We’ve hit on that subject many times over the last few months.

Right now, it’s the big blue chips that are wrestling with the idea best. Look at the recent earnings reports. The big boys with huge sales volume are increasing prices and boosting profits to overcome the rising cost of doing business.

Wise folks put their money in them.

We’d better move on… One more question…

Few folks realize that oil – as hated and picked-apart by Washington’s vote-addicted mongrels as any sector – is one of the most heavily subsidized industries on the planet.

Please list all of the subsidies that the oil and gas industry enjoys that are not given to other industries. – Reader A.B.

Oh boy… this may get us in trouble. We’re about to expose all sorts of political hypocrisy… and show readers why this sector has been one of the hottest plays of the year.

For obvious reasons, the numbers are tough to track down. But our work shows the sector (including coal) gets about $20 billion in handouts each year.

Here are some of the benefits:

• Intangible drilling costs deduction: Like a farmer deducting the cost of seed, drillers can deduct the cost of opening a new well.
• Percentage depletion: A factory can depreciate the cost of its building and equipment… and drillers can depreciate the usable amount of oil and gas that’s left in the ground.
• Nonconventional fuel tax credit: This one bolsters companies with a $0.50-per-gallon credit for alternative fuels like natural gas, propane and fuel derived from coal. It’s put more than a billion bucks a year into the coal industry.
• Master limited partnerships: This corporate tax structure is used almost entirely by companies in the energy industry. It greatly enhances tax efficiency by eliminating corporate taxes. Oddly, it’s not available to clean energy companies.

This list is just a start. It represents the big deals that are open to just energy companies. Once we include grants, research dollars and state incentives, the figures really start to bloom.

As A.B. hints at, there’s a lot of political hypocrisy in the space.

Anybody who thinks investing in oil and gas in the U.S. is a bygone idea should think again.

There are too many votes at stake.

There’s a lot of money flowing through the sector… and more will come in as Washington’s polls tank.

Keep the questions coming. Email us at mailbag@manwardpress.com.