In this next question, there’s some buzz around it. This question is from Paul. He says there’s a lot of talk about the dollar losing its status as a reserve currency and the stock market bubble. He also mentioned that we should invest outside the U.S stock market. How worried should we be? How should we be thinking about these headlines and all the trending buzz that’s out there about this right now?
Yeah, I feel like this is gathering a lot of attention right now, but I’d argue it’s been gathering a lot of attention for a while. I don’t feel like this is the first time that we’ve heard that maybe the dollar is not going to be the world’s reserve currency or maybe this is going to happen. I think that this has been going on for a while. Was there a stock market question in there as well, or was it specifically about the reserve currency he was asking?
He was asking specifically about the reserve currency, but he also mentioned the stock market bubble. Okay, yeah. So, should I be concerned? How should I plan for that? How should I change my financial life because of that?
Well, first, let’s talk about this. We don’t do politics on this show, but I think it’s important to recognize that we live in a very political environment, especially as we approach 2024, which is another presidential election year. There’s a lot of talk about this. America has many benefits due to the fact that we are the reserve currency. I mean, whenever I travel internationally, I just came back from Africa, and they still love our dollar bills. In Paris last year, they loved our dollar bills. Everyone wants our money. I think it’s valuable to consider if we are in danger of losing this. With oil contracts and other things, this has been valuable. If people are buying our debt and investing in our dollar, it really gives us the ability to be financially healthy. I’m trying to choose my words carefully because it’s a hot topic, but from what I found when I researched this, the dollar is still dominant. Besides my anecdotal discussions while traveling, we still account for about 65% of transactions. Also, don’t forget that China pegs its currency, so it’s manipulated according to their own disclosures. I don’t know if that can turn it into the world’s reserve currency when it’s manipulated. People might argue that we manipulate by printing money and through the Federal Reserve, but pegging your currency is different. This is why I think that looking at how dominant we are on the global stage, and considering the shortcomings of other currencies, we’re likely okay. However, it’s important for our government to be fiscally responsible so that we don’t appear as though we’re not taking our world responsibility seriously.
Here’s what I’ve observed: the way we manage our finances as a country is to how you view an individual. You want people to be trustworthy and responsible. Although the political climate and struggles with raising the debt ceiling don’t set a good example, I still believe that in the long term, humans want to expand and grow. The United States has ongoing domestic innovation. However, I also believe in a diversified portfolio. Having international exposure is beneficial. You’ll get through this.
That’s exactly where I was going to go with that. And I’ll let you close it out with a reminder not to get distracted by uncontrollable noise.
Exactly. When you ask, Paul, how should you think about this and how concerned should you be, you need to step back and remember that as an investor, your ultimate goal is to become an owner of certain companies. You should have confidence that the companies you own can navigate various economic scenarios. Regardless of whether you believe the global economy is shrinking or expanding, you have to be convinced that the companies you’re invested in understand how to conduct business. People will exchange their time for money, and that money, that currency, will be used to buy something someone else exchanged their time for. As long as this is the case, investors and business owners will likely be rewarded. When considering the current global situation, it’s essential not to lose sight of the fact that you can’t control everything. Focus on what you can control: manage your risks, live within your means, build an emergency fund, invest beyond your income, diversify your portfolio. By doing all of this, you’ll be in control of the aspects you can manage. The things you can’t control should be kept out of your mind’s focus. For more information check out moneyguy.com/resources.