What Will Happen If the U.S. Dollar Collapses?


Quick Answer

A U.S. dollar collapse could send investors and consumers into a panic, causing extreme turmoil in local and foreign markets. It is also likely that a severely devalued dollar is capable of quickly tanking the U. S. economy, sending the country into a recession or depression.

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Full Answer

Currency investors worldwide are likely to react to a U.S. dollar collapse by scrambling to sell their U.S. currency investments as quickly as possible. These investors are likely to buy currencies deemed more stable, such as gold, euros or Yuan. During this tumultuous time, the world stock markets would also experience instability due to investor panic, causing some individuals and businesses to lose unpredictable amounts of money. Some investors would switch their investments to commodities in hopes of avoiding a financial crash. Banks worldwide would suffer severe financial losses due to their heavy connection to the dollar.

Inflation is sure to rise and increase the cost of goods and services, and as a result, consumers would see higher prices in food, gas, utilities and other basic essentials. Some people predict that the collapse of the dollar is imminent. However, a sudden crash of this severity is unlikely, mostly because countries that sell goods to U.S. consumers need the dollar to remain stable.

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