“Kathleen, I have what I think is a very serious question for you:
“If the U.S. dollar loses its status as the world’s reserve currency, how would that impact countries like Panama, Ecuador, and Belize who use the dollar as their currency?
“I have noticed that services similar to yours never take into account the impact of such an event. They are all cheerleaders for whichever country(s) they are promoting now.
“I want to receive advice from someone who thinks things through before telling me all the good things and leaving out the realities.”
–Joe R., United States
I’m not an economist, and I can’t predict what’s going to happen with world currencies. That said…
There are two types of dollar countries—those whose currencies are tied to the U.S. dollar (these include Belize, the Bahamas, etc.) and those that actually use the U.S. dollar for their currency (including Panama and Ecuador).
Panama has never had its own currency. The country has used the U.S. dollar since it became independent. Therefore, Panama has no Federal Reserve equivalent. Trying to predict what the Panamanians might do if the dollar collapses is pie in the sky.
They could switch to another hard currency or they could institute their own currency. The issue then would be the exchange rate between the new currency of Panama and whatever currency your living money is denominated in. Again, there’s no way right now to predict any of this.
And none of this is the point for the would-be Panama retiree or expat. The important thing for anyone thinking about living, investing, or doing business in Panama, or in any other country, regardless of the currency that country uses, is diversification.
You want to diversify your holdings so that you aren’t completely tied personally to the U.S. dollar…or to any other single currency.
You can’t predict or control what currency any country chooses to trade in or what the exchange rate will be between that currency and any other currency months or years from today. The only thing you can do is to diversify your own holdings, assets, and income strategically so that your life and livelihood aren’t at the mercy of any one country or any one government.
A number of presenters at our recent Emergency Offshore Summit far more expert on these subjects than I addressed these kinds of questions and made the point that part of any sound diversification strategy is some investment in gold.
“I would be wary of the sweeping generalizations made by someone who pretends to be an expert on a place yet does not know such a basic fact.”
–David S., Costa Rica
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