“My questions are for Lief…”
–Joseph L., United States
[Editor’s Note: To make this exchange easier to follow, we’ve included Lief’s responses immediately following each of this reader’s questions.]
“First, will the U.S. dollar lose as much value in Panama as it will in the United States?”
Lief: Yes, the dollar will lose the same value in Panama as it will in the United States, but local prices for local goods will not be as affected.
“What will happen to us expat retirees in Panama if our Social Security checks become worth less than US$1,000 per month, the amount we must prove to qualify for the pensionado visa. Will our visas be revoked?”
Lief: Once you have your pensionado visa, it’s a permanent status, meaning you don’t have to re-prove your income. That said, your Social Security checks won’t become less than US$1,000 (they’ll continue to be the same amount they’ve always been…assuming Social Security continues to be paid out), but, continuing in our assumption that the U.S. dollar is going to continue to lose value, those US$1,000 would buy less and less over time.
“What can I do to keep my Social Security check from shrinking? Some are saying it should be deposited into a Panamanian bank and immediately converted to balboas. Is that correct?”
Lief: A balboa is a dollar. There is no difference in the banks or in the stores or on the street. A balboa and a dollar are the same thing, so, no, it doesn’t make sense to “convert.”
“Is Panama going to be forced to drop the dollar and go to the balboa?”
Lief: The balboa doesn’t really exist, except in coins. Panama could break from the U.S. dollar, but the country has no central bank.
“All of this is very confusing and complicated, Lief, so, please, do not ignore these questions. Many of us are interested in these problems.”
Lief: The real worry for those with only Social Security for their retirement isn’t the weakening U.S. dollar. Even if the dollar is replaced as the world’s reserve currency, it would take decades for its value to drop to a crucial level (as it took decades for the British pound to lose its value when it was replaced by the U.S. dollar as the world’s reserve currency).
The real worry, I’d say, is the possibility that the U.S. government won’t be able to continue to make Social Security payments at all.