Can USD kept outside the U.S.A be devalued?

[AndyN]

I have no right to enter the U.S. whereas I do have a right to enter and live in the UK as a British citizen. So USD is not really "my currency" but I need to use a lot of it because it dominates the financial markets/investments.

How possible do you think it is that one day they announce that USD kept outside the U.S.A. is worth, for instance, 1/10 of the USD kept inside the country, or something to that effect?

I am asking because I am considering U.S.-based broker vs. UK-based, both using USD. Another thing is that a non-U.S. broker offers a fully segregated escrow account whereas the U.S. one only an omnibus account where my funds are commingled with those of other clients.

This thought crossed my mind because of recent sanctions on Russia. It seems that we enter a period where there will be no rules and no rights respected so the scenario above is becoming very real, in my opinion.

 

[NicolasMaduro]

Thats not something that would ever happen.

 

[Martin Everson]

How possible do you think it is that one day they announce that USD kept outside the U.S.A. is worth, for instance, 1/10 of the USD kept inside the country, or something to that effect?

Not very likely. However if you are talking about paper dollars then it is very likely they could pull an India and render like $100 bills no longer legal tender tomorrow morning. Then instead those persons will be offered some sort of new CBDC to replace it. The net effect is those dollars hidden under peoples beds will flow back into US system causing massive inflation however. So this would only happen during a deflationary cycle I feel.

I am asking because I am considering U.S.-based broker vs. UK-based, both using USD. Another thing is that a non-U.S. broker offers a fully segregated escrow account whereas the U.S. one only an omnibus account where my funds are commingled with those of other clients.

Whatever the broker tells you do your due diligence. Make sure broker does not turn out to be an MF Global where clients funds were accessed. You need to look at rating of broker, last financial report, transparency and its risk management. If in doubt go with a too big to fail broker. Segregation does guarantee anything if company are scoundrels. As in UK the liquidators of a broker can use client funds to pay themselves if the company is insolvent.

This thought crossed my mind because of recent sanctions on Russia. It seems that we enter a period where there will be no rules and no rights respected so the scenario above is becoming very real, in my opinion.

Yup that is what I am slowly learning these days. Rule of law is being eroded. Confiscation and due process is disappearing. Shake hands with wrong person or have wrong passport and you could end up with your assets frozen indefinitely.

 

[369]

Thats the next step of the US and others like Martin already posted

https://www.elibrary.imf.org/view/journals/001/2019/084/article-A001-en.xml

 

[Silvio]

Make sure broker does not turn out to be an MF Global where clients funds were accessed

MF Global was not a regular broker but a Futures broker:
"Unlike bank deposits or brokerage accounts, futures accounts carry no backstop akin to FDIC insurance or SIPC coverage. For this reason, account segregation is deemed sacrosanct."

That's why the SPIC insurance was not applicable. Otherwise the clients would have been insured up to $500k for equities + $100k cash

 

[Martin Everson]

MF Global was not a regular broker but a Futures broker:
"Unlike bank deposits or brokerage accounts, futures accounts carry no backstop akin to FDIC insurance or SIPC coverage. For this reason, account segregation is deemed sacrosanct."

That's why the SPIC insurance was not applicable. Otherwise the clients would have been insured up to $500k for equities + $100k cash

I wouldn't rely on FDIC. The FDIC is not as safe as you think it it. I discussed FDIC in another thread in 2020. During 2009 financial crisis the FDIC was days away from going bust....lol. See for yourself below what FDIC insolvency looks like when liabilities are greater than your assets....lol.

https://www.fdic.gov/about/financial-reports/corporate/cfo_report_3rdqtr_09/balance.html
Even last year they were reporting the below issues with FDIC. Doesn't sound like a solid scheme to me when it needs to be topped up with "emergency" fees. But hey the US government can print to infinity so in end I guess everyone will be made whole when it bails out the FDIC .

https://savingtoinvest.com/fdic-going-broke-and-why-bank-fees-will/

 

[369]

I haven't read US laws for fdic but i know for a fact that in eastern europe this fund is a joke.
You get a guarantee of 100k PLN for example in poland.
What they don't say is that should the liability be bigger than the insolvency mass than they pay out based on priority.
Institutions gets back first their money and what is left to retailers.

There was a big affair in poland called ambergold giving high % interrest.
They went bankrupt so a governmental insolvency manager took control over the company and assets and paid after 2 years money to all institutions where ambergold had liabilities.
In the end such a small amount was left that retailers nearly got nothing back.

So thats why i would NEVER trust such a guarantee and i know for a fact that higher class also doesn't.

 

[Silvio]

I wouldn't rely on FDIC. The FDIC is not as safe as you think it it. I discussed FDIC in another thread in 2020. During 2009 financial crisis the FDIC was days away from going bust....lol. See for yourself below what FDIC insolvency looks like when liabilities are greater than your assets....lol.

I'm not saying I trust the FDIC or SIPC with my life, but will they let a broker like IB go bankrupt? I doubt it.

 

[Martin Everson]

I'm not saying I trust the FDIC or SIPC with my life, but will they let a broker like IB go bankrupt? I doubt it.

Fingers crossed it never happens and hope is never a plan. But IB is relatively small brokerage in terms of client assets and number of clients compared to its US bigger brothers i.e Schwab, Fidelity, E*Trade, TD etc. It will be way down the list of priority.

Also a broker collapse could take a long time to resolve while your assets are locked up with the failed broker. Bottom line these insurance corporations should never ever be relied on to backstop your investment portfolio. It is more important to look at brokers balance sheet and risk management and to spread your risk around more than one high quality broker.

 

[369]

I'm not saying I trust the FDIC or SIPC with my life, but will they let a broker like IB go bankrupt? I doubt it.

Of course they will .....thats why they build now fully decentralized solutions so it can't happen in the future anymore.
Why you think stocks are getting tokenized as security.

Fingers crossed it never happens and hope is never a plan. But IB is relatively small brokerage in terms of client assets and number of clients compared to its US bigger brothers i.e Schwab, Fidelity, E*Trade, TD etc. It will be way down the list of priority.

Also a broker collapse could take a long time to resolve while your assets are locked up with the failed broker. Bottom line these insurance corporations should never ever be relied on to backstop your investment portfolio. It is more important to look at brokers balance sheet and risk management and to spread your risk around more than one high quality broker.

IB makes HALF its income by lending peoples asset

 

[Golden Fleece]

It is more important to look at brokers balance sheet and risk management and to spread your risk around more than one high quality broker.

That is even more crucial for funds placed in banks, which are managed far worse that brokerage houses.

 

[jafo]

Also a broker collapse could take a long time to resolve while your assets are locked up with the failed broker. Bottom line these insurance corporations should never ever be relied on to backstop your investment portfolio. It is more important to look at brokers balance sheet and risk management and to spread your risk around more than one high quality broker.

Would you opt for direct registration then?

 

[bigbill27]

Happened in Lebanon . Google “lollars”

 

[Martin Everson]

Would you opt for direct registration then?

If your able to and you have a buy and hold strategy then do so.