One thing worth keeping an eye on for those interested in the future of the US, the dollar, savings and 401ks is the approaching Iranian Oil Bourse. In real simple terms, oil is sold in dollars only, which forces all other consuming nations to keep buying US currency. Now Iran is opening a Euro-denominated oil bourse in March, just a few weeks away. This will enable it to sell oil to Europe and the rest of the world for euros instead of dollars, meaning that there is a lot less reason for countries to hang onto their stockpiles of dollars. A much more detailed version is found here.

Add to this the rapidly rising inflation rates in the US, which continuously erodes the value of overseas dollar holdings and you have another reason to ditch the dollar.

Remember Iraq tried this just before the second Gulf War, although it was severely shackled by the UN Bribe Oil for Food Program.

If the dollar drops in value, everything we import, especially oil, will become a lot more expensive.

There are some upsides, especially for exports and balance of trade:

A key effect of devaluation is that it makes the domestic currency cheaper relative to other currencies. There are two implications of a devaluation. First, devaluation makes the country's exports relatively less expensive for foreigners. Second, the devaluation makes foreign products relatively more expensive for domestic consumers, thus discouraging imports. This may help to increase the country's exports and decrease imports, and may therefore help to reduce the current account deficit.

And some downsides, including that pesky inflation problem which will eat away at the real value of investments and savings:

A significant danger is that by increasing the price of imports and stimulating greater demand for domestic products, devaluation can aggravate inflation. If this happens, the government may have to raise interest rates to control inflation, but at the cost of slower economic growth.

And the thing about inflation is you can't solve it by printing more money. You have to increase interest rates, restricting the money supply. Which is bad for investment and spending, especially on the now more costly imports.

And VERY bad for the housing market. Mortgage rates would rise, slowing the housing market and lowering house values. On the other hand, house price reductions would be partially offset due to inflation making many homeowners feel a little better even as their assets lose real value.

Interesting Times - Keep your powder dry - Buy Gold!