The basket many people are holding all their eggs in, is the USD. That has depreciated significantly in the last few years, with a very good chance that it'll continue to do so.
My home currency isn't the dollar but my app is priced in dollars and that sucks. I'd far prefer to have Euro earnings and earn a few bitcoins a month as a speculative investment.
The basket many people are holding all their eggs in, is the USD
Not many people, or at least not many people with nontrivial amounts of money, have all their assets in US dollars. Most folks own shares and/or property. As you say, US-dollar cash assets are a poor investment right now since interest rates are lower than inflation.
Still, keeping all your money in US dollars (in a big brown bag inside a zoo, perhaps) is a lot less nutty than keeping all your money in bitcoins. Even if nothing else, the US dollar has a history of relatively low volatility over the past couple of hundred years, whereas bitcoins have a history of insanely high volatility and dates back to (uhh, goes and checks) 2009.
The US dollar hasn't existed nearly that long in its current form. The current currency regime began in 1971 when Nixon ended the policy of buying back each dollar with 1/35 of an ounce of gold.
Major changes to the nature or definition of the US Dollar occurred over the past 200 years:
- In 1945 the Bretton Woods agreement made the US Dollar the world's reserve currency
- In 1933 private ownership of gold in the US was outlawed. Gold was forcibly confiscated for $20 per ounce. The price was then raised to $35 per ounce.
That depends on what you mean by "few". Here is a chart of the US Dollar index since 2002.
http://futures.tradingcharts.com/chart/US/M?1306686035
The major depreciation trend stopped in 2004 and since then has bounced around in a trading range.
Investing in any stocks hedges against this. For instance, I have shares in General Electric. That means I indirectly own part of all GE's assets. Some of their assets are in US dollars, but the vast majority of their assets are tangible things -- factories that make jet engines and diesel locomotives and dishwashers and... whatever the hell else we make. If the US dollar drops in value, the US dollar value of these real assets goes up correspondingly.
That's only true for some stocks, and GE is a bad example. The majority of GE's assets are not tangible things but rather debt owed to GE Capital. As of 2010 only 9% of GE's assets were tangible property, plants, and equipment.
http://www.ge.com/investors/financial_reporting/index.html
In fact, Warren Buffett said this in an interview: Owning talent is the only way to hedge against depreciation of your currency (equivalently inflation).
Holding stocks can definitely hedge against a devaluation of currency. Even domestic stocks or others prices in the currency you're seeking to get out of can work, but are significantly worse at doing so than one priced in a "safer" currency. There are investment firms that specialize in investing in the stock of foreign companies.
China's been buying a lot of dollars to hold their own currency down. I assume that won't continue forever. When it does stop, the USD will drop & Yuan will rise. Also, Pimco, biggest bond trader in the world, has dumped all their treasuries. I'm with them :)
My guess is that the USD is seen as a safe haven during these risky times, but not a long-term store of wealth. That's why treasuries are (temporarily) high.
My home currency isn't the dollar but my app is priced in dollars and that sucks. I'd far prefer to have Euro earnings and earn a few bitcoins a month as a speculative investment.