Washington Fiddles While America Burns

Since the end of World War II, the United States has had the world's most powerful economy. That position of strength has allowed it to set policies that would have backfired nearly anywhere else. For instance, the U.S. is one of a very few countries that taxes its citizens' and companies' worldwide earnings, regardless of where the money happened to have been earned.

That kind of thinking only works if a country is so dominant that the benefits of being associated with it far outweigh the costs of the policies. The United States enjoyed that dominance as long as the world believed it to be such an overpowering force of wealth creation that one simply could not invest anywhere else.

After all, no other country could have racked up quite as large a national debt with such low interest rates and such a strong currency while running quite as high a trade deficit.

The party is over
Yet the Federal Reserve's recent easing of short-term interest rates was greeted with a slumping dollar, higher oil and gold prices, and rising long-term rates. These are all predicted by ordinary economic models of what happens when rates are cut, but they're all problems America hadn't really seen while it was the only game in town.

These days, though, the U.S.A. isn't the only game in town. Sure, America is still a big player, but growth around the world means other countries have strong local economies, competitive companies, and currencies of their own.

Hang on to your wallets
The biggest part of the problem, though, is that the international financial markets are realizing and reacting to this change in America's status far faster than American laws and policies are. Unless Congress, regulators, and political appointees in the Federal Reserve get moving, we may well be in for a prolonged period of higher inflation, weaker currency, and diminishing economic might.

But with the odds of that happening somewhere between slim and none, we as investors need to make sure we're protected from the devastating effects of such political inertia.

If you can't beat 'em, buy 'em
Probably the easiest way to protect yourself is to get your money out of the U.S. dollar. By buying stock in strong foreign companies, you get to take advantage of the falling greenback. After all, assuming the buck continues its slide, every euro, pound sterling, or yen of profits is worth that much more when converted back into ever-depreciating dollars.

The best part is that you don't even need a special brokerage account to buy some of the strongest global companies around. In fact, you don't even need to guess the marketability of exotic products. Perhaps you've heard of some of these items, brought to our everyday lives by foreign firms:

Unless Washington straightens up its financial act quickly, the sooner you look globally for investment ideas, the better insulated your cash will be.

If you're ready to own some of the world's strongest companies and protect your cash from the plummeting dollar, but are in need of a few ideas, I encourage you to join us at Motley Fool Global Gains. You can take the next 30 days to try our service, free. Even as the dollar continues to sink to new lows, free is certainly a price worth paying.

At the time of publication, Fool contributor Chuck Saletta did not own shares in any company mentioned in this article. Cadbury Schweppes is an Inside Value recommendation. The Fool has a disclosure policy.