The US dollar rose against nearly all currencies last night - with the singular exception of the Swiss franc. (Anecdotally, this means a pink to red opening for the US equity market today and if the US dollar pops again, the market will drop again).The Swiss economy is doing very well at present. Like most other countries, Switzerland endured a recession in 2008 and early 2009. However, the recession in Switzerland was not nearly as deep as it was in most other advanced economies. The peak-to-trough decline in Swiss GDP totaled 3.2 percent. Real GDP in the United States dropped 4.1 percent, both the British and the German economies endured contractions that exceeded 6 percent, and real GDP in Japan tumbled 10 percent. Moreover, the level of real GDP in Switzerland surpassed its pre-downturn peak in Q3 2010.While the US dollar is still the recipient of most of the "flight to safety" movement from the Euro, the Swiss franc also benefits.The big fear everyone should be having is the almost insurmountable problems coming up for the Euro. While Greek CDS and interest rates reflect a collapse over there, IMHO, the same does not seem apparent for the rest of the PIIGS. While the rates have risen, they do not reflect the problems that I suspect will be cascading over the next few years. There seems to be a concerted effort to encourage hope for a good outcome, rather than preparation for a lousy one and while politically expedient, the danger of another global meltdown comparable to the one caused by the States in 2008 is, in my opinion, very real. If this takes place before we are better prepared on this side of the pond (and I think that, based on time lines this is likely), things could become very ugly indeed as the US dollar soars in response. While gold and silver will, no doubt, respond in terms of Euros, it is not as clear that they will increase in terms of US dollars during a liquidity crisis (they plunged back in the 2008-2009 period). While not of our making, the "double dip" recession will be palpable and real over here. The "good news" is oil and other prices will drop. The "bad news" is that's what's called deflation. The US dollar will be king, but if we get bent out of shape and the government gets confiscatory, there may be few places to hide.The time to begin preparing is now, but the means of preparing are not yet very clear to me.Jeff
Ireland, Portugal, and Greece combined are not enough to force the US into a double dip, because core Europe can still afford to recapitalize their banking system. If Spain or Italy is in real trouble, that is a different story, but that outcome is far more unclear for the time being. I would advise you to focuse your energy on tracking Spain's outcome if you are interested in EURUSD over a 2 to 5 year timeframe. Track Ireland/Portugal/Greece if you're interested over the much shorter term. PIIGS is an unfortunate acronym because it lumps together at least two very different groups of countries.
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