"You don't have to rely on S&P's judgment to realize America's finances are on a slippery slope"
After saluting the Stars and Stripes, however, S&P continued: "Although we believe these strengths currently outweigh what we consider to be the US's meaningful economic and fiscal risks and large external debtor position, we now believe that they might not fully offset the credit risks over the next two years at the 'AAA' level." Translation: America is broke.
But you don't have to rely on S&P's judgment to realize America's finances are on a slippery slope. The
precious metals markets have been rendering this verdict for several years already. Gold touched another new all-time high yesterday. The dollar's feeble price trajectory has also been telling the world that America's finances are broken.
While the dollar remains the world's reserve currency, it is not acting like it. The dollar's value has been dropping against just about everything. Really. Everything. Would you believe that the top-performing currency of 2011 is the Paraguayan Guarani? And that's not all; the next best performing currencies are the Mauritian Rupee, Hungarian Florint, Czech Koruna, Russian Ruble and Colombian Peso.
This is not a joke. Not only are these currencies atop the leader board for 2011, but each of them has also appreciated at least 25% against the US dollar during the last two years. The Colombian peso is up 44%!
To be sure, the Colombian Peso is not about to become the world's reserve currency. But in a world in which the actual reserve currency has become as reliable as Scottish sunshine, even the Paraguayan Guarani becomes a plausible store of value. Nothing against the Guarani, but if the dollar's descent gathers steam, we'd rather be holding
gold and
silver.
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