It is funny how the market sometimes needs a news event to turn itself around. To become aware.
This is why I tend to agree with George Soros and not the efficient-market theory. This being that the market is always wrong.
This week, we saw the Standard & Poor's rating agency downgrade its outlook for U.S. debt. S&P held the country’s AAA rating but usually when it downgrades an outlook, a true credit-rating downgrade is coming.
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I have long warned of inactivity on unfunded liabilities and on cutting the current record deficit. It seems that the market wanted to ignore these problems until lately.
It is hard to gauge the bond market’s reaction because the Federal Reserve is so active in that market, artificially keeping rates low with their buyback program known as quantitative easing (a fancy term for printing money).
However, I think the currency market is where the real indication of selling and disapproval are. The currency market is very hard to manipulate.
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We have seen the U.S. dollar tank against everything. The Aussie dollar, the Canadian dollar, the euro even the British pound are rising against the dollar — or should we say the dollar is falling against all these currencies.
And we must also remember that as the dollar falls in the coming years, gold will remain an excellent way to protect yourself in the U.S. debt crisis.
About the Author: David Skarica
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