The dollar nevertheless remains the world’s leading reserve currency, with the euro in second place. Investors are naturally anxious to protect themselves against markets, including currency markets, which have shown such a high degree of volatility.

The Chinese, who have the greatest number of dollars in their currency reserves, have already suffered substantial losses.

In what amounts to a crisis of the dollar, the euro is in second place as a reserve currency, but there are potential threats to the future of the euro, due to the weak productivity of the Mediterranean economies.

So what was it that spooked the markets… Well… The only thing I can find was the report yesterday about falling Housing Starts that Chris told you about… Did you know that about 14% of US homeowners were either delinquent on their mortgage or in some stage of foreclosure? That is the highest rate since the group started collecting the data in 1972!

But there was something else that was announced as the day went on, that I think probably spooked the markets more than anything else… And that is a key House panel approved two amendments to a sweeping financial-overhaul bill that would give federal watchdogs new authority to audit the Federal Reserve, and would establish a fund of as much as $200 billion to help dissolve large, troubled institutions. Rep. Ron Paul (R., Texas) offered the amendment seeking to subject the Fed to audits.

“In the old days … the Fed controlled the federal funds rate with open market operations,” Antulio Bomfim, a former Fed economist now with Macroeconomic Advisors LLC in Washington told Reuters. “Now, at least in this period when reserves are over-abundant, the way the Fed hopes to raise the federal funds rate will be primarily by raising the interest rate it pays on reserves.”

Resident voice of reason at The Daily Reckoning, Bill Bonner takes a hard look at Goldman Sachs and replaces jealousy with admiration.
“We pick up sword and shield, ready to fight for Goldman, after reading the Financial Times. The FT has devoted a whole page to Goldman bashing. It’s time someone stood up to say a kind word for the firm.”

Doug Hornig, senior prognosticator at The Casey Report, analyzes the alarming trend of U.S. federal debt and its future implications.

“I have always depended on the kindness of strangers,” said Blanche DuBois, in the final words of the play A Streetcar Named Desire. Well, don’t we all.

Many citizens probably still cling to the old saw that public debt doesn’t matter because “we owe it to ourselves.” Wrong. Debt always matters. And as for whom we owe it to, it is a lot of kind (or, at least, not yet unkind) strangers.

Money Morning’s Keith Fitz-Gerald brings us a sobering look at investing in gold. If there is a moral to the story, it’s that nothing is what it seems anymore – not even gold.

The 19th century belonged to Britain, the 20th century belonged to America and in the 21st century, China will rule the business world. Whether you like it or not, this transition is already underway and it will intensify over the coming decades.

Chuck Butler (The Daily Reckoning):
What a ride yesterday for the currencies! Gold? Well, at one point gold had shot up $24 on the day! It topped out at $1,142… The shiny metal then gave some back on profit taking, but gold holders have got to love it! Those who keep waiting for a pullback. Well, they might still be waiting when the cows come home.

Keith Fitz-gerald (Whiskey & Gunpowder):
Everything we know about classic economic theory suggests the U.S. economy should be experiencing Zimbabwe-like hyperinflation right now, thanks to the nearly $2.2 trillion the U.S. Federal Reserve has pumped into the system.

Are you sold on gold? The precious metal outperformed every major equity index in the world in 2008. The question is, can gold—and other precious metals—keep on flying? Or would buying today be buying high and selling low?

Precious metals have always been intriguing to investors because they tend to hold their value. In times of geopolitical crisis or currency devaluation, for example, the value of paper money might fluctuate, but a hard asset will always be worth something. As a result, historically, precious metals have been considered a “safe haven” in times of economic and financial instability.

That brings us to why gold is on a tear today. It declined in 2008 and early 2009 as panicked investors rushed into cash…