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.

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.

James Dale Davidson’s latest special report, “The Plague of the Black Debt,” went live to Notes readers yesterday.

Currencies rebound…  G-8 has no fireworks…  Aussie / China and coal… Entitlements… And Now… Today’s Pfennig!

Bias to sell dollars fades away…  Trading in yesterday’s clothes…   More thoughts on China…   Shadow Inventory…
And Now… Today’s Pfennig!

Gold steadied today,  Tuesday, erasing earlier gains, as the dollar recovered lost ground against a basket of currencies, reducing the precious metal’s appeal as an alternative asset.

European shares climbed 1 percent on Monday, boosted by upbeat euro zone data, while the dollar steadied after falling late last week on a renewed call by China for a super-sovereign reserve currency.

Gold rose above $942 per ounce on Monday, strengthening as the dollar turned lower against six major currencies with slight caution toward riskier assets also proving supportive.

The dollar extended losses against the euro on Tuesday as the market awaited the outcome of a U.S. Federal Reserve policy meeting on Wednesday and a record $104 billion in U.S. debt issuance this week.

Gold rallied from a six-week low hit earlier in the global session, rising above $923 per ounce with currency fundamentals proving the dominant factor as the dollar got stung by concerns over U.S. indebtedness.