Hello Everyone,

 There has been a ton of speculation and heated debates whether the US dollar will collapse.  While there are some great arguments why that might happen, its always a smart idea to hear arguments on the other side of the coin because…

It is easy to make trades that are way too agressive simply because we are totally sold on one side of the argument and as a result can be blinded to signs that say our trade is not working out.

Here is an article written by a writer from a newsletter I get from time to time.  I have no association with them and just wanted to pass the info on as I liked the way it was written.  For me it expanded my thinking as I realized that I was unware of just how jaded I've become about the fate of the US $.  Anyway, here's the article…

What I Learned on My Recent Trip to Europe

In the past month I've met with bankers from Copenhagen, Geneva, Zurich, London, Paris and Vienna.

And all of them – to a person – are extremely concerned.

Not only are the blinders finally off when it comes to E.U. sovereign debt. But there's a reluctant sense that ECB President Jean-Claude Trichet is losing control.

That's why I'm not the least bit surprised to see the euro continue to struggle.

Traders will not let up, which means the worst is yet to come for the single currency.First, options premiums related to selling the euro over the next three months have hit new highs. And European banks are paying the biggest default swap premiums we've seen since May.

Both are signals that traders expect the euro's recent rally to be short-lived.

Then there’s news out of Germany that it’s opposing an increase in the $1 trillion European bailout fund, as well as the creation of eurozone bonds.

That makes sense, because Germany has the strongest economy in the E.U. As such, it has everything to lose, while other members, like Greece, Ireland, Spain, and Portugal, only stand to gain.

Not many people realize this, but even though E.U. members use the euro as a common currency, member nations still issue debt on their own.

This is why Germany is hammering on about austerity measures. Merkel & Co. know that it’s one thing to put Europe's most indebted nations on a diet, but it's another thing entirely to control the amount of food they're eating.

I think this exposes an inherent flaw in the euro that, ironically enough, I recall being discussed (and summarily ignored) when the union was formed.

It used to be that the imbalance between a nation's economic strength and that of its currency was corrected by market forces and reflected in its exchange rate. The strong were rewarded, while the weak were penalized. Now, the strong governments are forced to reward the weak for the latter's complete lack of discipline.

I continue to believe that we could see a complete restructuring of the E.U.’s debt before this is done and things improve. Maybe not all at once. But definitely in bits and pieces.

The thing to remember is that, while it's in Germany's interest to maintain a stronger currency, the bailout will require weaker nations to absorb a weaker euro as a means of jumpstarting their own economic recoveries. So it's only natural that the euro, which is held together for political expediency, begins losing ground again based on economic reality.

What’s happening now reminds me of the attacks George Soros used to mount on the British pound and other currencies years ago. He'd keep attacking with such strength and ferocity that the government "victim" would either have to bail him out… or capitulate.

Based on early successes and a completely lopsided playing field, I believe traders will continue on the attack until the governments being targeted do “bail out,” and they'll make a killing in the process. Next up Spain…then Portugal…then Italy…then France. And then possibly even the E.U. itself.

Make sure you stay away from the euro. At least lighten up on any exposure you may have.

Good investing,
Keith Fitz-Gerald