My choice is simply and clearly the Euro instead of USD.
Now the complex reasons:
1. Euro is a good choice in the long or even medium term if Euro zone does not implode by itself.
2. Although USD is solvent as the Fed can monetize the debt by printing more USD to pay their sovereign bonds. Joke being that they promised to pay you at a future date stated on the bond in USD and definitely will.
3. Euro is structurally more secure on the monetizing front as ECB has a rigid golden constitution to prevent it from doing so. It seems that ECB has broken her silver constitution of not being allowed to buy sovereign bonds of its member states but has done so for 5 (PIIGS) countries on the open market.
4. Euro zone seems to be in a big mess and the most powerful man or oops lady i.e. Chancellor of German has kept almost silent and nonchalant about it. While I understand the need to turn domestic as her election is due in 2012 but surely this might be too early and careful. Sexist joke that she can hide under her own skirt for cover since she is a lady. Please laugh for my dry sense of humor.
5. Of the five problematic countries PIIGS, only Greece is real trouble if we were to take a second and more careful look of the situation. The rest Italy, Spain, Ireland and Portugal are most probably only knee deep if we keep speculators playing the credit default swap market betting on their failure and therefore might be self full-filling. A good numbers of the speculators are investment bankers in their seville row suits and my view of them is so low threatening that their extinction will not spell the extinction of mankind.
6. Another major stumbling block is the domino effect on the sovereign default is on the major banks that hold a large portion of these sovereign bonds and their failure will therefore spread like wild fire from wall street to main street. The major banks are mostly too poorly funded for what they are doing. We should revive Glass-Stegall to separate investment banks from commercial banks. I think it was a big mistake in the 2008 crisis to allow them to merge like ML brought under BofA. Commercial and investment bank can then have different funding ratios. Looked how Soc Gen stoc was hammered down by about 20% in a single day few weeks ago.
As a Singaporean, wonder if my fellow country men has noticed that SGD has weaken against USD in the last 3 weeks from about 1.19 to 1.29? Reasons like making our exports more competitive etc are tossed in state control media but might reflect the depth of market that hot funds occupy in our market. Perhaps money is going into USD for short term cover if arguement above is correct.
Peter Lye aka lkypeter
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