A black swan event – US oil spillage

Better to bet against the Dollar than the Euro?

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US rating agencies do their best to put pressure on the EU and the Euro. But so far the Europeans still stick together and fight the pressure. EU governments sit down this weekend and deal with their debt situations, while NO-ONE is there to take on the much larger US debt issue.

On Top of that diversion we have an incident which might come as a trigger for a potential US Dollar collapse. The BP oil-platform spill in the Gulf of Mexico caused, which seems to be due to deregulation caused by the Bush administration under active participation of the former Vice president. A fail-safe system was obviously not implemented at the oil-platform. The spill now gives the rest to large parts of the American travel and leisure industry, as well as to fishing in the area. So far nobody can predict the end of the oil-leakage.

The cost involved to clean-up and restore economic growth in this area might be the final trigger for the US debt burden to follow the Greek example. With setting the Greece precedence for a western country to implode within days, investors have now a good understanding what can happen. When US spreads will finally start to implode you will start finding European, Asian and middle-east investors to scream for a rating downgrade.

The single, unexpected event might lead investors to re-evaluate where the risk is bigger. While Greece and Europe is already under deflationary pressure, the US is still far away from deflation. Cheap labor and infrastructure to be used is becoming ready in Europe, while in the US there is still a lack of productive capacities.

In case Europeans get their act together and utilize the differences in their fiscal policies to smooth out economic events, then there might be the slight chance that the Dollar collapses at a faster pace than the Euro. That however would catch many of those investors at surprise which thought the Euro short is a safe bet. Once again, life tells us nothing is safe, only death and taxation can be taken for granted.