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"In sum, confusion prevails, and the best summary so far of the situation coming from Pimco's Tony Crescenzi:

In the past investors did not question actions taken by the fiscal authority to help the private sector. Even in recent times, investors have welcomed such actions worldwide," he said. But, "this view is evolving.

No longer are investors sitting ready with blank checks to underwrite any amount of debt that governments wish to issue.In 2010, signs of discomfort are surfacing, with investors putting upward pressure on interest rates in developed nations in
Europe, in particular the PIGS nations - Portugal, Ireland, Greece (especially),
and Spain, all of which are part of the European Monetary Union.



For the U.S., its immense power means that any loss of hegemony
will occur over many years.

This will help to sustain the U.S. dollar as the world's reserve currency. Moreover, with Europe under duress, there is no alternative to the dollar and there is no other bond market for the world to house its $8 trillion of reserve assets. Investors can't turn, for example, to China, whose balance sheet is unmatched, because China has no bond market. This all means that the U.S. probably can kick the can down the road before it has to worry about whether foreign investors will continue to invest in U.S. Treasuries,

Still, with the dollar now back to July levels, gold is still only back to where it was in November. That is because gold has shifted from a dollar safety play to a fiat-currency alternative. And thanks to fiat banking, there is a whole lot more to "alternate" from.

In summary, despite all the confusion, the one underlying theme is that risk is back. Welcome back to efficient markets.