Dark days for the dollar

Dark days for the dollar

By Sean Brodrick

JUPITER, Fla. (MarketWatch) -- In May, the U.S. dollar index cracked important support. This affects all Americans, because we are all speculating in the U.S. dollar.

If you don't think so, open your wallet. Do you see dollars there? Then you're speculating on the dollar by holding on to it. Probably most of your investments are dollar-denominated as well. Another leg down in the dollar could translate into tough times for your portfolio -- and you.

Now for the good news -- there are ways to cushion yourself against the dollar's pain. I'll give you some ideas in just a bit.

First, why is the U.S. dollar in such trouble? U.S. government deficits are ballooning, and turning a deeper shade of red -- about $1.8 trillion this year alone, and up $500 billion in two months. In fact, the U.S. government is going into debt so fast that the Fed is buying Treasuries, which is like a snake eating its own tail.

The government is doing this with good intentions, to try and keep the economy from running off the rails. But our debt is increasing so fast that the U.S. may lose its Triple-A credit rating. Losing that rating would start a downward spiral of higher rates and more debt. The Treasury thinks it can just print dollars to paper over the mess; traders are showing their displeasure by sending the dollar lower.

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