Unfortunately for the non connected the US dollar as the official reserve currency is the only place to run. there is no other currency or assett class in the world that is big enough to absorb all of the hot money that is running around looking for the next rock to hide under. Ask Saddam and Gadahfi what can happen if you do not go along with this fact. Oh yeah, I forgot they are now dead. The question is what will happen when the holders of all of these US dollar reserves look at diversifying. Remember if even 3% of this money decided to diversify into gold we would not have enough gold to fill the demand. James Turk recently said that the USD is the best looking horse at the glue factory. Although money is flleing to the USD it is not going into long term debt instruments such as bonds and as such the fed is in trouble. They need to sell long term debt that can be inflated away as it sits in retirement accounts.

Jim Rickards explains the situation quite well in a recent KWN interview.

"Now as losses on future bond sales arise, the Fed does not reduce capital, as would normally occur, instead they increase the amount of the IOU to the Treasury. In effect, the Fed is issuing private IOUs to the Treasury and using the cash to avoid appearing insolvent. As long as the Fed can keep issuing these IOUs, its capital will not be wiped out by losses on its bonds. Corporate executives who played these kinds of accounting games would be sent to jail. Americans might be outraged to know that the Treasury is a public institution while the Fed is privately owned by banks, so this accounting sham is another example of bilking the taxpayers to enrich the banks." http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/11/23_Jim_Rickards_-_Who_Will_Bail_Out_the_Fed_%26_How_High_for_Gold.html