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tdp2664 InvestorPlace The European debt crisis was the by far the biggest news story of 2011 , and now, as expected, S&P has downgraded France's debt rating from AAA to AA+ . Austria also got dropped to AA+, and Italy, Spain, Portugal and Cyprus were cut by two notches. Germany kept its AAA rating, along with Finland, the Netherlands and Luxembourg. If we start to see European nations default on their bonds, and if bond yields (i.e., the cost of borrowing more money to fund the massive EU debt loads) spike to unsustainable levels, we could see a major deleveraging by banks around the globe. The real harm here is that debt defaults could be the fissure in the dike that causes the entire global financial dam to break open. A freeze-up in European credit would cause a major contraction in economic activity in the region, and that contagion would quickly spread to the emerging markets, to Asia and eventually to the U.S. PowerShares DB US Dollar Index Bullish If Europe crumbles, the euro will get pulverized relative to its rival currencies. That means a currency such as the U.S. dollar will attract a lot of investment capital. Indeed, a euro collapse means a flight to quality in what is still seen as one of the world's most stable currencies — the good old American buck. PowerShares DB US Dollar Index Bullish
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