Because fund managers who have cash holdings are mandated to keep short term equivalents with either banks or the federal govt. Buying gold or other currencies is perceived as risky and unacceptable - it is just out of mandate. And there is no trust in banks. So that leaves the federal govt. status quo.
When I woke up this morning and saw the euro I was like holy crap. I was thinking about shorting for a second but realized that would be suicide considering how hard fx trends.
not sure i follow your economic reasoning here. in fact the only long term way out of this mess is mix of: 1. inflation (i.e. taking down consumers' spending power, reducing debt in real terms, bringing house prices in line with inflation adjusted long term trends), 2. more unemployment (i.e. lower labor bargaining power and therefore labor costs) and 3. devaluation (to equate labor costs and fix external deficit). 4. raise taxes (to pay for the public debt) sad list....
EUR was acting bullish for the past 2 weeks - only blind people did not see it. the strong USD was bullshit to start with - just a repatriation effect and loss taking on USD assets exacerbated by an expensive short term funding (it was discussed in length here on ET). coupled with record lows for specialists' shorts in equities (and record highs for public) the writing was on the wall... i am more surprised that JPY is acting strongly - looks like carry trade has reversed due to aggressive fed cutting campaign. this may spell more trouble for US as it basically means outflow of foreigner capital....hohoho