By Bill Bonner

A prudent investor might very well decide to keep his powder dry until the next big investment trend reveals itself.

But thus the big question what kind of powder to keep?

An investor needs a baseline. He needs to be able to figure out whether he is making progress or backsliding. An American typically keeps score in US Dollars. But there's the rub...

The Dollar is a baseline that keeps moving.

When the Euro came out in 1998, it quickly fell against the Dollar down from $1.12 to just 88 cents. Of course, that was the era when the Nasdaq was flying and Americans were still the world's most admired people.

Since then, the tech stocks have crashed...the information age has proved a disappointment...the War against Iraq didn't go as planned...housing has gone up and now down...and Wall Street has shown itself to be as incompetent as the rest of us.

(We all knew Washington was incompetent already.)

And now, as if to underline the point: Europe's esperanto money has risen to $1.55. In terms of what a Dollar will buy in the United States, a Dollar is down around 25% so far this century. In terms of what it will buy in Europe, it is down by about 50%. In terms of Gold, it has shrunk 75%.

So where should an American keep his money? This was a much easier question when the Gold Price was under $500 and the Dollar was worth more than the Euro. Of the three, the Dollar was the last place you wanted to be.

But now the buck is already down. Will it go down even more? Or is it time for A Dollar Rally? Now we're not only uncertain...we're unsure too.

It is still early in the credit crunch. If it crunches hard enough, the Dollar will pop up...squeezed out like a pea from a peapod. On the other hand, there will probably come a time when the Feds bring out the helicopters and begin throwing dollars out of the cargo hatch.

Then, like Germany in the 1920s... Argentina in the '80s...or Zimbabwe today...we'll see some real inflation!

In the meantime, it's probably best to play it safe. Here's what we're doing with our own money: we're splitting our cash into three parts and putting each third, equally, into Gold (which we expect to double again from here)...Swiss francs, (because we fear the Dollar could fall apart at any moment)...and the dollar itself (because you just never know).

Bill Bonner is founder and owner of Agora Inc., one of America's largest consumer newsletter publishers. Editor of free The Daily Reckoning email now read by more than 500,000 worldwide he is also the author of three best selling investment books, most recently Mobs, Messiahs Markets (John Wiley, 2007).

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