Much has been written about the upcoming fiscal cliff, particularly as it relates to a substantial drag on future economic growth. Some have estimated that it will drag down growth by as much as 3%. That is pretty substantial, given we are muddling around in the 1-2% growth range as it is. However, you would never know that such a risk exists, by looking at the action in both the dollar and the U.S. Government Bond Market. If there indeed is such widespread concern about the state of our fiscal house, why is everyone still holding on to dollar based safe assets. We would assert that the main reason is because it is the deepest, most liquid choice available. In other words, global investors have been hardwired over the past number of years to instinctively reach for the dollar/bonds in times of distress and uncertainty. However, what will they reach for when the uncertainty is tied to the soundness of the currency and the very solvency of the sovereign itself? We would hold up hard assets as one defensive asset class of choice in this event.