Will Americans Forgive an Uncle Sam Bankruptcy?

Citigroup stated that foreign investors may be quicker to dump their dollar holdings than domestic investors if the U.S. debt ceiling is breeched, according to Bloomberg.That move might have a harsher affect on the dollar when compared to U.S. treasuries.The U.S. House of Representatives is expected to vote today on an increase to the U.S. debt ceiling. That vote is widely expected to fail.Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke have both warned of the economic consequences of a failure to raise the debt ceiling. Should the debt ceiling not be raised by August, the U.S. government may default on its debt obligations, which might have a catastrophic consequence on investors' confidence in the dollar.According to Citigroup, that effect would be most pronounced among foreign investors, who would be more likely to dump dollars, than domestic investors who would be more likely to dump treasuries.Traders expecting a bear-market for the U.S. dollar might consider PowerShares DB US Dollar Bearish Index (NYSE: UDN). UDN attempts to return an inverse value corresponding to the strength of the U.S. dollar.Traders may also consider SPDR Gold Trust (NYSE: GLD). GLD tries to correspond to the price of gold and may do well if investors shift to gold over the U.S. dollar.