The Rug And Who Can Pull It

By Kleinheider Posted on July 7, 2008 at 8:17 am

The implications of the falling dollar on our political stability:

The loss of the dollar’s purchasing power and international respect has some experts worrying that the euro might one day replace the dollar as the so-called primary reserve currency. And that could trigger a dollar rout as foreign governments and international investors flee from U.S. Treasury bonds and other dollar-denominated investments.

Making matters worse: The gaping U.S. current-account deficit — the amount by which the value of goods, services and investments bought in the U.S. from overseas exceeds the amount the U.S. sells abroad — and the low levels of domestic savings means that foreigners must purchase more than $3 billion every business day to fund the imbalance.

Since roughly half of the nation’s nearly $10 trillion national debt is held by foreigners, mostly in Treasury bills and bonds, such a withdrawal could have enormous consequences…

The impact of the falling dollar is not always visible to the average consumer. Not like the big numbers on gas pumps that give stark evidence of price levels.

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