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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: Jack of All Trades who wrote (71230)10/6/2006 4:10:08 PM
From: GST  Read Replies (1) of 110194
 
Cheaper but rising. If the dollar falls by more 30%, you will see a drop in the goods portion of the current account deficit that will be more pronounced as you approach a drop of 50%. I don't think we will see a quick drop that far. I think we will see a slide like that over a longer time frame -- more like five years. At that point, the current account deficit will be increasingly driven by the mounting interest on the existing debt. We do not have the money to pay interest on what we owe, mush less principal. We will be like a poor family with credit card debt that can't make the minimum payment -- you don't have to buy kore to expand your debt, just fail to pay the interest.

Add to that soaring government debt and higher interest rates and you have a current account deficit increasingly driven by interest payments rather than the trade in goods portion of the deficit.
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