Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Pastimes : Crazy Fools Chasing Crazy CyberNews -- Ignore unavailable to you. Want to Upgrade?

To: ms.smartest.person who wrote (2235)	12/30/2002 11:54:36 PM
From: ms.smartest.person	Read Replies (1) \| Respond to of 5140

The Demise of the Dollar? By Antony P. Mueller [Posted December 27, 2002] Since the early 1980s, the United States has been the major destination for foreign goods on a global scale. With an increasing part of these imports being financed by debt creation, the international monetary system has been swamped with liquidity. A financial bubble has emerged and penetrated each corner of domestic and international financial markets. The funding of the US economy by foreign investors enabled the U.S. to spend rather freely. The United States could act as the global borrower and as the international lender of the last resort at the same time. This way, the role of the United States as the main provider of international liquidity has been perverted and an unsustainable situation has emerged. The net external investment position of the United States now is negative at more than two trillion US dollars. With the absence of private savings and growing government deficits, the need of external financing is growing. Whatever may be the appropriate political reasons for the US government's new geo-strategic aims, economically the consequences will be a cost push, and the risks are mounting that the U.S. will be headed for an economic and financial disaster when foreign funding of its expenditures should collapse. The current global financial system is tilted towards favoring excessive absorption by the United States as it shows up in the current account imbalances (see table 1). For some time, a structure like that is highly beneficial for the economy, which has the privilege of providing international liquidity. The country that issues the global currency gets a free lunch as long as its debt certificates serve as international means of payments. At some point, however, the system must necessarily go into reverse, when the discrepancy between the issue of debt and the productive capacity becomes too large. Click on link for rest of article & tables. mises.org