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To: GST who wrote (157987)	6/19/2003 5:54:47 PM
From: Oeconomicus	Read Replies (1) \| Respond to of 164684

A current account deficit of 136 billion US dollars is one hell of a thing to finance in one quarter... Consider the options. $136B is flowing out of the US. Those receiving it, mostly in exchange for goods, must either hold the dollars and invest in dollar-denominated assets, buy goods or services with the dollars, or sell the dollars for Euros, Yen or some other currency and invest (or spend) in that currency. They will do the latter if they have attractive non-dollar investment opportunities (relative to dollar-denominated ones). If not - i.e. if dollar-denominated investments continue to offer the best prospects for returns - then they will continue doing what they been doing most of the time for the last several years. For them to simply "run out of steam" as you put it, they'd have to run out of their steady flow of Dollars from the US. The bigger risk for us (if you define risk as a falling dollar) is that a surge in growth and demand for capital makes investments in Europe, Japan, etc. relatively more attractive than here. OTOH, I will agree that over the very long term, this should not be sustainable. But that's what the experts said 15+ years ago.