Twin Deficits Threaten American Supremacy!

Great research by Menzie D. Chinn of the Council of Foreign Relations. (I recommend you read the entire report in PDF file). The gist of the paper is that the huge current account and budget defecits are threatening the dollar, and thus American influence in the world. Similar to what happened to England at the turn of the last century when they became net debtors. If the world gets tired of supporting our hedonistic lifestyles, and pull the plug on buying treasures, our yields will soar leading to a severe recession, dollar decimation and loss of our world status. Also, if we go into recession, whether lead by housing bust, or followed by a housing bust, the world will stop buying our treasuries leading to the same result. The bottom line, in my opinion, is that Greenspan is in a box. He cannot lower rates. PERIOD!!!!!!!!!! He cares less about the overly indebted house "owner" than about defending the dollar. If the dollar is destroyed, the game is completely lost.

AG Must Defend Dollar