A reader writes:
The dangers of the kind of debt the US is now holding are immense. It's textbook imperial collapse/welfare state sclerosis combined."
The accelerating decline of the dollar indicates financial disaster may already be on our doorstep. The relentless decline in the dollar since 2001 is the most underreported story outside of finance. Today the dollar is like an old empire on the verge of collapse - the end, if it comes, will be sudden, swift and brutal. The US people are in for a rude awakening should this get out of control. Symptoms of trouble abound. The world central banks are dumping dollars by diversifying their holdings into commodities, and other currencies.
Private investors are dumping dollars by moving the money into higher yielding currencies. Ben Bernanke is the first US official in history to pronounce that benign neglect of the dollar is the official policy of the Federal Reserve. The US debt has reached levels only seen in WWII, but after WWII the debt was quickly paid down. The political will does not exist today to pay down the debt like we did in 1946. Should the dollar collapse in value, the only tool left in the US financial arsenal is to raise interest rates a lot, which of course would bring down the US economy - again. The only way out of our dilemma is if China, Brazil and India begin consuming more, and the US begins to save more, meaning pay down the debt. Such a readjustment will take years, and the forces of financial decline may overwhelm the readjustment first.