Re: The U.S. Trade Deficit


"William F Hummel" <wfhummel@xxxxxxxxxxx> wrote in message
news:qlteg1lr297dcc8rdd7r0gs5vhpc3r51op@xxxxxxxxxx
> Why a Collapse of the Dollar is Unlikely
>
> Foreign investment in the U.S. will continue as long as the economy of
> the U.S. grows apace with those of its trading partners. Indeed the
> U.S. need be concerned only if foreigners no longer desire to
> participate in, and own a share of, the U.S. economy. When they feel
> they have accumulated more dollar assets in the aggregate than they
> wish to hold, the forex value of the dollar will decrease as the
> excess dollars are offered for sale. However a collapse of the dollar
> is highly unlikely short of an environmental catastrophe or runaway
> inflation that ruins the U.S. economy.
>
> William F Hummel
> http://wfhummel.net/tradedeficit.html


You are not saying why it is unlikely you are only saying that it is unlikely.

Here is a possible scenario. Many foreigners now hold US mortgages. These are
now becoming riskier as people put less down, interest only, etc. Some suggest
a housing bubble which may collapse in some areas. It is possible that people
will being walking away from their homes and mortgages in this situation -
leaving the foreigners with losses. They begin to attempt to get away from
this risky business and into other currencies - dropping the value of the
dollar.

Or a simpler one: Soc. Sec. privatization goes into effect and people become
concerned about the ability of the govt. to pay off the large new debt.

Bill


.

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