"'If the world's central bankers accumulate fewer dollars, the result would be an unrelenting American need to borrow in the face of an ever weaker dollar - a recipe for higher interest rates and higher prices. The economic repercussions could unfold gradually, resulting in a long, slow decline in living standards. Or there could be a quick unraveling, with the hallmarks of an uncontrolled fiscal crisis.'
-- New York Times editorial"
Saturday, April 09, 2005
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Interesting. I am no economic historian but there sure have been periods before where interest rates and inflation took hold. Dumping of the dollar (with CBs pretending not to but doing so none-the-less) would require higher rates in order to attract back those needed $$$ but would also drive up the cost of imported goods.
Goods produced domestically would be relatively cheaper (unless we need to pay people more due to inflation) but there aren't many of those goods as we are dependent on China and India for cheap labor.
China and India compete with the U.S. and Japan for world market oil also driving up price, hitting the U.S. economy again. With a dollar buying less globally and having greater risk associated might also lead to yet higher prices for oil or alternate system of Euro based oil purchases.
It's the spending spending spending without the income income income. Time for Uncle Sam to stop buying so many guns, he's got enough already.
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