Asked By: Ivar - 12/4/2006

Best Answer - Chosen by Asker

Obviously the majority of posters have no clue what they're talking about. Yes, the dollar has been lower than it currently is, but when has the U.S. been so in debt before? And when they say $9 trillion in debt, that only current federal debt. Including longer term debt and unfunded liabilities, total government debt (federal, state, local, etc.), corporate and private, is around $44 trillion.

And where is the poster that said the domestic economy is strong getting his data from? The housing market is falling apart, GDP is contracting, ISM manufacturing data is contracting, the dollar is in free fall (the GBP is almost at 2:1 against the USD). The economy is beginning to come apart. If you take into consideration that 70?f GDP is consumer spending and with the housing market coming apart (Americans have been using their home equity as ATM's to the tune of some $3 trillion in equity withdrawals over the past few years) if their source of funds to buy things is drying up, where is the money going to come from to fund their spending - which is 70?f GDP. Americans import the majority of products they consume. So, a weaker dollar means higher import prices. China has $1 trillion in forex reserves of which $700 billion is USD and China is looking to diversify out of dollars. As a matter of fact many of the Asian countries are looking to diversify out of dollars. The US Dollar Index is at 82.42. The last time it was below 83 was 15 years ago. The 80 level is the demarcation line between an "orderly withdrawal out of dollars" and "a mad panicked rush to the exits to get out before its too late". Currency analysts are seeing continued weakness in the dollar. The lowest the dollar has ever been is 78.33, anything below that and we're in uncharted territory. When (not if) the dollar collapses and all those countries holding dollars start wholesale dumping them, all those dollars are going to flood back onto U.S. shores and that my friend is inflationary. If Bernanke is the hawk he claims, he'll have to raise rates which will put additional pressure on the housing market. And just and FYI, the real estate market is was accounted for 40?f the jobs created in the last 5 years.

Anyone that says a dollar collapse isn't important is clueless. The last time the world's reserve currency changed, there was a depression and a major war. Do you think for 1 second that a dollar collapse is going to go by without any problems?

What the other posters have failed to realize is this; the U.S. needs to borrow $2.4 billions PER DAY in order to function. With foreign companies importing so much to the U.S., all those dollars they get, they purchase U.S. treasuries. A collapse in the dollar would cause all dollar denominated assets to follow suit. Which means, U.S. treasuries would be sold off, that in turn would 1) drive interest rates through the roof (interest rates move inversely to bond prices) and 2) with no one buying U.S. treasuries any more, the government would lack the funds to operates. And just an FYI, Japan holds approx. $750 billion in U.S. treasuries and $650 billion in Dollar reserves. China has $700 billion in dollar reserves and about $300 billion in U.S. treasures. If the dollar collapses, can you imagine the financial tidal wave if China and Japan sold in excess of $2 trillion in dollars and treasuries to cut their losses? That would collapse the U.S. economy.

No, it is not conceivable that the dollar will collapse - it is inevitable. I'm a U.S. citizen and I love my country, but I am also a realist and no person, company or country can keep borrowing and borrowing and borrowing without ultimately having to face a day of financial reckoning. What happen if you made $100k a year and each year, your debt level grew every year? There would come a time when your debt service payments would exceed your income - that's called bankruptcy. The U.S. has passed the point of no return. An economic collapse that's going to make the Great depression seem mild in comparison is coming upon us. If we had reacted back then, we could have possibly averted it, but our leaders did not. Now, we will have to reap the consequences of what we have sown and it's going to be very ugly and painful.

Answered By: 4XTrader - 12/4/2006