"The dollar will go on down because the good empire has the same faultlines as many other empires: unsustainable living standards at the core depend on flows of wealth from the periphery," says Independent Strategy in terms that would not be out of a place in a Marxist textbook. "The US no longer earns the return needed to sustain these flows. The costs of war and unilateralism will increase the thirst for capital, but reduce the return earned by it."
In plain English, America relies on the rest of the world to finance its deficits. The rest of the world was happy to do so when the US economy was strong and returns were high, but investors will put their cash elsewhere if America looks weak economically. America borrows hundreds of millions of dollars from the rest of the world each day to cover its savings gap and, under George Bush, US dependence on foreign capital is set to increase.
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timeasmymeasure
