I was going to photocopy Paul Craig Roberts' "Delusion Rules" for my students, but the whole thing is so badly written... the crucial passage is here:
The US has become the world's largest debtor, in hock to foreigners for one-fourth of our Gross Domestic Product. The ratio of US external debt (what we owe to foreigners) and US exports is approaching the crisis ratios of banana republics.The real danger, here, is that the Asian banks that buy our national debt are going to stop buying more of it. Nothing is going to change with Middle East oil, though. It has more to do with what else is going to happen if DC is going to prop up the dollar.
It is inevitable: America's mounting debts will produce a crisis. The dollar's value will plummet, and US living standards will drop. Everything will become more expensive for Americans.
The perilous condition of the dollar is one of the reasons Bush invaded Iraq. What keeps the overvalued dollar up is the fact that it is the currency in which the Middle East bills its oil. Every country has to purchase dollars in order to pay for its oil, and these purchases keep the dollar afloat.
Interest rates will go up, new loans will become more difficult to maintain, perhaps deflating the real-estate bubble. Since the market in real-estate debt is what has been keeping the economy afloat for the last year or so, its end will spell the end of prosperity for the world economy. Everything will become more expensive to Americans, thus the dollar's value will plummet. Perhaps a new era of global currency chaos will ensue. Cause becomes effect, effect becomes cause.
The main good of all of this is that the US will be hobbled in its grasping plans for world domination, since it will not be able to pay for them.
In other news, the debates started. Yawn. Circumstances will determine the next few years of political chaos; boasts of Presidential power to affect events will come to nought.