Thanks For The Memories, George

Pull out the waders. Lots to slog through. AP (03.19.05):

"President Bush frequently says he wants to solve big problems like Social Security's finances, not pass them on to future generations. It appears unavoidable, however, that Bush will leave a painful legacy of staggering government debt. What was once expected to be a $5.6 trillion surplus over 10 years is now projected to be at least a $4 trillion deficit by 2015, if Bush's tax cuts are made permanent and his Social Security suggestions adopted." For Bush, Huge Federal Deficits May Be One of His Legacies An AP News Analysis

"'Everybody recognizes that deficits are unsustainable. And I don't think anybody takes the current deficit-reduction effort serious,' said Robert Bixby, executive director of the Concord Coalition, a bipartisan group that advocates eliminating federal deficits. Bixby said it might take some major outside force - a financial market collapse, foreign investors deciding to flee U.S. government securities - to force action." Stephen Roach (03.18.05), via Wolcott:

"The current account deficit probably says it all. As I have noted ad nauseum, it is an outgrowth of America’s biggest problem -- an unprecedented shortfall of national saving. ... Not only is this a record current-account deficit for the US, but it is also a record financing burden for the rest of the world. Based on the annualized current account deficit of slightly more than $750 billion in the final period of 2004, America now requires an average of $2.9 billion of capital inflows each and every business day to keep the magic going. ... But the message from overseas is that this game is just about over. One by one, Asian central banks -- America’s financiers at the margin -- have dropped the not-so-subtle hint that they are saturated with dollar-denominated assets." America Smells the Coffee

"In my view, March 16, 2005 could end up in the running as a possible tipping point for America. Suddenly, the US has taken on a very different aura in an increasingly unbalanced world: The confluence of a record current account deficit, a disaster from General Motors, and yet another new high for oil prices all speak of an increasingly precarious role for the global hegemon." Buttonwood at The Economist (03.16.05):

"The fear that central banks are contemplating industrial action against the dollar—and the collective sigh of relief when it seems they are not—is part of a broader unease about the nature and solidity of America’s economic growth. Based, as it is, on mammoth consumption by both the private and public sectors—ie, on big trade and fiscal deficits—it needs foreigners willing to suspend disbelief and buy shiploads of securities denominated in a currency that has steadily lost value for about 40 years. ... But the Faustian deal into which Bretton Woods II has turned—whereby America gets to spend beyond its means and Asia gets to invest in export-led growth, at the cost of recycling much of its earnings in America’s securities markets—turns out to have a shorter horizon than most people reckoned. It could turn sour at any time now. And confirmation of that came from another set of economic data, released on Wednesday: America’s fourth-quarter current-account deficit widened to $187.9 billion, a record. ... (W)hat will happen if a significant portion of countries decided not to add to their dollar holdings? More than the dollar would weaken. Big foreign buyers of bonds have been keeping interest rates down, perhaps by one percentage point, as Alan Greenspan suggests. That would change, for a start. Without this support, the yield on the ten-year benchmark Treasury bond could rise to more than 5%, pushing up interest rates on mortgages. That, in turn, could prick America’s house-price bubble and prompt a general deleveraging, with implications for economic growth both in America and elsewhere. Standard & Poor’s, a rating agency, warned on Monday that a weak dollar would substantially increase concerns about credit quality. In the end, what foreign central bankers have it in their power to do is to reveal before all the world that the mighty American economic empire has no clothes—not even a pair of little fuchsia-coloured shoes." Starkers

Cockburn at Counterpunch (03.19.05), also via Wolcott:

"If the current trend among countries such as China, Japan and India to reduce their dollar holdings continues, the dollar's status will plummet, and eventually its role as the world's reserve currency will come to an end. No longer will the Asian nations subsidize America's debt, and in consequence the cost of living for ordinary Americans will start to soar, pushing even more over the edge. And as the dollar tumbles, so does one of the keystones of what in the 1950s used to be termed reverently, the American Way of Life, meaning in coarse material terms a civilization that guaranteed its middle class affordable higher education and the decent jobs consequent upon same." Three-Card Monte and the One-Party State

Things might get a little dicey here this Summer. Wonder when that new bankruptcy statute goes into effect? By the way, see if your granny remembers these: Hoovervilles.