June 27, 2008

The Decline and Fall of the American Economy: Offshoring Our Security

The United States has three large economic problems. The overarching one is that the U.S. dollar’s role as world reserve currency is wearing out from continuous and large trade deficits and from government budget deficits that have to be financed by foreigners because the U.S. savings rate is approximately zero. Judging by the dollar’s loss of value in relation to gold and to currencies such as the euro, Swiss franc, and Japanese yen, the U.S. dollar is losing its attractiveness as a currency in which to hold assets.

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