Debt and Denial by PAUL KRUGMAN

[papau]

Unsustainable borrowing from Japan, China and Middle Eastern oil producers to finance a budget deficit so the rich can buy more consurmer goods and houses...(has produced a).. consensus view among trade experts that the dollar will eventually have to FALL 30 percent or MORE to eliminate the trade deficit.
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Debt and Denial
by PAUL KRUGMAN
The New York Times
February 13, 2006

Last year America spent 57 percent more than it earned on world markets.That is, our imports were 57 percent larger than our exports.<snip>

Denial takes a more systematic form within the federal government, where Dick Cheney is doing to budget analysis what he did to intelligence on Iraq. Last week Mr. Cheney announced that a newly created division within the Treasury Department would show that tax cuts increase, not reduce, federal revenue. That's the Bush-Cheney way: decide on your conclusions first, then demand that analysts produce evidence supporting those conclusions.

But serious analysts know that America's borrowing binge is unsustainable. Sooner or later the trade deficit will have to come down, the housing boom will have to end, and both American consumers and the U.S. government will have to start living within their means.

<snip>In practice, however, a "soft landing" looks unlikely, because too many economic players have unrealistic expectations. This is true of international investors, who are still snapping up U.S. bonds at low interest rates, seemingly oblivious both to the budget deficit and to the consensus view among trade experts that the dollar will eventually have to fall 30 percent or more to eliminate the trade deficit.

It's equally true of American home buyers. Most Americans live in regions where housing remains affordable. But a detailed new study by HSBC, a multinational bank, confirms what I and others have been saying: most of the rise in housing values has taken place in a "bubble zone" along the coasts, where housing prices have risen far more than the economic fundamentals warrant. According to HSBC's estimates, houses in the bubble zone are overvalued by between 35 and 40 percent, creating trillions of dollars of illusory wealth.
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http://select.nytimes.com/gst/tsc.html?URI=http://select.nytimes.com/2006/02/13/opinion/13krugman.html&OQ=_rQ3D1Q26hp&OP=1c414657Q2FQ27D8,Q27io544iQ27EQ20Q20jQ27Q20EQ27N)Q274zQ7BUQ7B4UQ27N)@5JQ5DQ60VUHQ3CiQ60r

Republicans, liars.....soft on crime and corruption, incompetent in
fighting terrorism, family matters, finance and foreign affairs!

[Trillo]

1. Maybe they can take the penny out of circulation

and rename a nickel the 'new and improved' penny. The Penny Reloaded?

[greenman3610]

2. so if the dollar "falls" 30 percent, what does that mean to me?

does that mean inflation? ie dollar worth 30 percent less at store/pump?
hyper interest rates like '80-'81?

[papau]

4. standard of living falls - no effect on things made here or local wages

n/t

[Inland]

3. kicked. nt