Monday, July 19, 2010

How Dangerous Is U.S. Government Debt?

A Greenberg Center for Geoeconomic Studies (CGS) Capital Flows Quarterly

The dollar's status as the world's reserve currency has become a facet of U.S. power, allowing the United States to borrow effortlessly and sustain an assertive foreign policy. But the capital inflows associated with the dollar's reserve-currency status have created a vulnerability, too, one that Francis E. Warnock argues came close to causing a foreign sell-off of U.S. securities and subsequent rise in U.S. interest rates in 2009. How the United States uses this reprieve will affect the nation's ability to borrow for years to come.