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I response to my post "The point is the collapse of the dollar will produce immediate hardships, while any benefits will take time." Southack replied "Not a chance."

Let me just consider a few possibilities:

1. When foreigners get burned on their dollar holding they will stay home from the T-bill auction, meaning less money chasing them, meaning lower prices and thus double digit interests rates.

2. Grandma's investment portfolio was weighted towards bonds, now her bonds have a lower resale value due their lower interest rates, meanwhile...

3. Imports which are equal to 16% of our GDP are more expensive due to the weaker dollar, we already see a little of this at the gas pump. In the short term we have little capacity to increase production due to all the capacity we sent to China. Initially we will import a little less but it will cost more for less. Of course Grandma is on a fixed income, except for...

4. Entitlement spending will go up because of COLA raises, unless you expect that Congress will tell the AARP to get lost in an election year. Anyway, federal spending will go up.

5. Grandma grandson owns a house with an ARM, his mortgage payments are going up, he's upset and will probably actually get out and vote this time. Hmmm, I don't think he will vote Republican.

All this unrestrained joy over the dollar puzzles me, the cheerleaders are happy that imports will cost more. An import tariff would have done the same thing while keeping the dollar strong for what we need to import. Is their an American banana industry overcome with joy at the prospects the weak dollar will make banana imports more expensive?

Anyway, with the import tariff we would not have squandered our industrial base and built up that of China's. So we would be better off, higher prices for imports but with the capacity to produce what we need. I suppose future generations will regard those smitten with free trade mania in the same way as Dutchmen smitten with tulipmania.

"1. When foreigners get burned on their dollar holding they will stay home from the T-bill auction, meaning less money chasing them, meaning lower prices and thus double digit interests rates."

Only if they want to kill their economies overnight. The play above that you opine would crash the Dollar so far as to render "cheap" Chinese and European imports more expensive than cavier and car-loads of cocaine.

They'd lose their *largest* customer overnight. Export-driven economies simply don't have that luxury...

...and even if they did, bring it on. You'd shift our current 9.5% of import-driven GDP to domestic American jobs. American employers would be hiring at rates not seen in decades.

"Is their an American banana industry overcome with joy at the prospects the weak dollar will make banana imports more expensive? "

I don't know about the banana industry, but there are 98 trade associations, representing the country's largest manufacturing and agricultural trade groups that say U.S. dollar "is not becoming too weak...In fact, the dollar is still too strong."

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