Going Out of Style

(cross posted at Running Scared)

Is the dollar's attractiveness really just a trend? MSNBC reports Central banks shift reserves away from U.S.It's true that the dollar has been strong for a long time, but now, according to this article,

...70 percent of central bank reserve managers said they had increased their exposure to the euro over the past two years. The majority thought eurozone money and debt markets were as attractive a destination for investment as the U.S.

Alan Greenspan, the chairman of the Federal Reserve, warned in November that there was a limit to the willingness of foreign governments to finance the U.S. current account deficit.

So, these banks are finding that investing in places other than the U.S. is just as attractive to them now? Is the idea that we're a superpower fading out of fashion like so many straight-legged jeans? Does the Euro make you hips look smaller the way that pants with a slight flare do? OK, that's probably going a bit too far.

Still, this does not bode well. Conservative estimates state that we're (the U.S.) going to need to borrow another $500 billion dollars over the next 4 years. If foreign banks are less eager for the business from our government, that money could cost us more than we were "banking" on, or even worse, just not be made available to us. Now, I know that the government borrows from itself, as it were, using some sort of arcane system that I won't pretend to understand. How long can we keep doing this before our economy actually gets bad enough to collapse? How long before a fistfull of dollars is about as attractive as a fistfull of neon sweatshirts with the collars cut off? I don't think it's soon, but this is one trend that I'd prefer to see reversed.