Have any of the experts speculated what will happen to the $US

[Blue Meany]

if we try to borrow another $1 trillion from overseas? Isn't this certain to lead to a devaluing of the dollar and inflation? And by tying up so much credit in a non-productive activity, won't this both cause a rise in interest rates, decrease available credit and hurt businesses. I guess I just don't see how borrowing a $1 trillion helps a credit/liquidity crisis. It seem to me that it would make it worse.

[marmar]

1. Your Quilted Northern will be just as valuable.....

n/t

[On the Road]

2. If You Borrow the $700B

you are by definition liquid.

A 10% rise in debt levels might affect the value of the dollar, but nothing approaching a continuing string of failures in the financial industry.

[tama]

3. Big assumption

that China & co would lend, to begin with - instead of starting to decouple from dollar in a serious way - like Iran and Venezuela have done and Russia is about to do because you pissed Putin way bad. A 10% rise in debt levels in addition to several trillio Fannie and Freddie bailout and other bailouts piling up, with no end in sight nor promised for the bailouts and debt levels. Not to mention the (doubly) standard deficit of 400 something billion this year, rising the nominal cap to 11 something trillion and US public debt going way (and way) over 100% of the nominal GDP while still claiming to be trusty reserve currency of the world.

[On the Road]

4. No, They Can Issue It

There was, in fact, a huge rush to US Treasuries over the last week. It make change a rates a little, but being able to issue the bonds is not in question.

[tama]

5. The huge rush

last week was capital fleeing stock market and looking for temporary safe haven in bonds. Consequently the yield of bonds dropped hugely -> low yield of bonds and high inflation -> negative profit.

[On the Road]

7. Yes, I Agree

and the effect is not permanent. But it does show the status of US T-Bills in the world market and the willingness to buy them.

Even after an additional 10% is added to the national debt, the US is still less indebted than most other developed countries. It's difficult to see how finding buyers would be problematic.

[OllieLotte]

6. I agree with your analysis.

It may take a while, as liquidity is the short term problem. Once we are past that, I believe the bailout and deficit spending will cause the U$D to drop in value.