Looks like Central banks are starting to hedge against the dollar by shifting their new buys to the Euro. China and Japan are still actively buying, so that means basically they are funding our debt, and lets hope they don't decide to stop.

Should the dollar get dumped in a mass move to the Euro, we'll see some really really high interest rates coupled with Inflation[*]. The massive sucking sound will be wealth flowing out of the US.

The trade-off in the ideal world would be better exports of manufacturing goods. Problem is, with China pegging its currency at a constant rate below the dollar, the trade imbalance with our biggest note holder won't change. Plus we don't DO manufacturing anymore.

So its a raw deal any way you slice it if the dollar falls.

Davin :.

[*] Income generating Realestate is a good place to hedge against this, BTW.