We are currently running a current account deficit approaching $725 billion--meaning that we import more goods, services (and financial transactions)
than we export--or simply that we are net consumers. We are heavily in debt to other nations.
We are able to be net consumers because we exchange IOU's--or U.S. Treasury Securities--for cash with other countries. If you are wondering where a
great deal of your tax dollars go, we pay a huge amount of interest on these t-bonds, t-bills, and t-notes, about $400 billion dollars a year.
Currently, over 60% of all U.S. treasury securities are owned by foreign investors, mainly foreign central banks (see below.) The dollar is used by
some other countries to regulate their own currencies--they peg or link the value to the dollar.
If and major holder of the dollar dumped their U.S. holdings quickly, it would have serious effects on our economy, but it would be even worse for
them. They would completely destabilize their economy.
The Euro may replace the dollar some day, but it would be a gradual shift over many years, with a slow sell-off. Earlier in the year, there was some
speculation that China and Japan had begun to slowly diversify away to the Euro because of concerns about the growing deficit and continued weakness
in the dollar. This may or may not be the case--but a sudden crash is unlikely.
www.treas.gov...