| the forex (eg. currency) market would eat us alive..
some $2 trillion is traded every single day - that's over 45 times the trading volume seen in the nyse.. failure to pay our debts would cause debt holders (typically foreign national banks) to dump their dollar assets as fast as possible.. we'd probably see many (heavily indebted) hedge funds collapse overnight. and the effect of all this would cause hyperinflation worse than what germany experienced prior to ww2.. it's probably also cause serious problems in all countries that have a trade surplus with us, and potentially spark a world war..
i've been reading economics books/papers for years, but a good book to start with would be the "global political economy" by robert gilpin. although, that book alone doesn't really touch on the current account deficit and all of its rammifications. the fed has written a lot on that subject though... greenspan's work is the best imo, but you have to read it many times translate every paragraph into simple english in order to understand what he's saying. much of what i'm saying about the current account problem i've learned from deciphering greenspan's writings - although these views aren't solely held by greenspan (they're mainstream)... be it good/bad, greenspan has the most to the point analysis of the current account, even if it's so difficult to understand what he's really saying. |