Our Place in the World: Global forces alter U.S. economy
Because each year the United States consumes roughly $700 billion more than it produces, it must borrow from abroad to finance its excess consumption. Foreign central banks provide the financing by buying U.S. Treasury bills and other financial assets. For the first time in history, they are reducing their dollar holdings. The nervousness of the European Union, Russia, OPEC, Japan and China about the possibility of a sell-off of dollars as the world's reserve currency may not make for bold headlines, but that doesn't mean that the dangers are any less real. The chronically overvalued dollar and the export-driven growth and prosperity of so many other countries is causing a steady and sustained transfer of production and technology abroad while putting enormous downward pressure on U.S. salaries.
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