The current snap-shot seems to picture a U.S. Dollar in decline. Take for example the fact that India has joined Russia and China in Questioning U.S. Dollar dominance. Suresh Tendulkar, an economic adviser to Indian Prime Minister Manmohan Singh, said he is urging the government to diversify its $264.6 billion foreign-exchange reserves and hold fewer dollars.

          Even during the FDR depression of the 1930’s when the Dollar was backed by gold, even after abandoning the gold standard, the Dollar was still the premier currency of the world. Llewellyn H. Rockwell, Jr. of the Austrian school of free-market economics published an article in 1950 essentially saying that the Federal Reserve will likely expand the supply of money by making borrowing easy, giving opportunities to less than credit worthy recipients which will add to the inflationary trend. “From an Austrian perspective, the likely scenario is that the Fed will attempt to forestall recession via credit expansion which distorts production structures and makes the recession even deeper.” Llewellyn H. Rockwell, Jr. As it turns out his predictions were correct when almost everyone else was clueless.

          There will likely be more foreign investment in U.S. Treasuries since the Obama Administration has saturated the new Works Progress Administration with stimulus money. To support the President’s ambitious projects, the Feds will have to finance unprecedented amounts of currency. To do so the interest rates on Treasuries will have to rise. In June of 2009 the 10-year Treasury was 4%, and the short-term bond which had been at less than 1% increased to 1.35%.

          The question is whether the future GDP will be sufficient to pay off the staggering national debt anticipated which is estimated to exceed 12 trillion dollars. Real gross domestic product decreased at an annual rate of 6.1 percent in the first quarter of 2009. The enormous debt being created by the Democrats in Congress is not likely to be offset by future revenues, at least in the short term, unless the economy is allowed to recreate the high-paying jobs that have been squandered as a result of over-regulation, community organizations, and high corporate taxes. The problem is that in this political environment it is simply impossible for industry to provide high-paying jobs.