That is a standard answer to the question of why the foreigners do this. "What else are they gonna do with their money? They just HAVE to buy U.S. bonds. Boy, don't we have them boxed in. He! He! He!" We shall see. It is just economic intertia, the natural coninutation of an unbalanced economic policy until it blows up on somebody.

This state of affairs continues at the moment because of their desire for "stability." Because no dollar crisis has erupted, it is assumed by the government that this can just continue forever. Taking preventative measures would likely cause some pain, and better to shift that onto the next guy who follows along, if it is in fact, needed at all.

Allow me to use an analogy here. Picture a tranquil Alpine setting. All the towns and villages are down in the valley. Snow keeps falling and falling in the mountains in the higher elevations. Alert people down below are nervous about this and warn of a massive avalanche if things continue at this rate. They are scoffed at by the others, "Don't you see it is different this time because (fill in your own explanation)."

And everyone goes about their business. Intrepid weathermen have attempted to climb up higher to measure the snowpack to try to measure how much can be accumulated before the avalanche triggers, but even they admit that this is impossible because there are too many variables and unknowns involved to confidently predict the breaking point.

But from merely looking at historical examples, they know such a point exists, and we are past points where it has occured in recorded history. Down in the valley, it all seems great... except for these annoying, irritating worry-wart weathermen who seem to be crying wolf all the time about the record snowfalls up in the mountains.

Doesn't this end in a dollar crisis? And then the Federal Reserve has to either allow the value of the dollar to crash (further at this point) against foreign currencies and gold, or ratchet up interest rates to very high levels to defend the value of the currency? Pick your poison, so to speak. That's where these sort of circumstances always led in all the economic classes I ever took.

The crazy thing is that we have seen this movie before in the runup to the collapse of the Bretton Woods system. Hello 1970s all over again? I didn't particularly like that decade the first time around. I'll like it even less if we experience a rerun. But is that not where this is headed, ceteris paribus?