"Many economists believe the dollar will decline in value - and needs to decline - rela- tive to other currencies. The reason: The record US trade deficit shows no signs of shrinking on its own accord. The larger it grows, the greater the risk of a 'hard landing' for America if other nations become worried about America's ability to repay foreign creditors, who are now lending some $1.6 million per minute to finance overall US spending.
The hard landing scenario, which could spark a global recession, remains a possibility rather than a consensus forecast. But policymakers worldwide, from finance ministers to the International Monetary Fund (IMF), take the threat seriously.
'The thing that's driving the international focus is the concern that the adjustment [in the dollar] could easily be disorderly and really painful,' says Charles McMillion, president of MBG Information Services, an economic consulting firm in Washington. 'This imbalance will dominate Paulson's and [Federal Reserve Chairman Ben] Bernanke's efforts, for the rest of their terms.'"
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