The World Bank tiptoes but does not reassure...

Francois Bourguignon

of all the potential crises facing the u.s. and the world, one of the least visible to most of us is the potential financial melt-down of the u.s. dollar as the preferred currency reserve of central banks in many major countries... the ballooning u.s. deficit, says Francois Bourguignon, the chief economist of the World Bank, and the "[a]ccumulation of dollar reserves by some Asian countries could spark a systemic foreign exchange crisis."

he continues:

"Some countries, particularly Asian ones, have no interest in the parities of major currencies being modified. As a result, they are financing the enormous American current account deficit.

"Today, the danger is that some dealers are starting to think they must change the rules of the game, play dollar depreciation and move toward the yen and the euro. That would confront us with a real systemic risk."

Cutting the U.S. deficit was key, Bourguignon said. The World Bank foresaw an orderly adjustment with the United States announcing a progressive reduction in its budget deficit accompanied by interest rate rises.

ok, so much for economist-speak... here's where i start to get nervous...

"Today, no catastrophe is anticipated in the coming six to nine months. So I am not yet totally pessimistic," Bourguignon added.

when an economist says, "i am not yet TOTALLY pessimistic," you better listen for the air-raid sirens...

oh, damn... i forgot... bourguignon is FRENCH... what do they know...? oh, yeah...! and wolfie's coming on board... phew...! not to worry... bourguignon will soon be toast and everything will be just FINE...!

"in the long run, we're all dead..." -john maynard keynes

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