One Step Down the Ladder--Asian Dollar Holders Get Twitchy

From Bloomberg News:

The previously symbiotic relationship between the U.S. and Asia is looking more like unhealthy and unsustainable co- dependence. Asia feeds its addiction to export-led growth by feeding the U.S.'s addiction to importing capital to finance its economy, and vice versa. Now, Asian leaders are concerned they are getting the short end of the arrangement, and they should be.

The upshot of the article is that a number of countries in the East like Japan, Korea, Singapore, et. al. are holding a lot of dollars, and the dollar is falling against the euro, and therefore they would like to dump some dollars. Unfortunately, if any one of them does start selling, as Korea intimated it might do a couple of weeks ago, the dollar drops, depreciating their holdings.

So the question is not if, but when someone is going to blink, start dumping dollars, and cause a terrifying freefall for the U.S. currency?

Result? Higher import costs, higher inflation, higher interest rates, and one step closer to becoming a second-tier power.

Thanks, George.