As a result of the global financial crisis there has been a lot of discussion about the stability of the US dollar. Both investors and international agencies have openly addressed their concerns for this issue in the media. Many state that the consistent accumulation of US national debt could have negative implications on the US economy.

In Quarter 1, (2009) US spending reached $2.67 trillion, exceeding revenues totalling $1.59 trillion. Personal income tax revenues declined 26% and corporate taxes plunged 57%. Despite this, the government has continued it’s spending on economic stimulus measures, defence, health care and pensions.

The American government has been borrowing and printing money in order to solve the budget crisis resulting from these rising costs. In effect, these measures have been diluting the US currency and causing inflation, raising concern among investors. Canadian Investor Eric Sprott has even gone as far as to say that the US government is ‘virtually bankrupt.’

In April 2009 the International Monetary Fund (IMF) estimated that American foreign debt was in the process of doubling from 4.5% of world GDP in 2007 to 9% of world GDP in 2009. The consensus is that this situation will continue to worsen going forward. Therefore, as the need for government financing increases so will the U.S. long-term bond yield. When this happens foreign investors will begin to reduce their U.S. exposure, leading to an abrupt depreciation of the US dollar.

It is crucial for the United States to begin paying off its debts in an attempt to fend off a complete collapse in its currency. However, the likeliness of this occurring given the recent advancement of the Senates new $871 billion Health bill makes this case unlikely. As such, it is clear that Americans are destined to face this inevitable fate. Only then, may they finally understand that fools and their money are soon parted.