An article from Newsweek that explores the implications of the continued declining US dollar and how that could, over time, inhibit American use of power in the world at large.  There is no doubt this is a serious concern.  Americans are overleveraged and are counting way too much on foreigners to fund our deficits.

That said, we still have opportunities to address our spending habits in America.  Not only can Americans save more themselves, but, most importantly, the government MUST address its spending.  Outside of defense and the maintenance of roads (a hugely important resource that facilitates our economic competitiveness), and a few other responsibilities the government needs to reevaluate, fundamentally, much of what it currently does.

Simply put, it is the long-term threat of ballooning entitlement spending that will force the debate into the open.  The world knows that we are going to have a difficult time funding the benefits promised to the soon to be retiring "Baby Boomers."  The world wants to invest in something they can count on.  That used to be the dollar, but horrible fiscal imprudence domestically has made the dollar much less inviting.  If we can't get those programs under control (and/or continue to add new benefits like "universal healthcare") we will never be able to get our domestic financial situation under control.  That will force other nations to continue the diversification process that has led to the current decline of the dollar.  As this article relates, a continued decline of the dollar will limit what America can purchase and will make it ever more difficult to maintain our global commitments. 

This is a problem of the first order.  As I have stated before, outside of the threat of WMD proliferation and the use of a WMD in a major American city, there is no other threat that could harm us more than the loss of confidence in America as exemplified by the decline of the dollar.  To that end, government spending must be maintained on only those significant things that it alone can do.

Long term, we must defend our capacity in the world or the world will face a unique situation that will breed not peace and prosperity but chaos and war.  The historical analogy is Rome.  Granted, it is an imperfect analogy from many perspectives, but what the world (or at least the "western" world) experienced in the vacuum that emerged after the decline of Rome was danger, disorder, and superstition on a previously unknown scale.  True, the "Dark Ages" weren't quite as dark as is generally thought, but it certainly was a far cry from the relative stability brought about by Roman power.  In a world with such dangerous technology as is present today, a comparable breakdown of order could prove far more catastrophic.

Its America's responsibility to avoid this, but it means making tough choices that will not be politically palatable across the spectrum.