The New Republic has an interesting article on the “Bretton Woods II” system of Asian nations maintaining cheap currencies and high exports while the US maintains large deficits and low taxes. The collapse of this system has been predicted for ore than 10-years, but so far it holds fast.

I’ve maintained for years that the system in place today is far more durable than most economists and politicians believe. To me, it is very much like the US/Soviet relationship during the Cold War. That relationship was predicated on the notion of Mutually Assured Destruction (MAD), the idea that either party could end the world at any time, and that prevented either party from straying too far from agreed-upon norms. Today, for example, China could stop funding our debt but that would necessitate the US cutting Chinese imports, an unpleasant result for both sides of the equation.

Think of the stress-tests the system has passed over the last 10-years. The Asian financial crisis, the dotcom collapse, 9/11, the Iraq War, the housing bust. We’ve thrown about every imaginable curveball at the global economy and while there have been temporary dislocations, it remains durable. Don’t count me among the Chicken Littles predicting the demise of the dollar. Maybe someday, but no time soon.

Long-time readers have heard this all before, but hopefully there are some newcomers about.