The significance of this is as follows:

America is currently importing $600 billion worth of goods each year, a third of its imports, without having to pay anything that took real resources to create for them - because it can pay in dollars, the world's chief reserve currency. If the dollar ceases to be the world's chief reserve currency other countries would be unwilling to take dollars in payment unless they could use dollars to buy real goods and services. Part of the reason for the continued acceptance of the dollar as reserve currency is that pricing and payment for oil in international trade has hitherto been in dollars - which, in the absence of being used to purchase real imports, are then deposited mainly in US banks or used to give loans to the US government (purchase of US Treasury Securities). Effectively the US, including its government, is obliging other countries to lend to it - and in the process the US is currently paying for part of its lifestyle and its military expenditure by borrowing half the world's savings.

Most of this will probably never be repaid - and other countries are increasingly aware of this. A number of countries are getting very restless about the situation - particularly when, as in the case of countries like Venezuela and Iran, they end up lending to the US government when they pay their surplus dollars back to the US and thus help the US finance its military machine that they see as a threat to themselves...For that reason, a year before he was toppled, Saddam Hussein had started pricing Iraqi oil in euros and wanting payments in euros...

Once countries started to shift their dollar assets into euro assets and other currencies expect to see interest rates in the USA going through the roof - as it becomes more difficult for the USA, including its government, to borrow from backflow of dollars generated by their own import surplus - most likely this would then crash a real estate bubble - house prices having been pushed up over the last few years to astronomic levels by people borrowing low interest credit to buy property on the expectation that real estate asset values would continue to rise.

Even Alan Greenspan warned investors recently that they shouldn't be lulled into a false sense of security by the economy's long stretch of low interest rates.

"History cautions that extended periods of low concern about credit risk have invariably been followed by reversal, with an attendant fall in the prices of risky assets," Greenspan said in remarks to the National Association for Business Economics in Chicago.

Greenspan didn't specify what risky assets he was referring to but it's clear it was the real estate market.

As many people in the US (and Britain) have seen the apparent monetary value of their houses rise, they have used this rising value as collateral to borrow more to fund higher consumer spending. The consequence is that, if house prices come down so too will consumption expendture - at which point expect the herd to run in the other direction producing an avalanche effect. With rising interest rates more and more money will go into servicing debts (not to mention higher oil prices). Those who cannot pay will find that they are forced to sell their real estate tht they have used as collateral - but as many others are doing this too, the price that they hoped to get for it will be a lot lower, and the more people are ruined in this way the lower real estate prices will come down. As people pull back their consumption to pay their banks so expenditure in the economy will shrink and an avalanche will occur in which others find it difficult to pay their banks - for example, if they ahve been made unemployed, they too will have to sell up....the process will spiral downward...

It's been known for ages that this would happen eventually - but, although many informed investors have known it, there are many who are uninformed. In any case, while the herd are still running one way the best short term money making option, even for informed investors, typically appears to be to run with the trend, trusting that they will see the signs and get out just in time when the long awaited market 'correction' occurs. In other words, the chief economic process is that most people follow the trend and thereby reinforce it into overshoot on the way up - until growing nervousness about what is happening, for example, expressed by influential people, followed by a few shocks, produces a melting away in confidence and the panic starts the stampede the other way...