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A rule of thumb in recent years is that the tipping point for a flight of capital is a rising current-account deficit of about 5 percent of a nation's GDP and a rising foreign debt of about 40 percent. [...] the Chinese and other trading partners have been more than willing to lend back the U.S. dollars they earned through their trade surpluses in order to keep American consumers buying their goods- on credit. [...] with some $2 trillion sitting in its banks, the Chinese government can play the international currency markets to keep its yuan undervalued, allowing it to export still more to the United States.
One More Bubble to Go Jeff Faux The American Prospect; Dec 2009; 20, 10; Docstoc pg. 20 Reproduced with permission of the copyright owner. Fur
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