FLASH: Greenspan hints that we're kinda fuc*ed

Greenie telegraphed this morning that hey, we're kinda screwed...

Why? When foreigners stop buying our bonds (as they are starting to do) then duh, bond rates go up, bond prices go down, mortgage rates go up, house prices go down, economy collapses. And I don't even want to start on what an inverted rate curve will do... Doesn't Bush have an MBA by the way? And will Greenspan be seen in a totally different light in 5 years?

Econ 101 folks.

Foreign investors will likely tire of bankrolling the bloated U.S. trade deficit but the economy's flexibility should help temper any fallout, Federal Reserve Chairman Alan Greenspan said Monday.

Greenspan's remarks delivered via video link to a conference in Mexico referred to the broadest measure of U.S. trade called the current account deficit, which swelled to a record $668 billion last year. The shortfall is financed mostly by foreign investors.

The huge current account deficits the U.S. has been running up each year "cannot persist indefinitely," Greenspan warned in prepared remarks. "At some point, investors will balk at further financing," he said. The Fed chief didn't say when this might occur.

This current account deficit is considered the best measure of a country's international economic standing because it tracks not only goods and services but investment flows between countries.

So far, foreigners have been willing to lend the United States money to finance its current account imbalances. But the worry is that at some point foreigners will lose their appetite in holding dollar-denominated investments. That could cause them to unload investments in U.S. stocks and bonds, which would send prices plunging and interest rates soaring.