Despite signs that the U.S. has avoided a repeat of the 1930's, it may be unrealistic to get overly optimistic about the country's economic future. That's the message from Nobel economist Paul Samuelson, who fears that the U.S. dollar is in for a dramatic fall:

Up until now, China has been willing to hold her recycled resources in the form of lowest-yield U.S. Treasury bills. That's still good news. But almost certainly it cannot and will not last.

Some day -- maybe even soon -- China will turn pessimistic on the U.S. dollar.

That means lethal troubles for the future U.S. economy.

When a disorderly run against the dollar occurs, I believe a truly global financial panic is to be feared.

... [Obama's] experts should right now be making plans for America to become subordinate to China where world economic leadership is concerned.

Samuelson isn't the first to raise concerns over the fate of the dollar. And in many ways, a dollar collapse would be the ultimate conclusion of the bursting of the subprime bubble, which was inflated by Chinese purchases of U.S. government and agency debt. Still, the Economist's Free Exchange blog doesn't buy that Samuelson's worst case scenario will come to pass:

A dollar run would be very bad indeed for America. It would also be bad for all those with large portfolios of dollar assets, like China. Why would China take a decision that would cost itself hundreds of billions of dollars? ... One would think an economist would be sceptical of any argument requiring a country to do something blatantly and massively against its own interests. Not in this case!

But even if we manage to avoid Samuleson's nightmare, a healthy non-bubble-inspired boom would still seem to be highly unlikely in the presence of global imbalances--particularly China's high savings rate and America's nearly non-existent one. That's because while most economists believe the dollar does need to fall, they believe that a decline should be accompanied by reduced consumption on the part of the U.S. The good news is that it's something we're starting to see; the adjustment process is underway. The bad news is that this sot of adjustment is hardly a recipe for resurgent GDP growth.

--Zubin Jelveh