Long long ago, I had posted on the question of why the dollar is strong even though the US has run up a huge current account deficit. That post was based on this article in the Economist

Swaminathan Aiyar weighs in on the same question. He too claims that the dollar is not in danger of a collapse although economic fundamentals dictate that it ought to. He says that “In effect, the US can pay for its imports by exporting its own currency. No other country can.” Why? Because

the US can literally export dollars, because the world has decided that this is the world’s monetary anchor….
unlike other commodities, the dollar is used not for consumption, but for building up foreign exchange reserves.

But how long can this continue? The dollar is a stable currency, but that only means that it will be used as a means of exchange right? Surely people won’t hoard dollars for ever? If demand for dollars is entirely driven by the fact that there are others who will demand the dollar and pay inflated rates for it, doesn’t that make it a bubble? Of course, the only thing that we can definitely say about bubbles is that they will burst eventually, even though the eventuality may take place in months, years or even decades.
But given that the US is going to be dependent on imports for the foreseeable future, given that its population is ageing (though not as much as European countries, mainly because of migration) and its social security system is broke, am I right in assuming that the bubble will burst sooner rather than later?

I hope some real economist can answer this question. I wouldn’t want the US economy to collapse – if it does it will probably plunge the world into a prolonged recession, – but if it does, remember that you read it here.