A couple of days ago, I noted the “developing attitude of the Republican establishment towards government debt, which is essentially that of banana republic populism. “. Now the same characterization has hit the pages of the NYT, in a piece by Floyd Norris on the decline of the dollar

To John Paul Rathbone, an economics commentator on breakingviews.com*, such borrowing is evidence that the United States is “taking on the financial characteristics of a banana republic.”

That’s a hostile view from Britain. But borrowers need to worry about what lenders think of them.

Norris is careful to put exactly the right amount of distance between himself and the “banana republic” characterization. But who would have imagined, in the late 20th era of US economic triumphalism, that such a thing would be said at all, let alone in the NYT Business section.

*The breakingviews.com site requires registration -free for a 30 day trial. The article to which Norris refers discusses the shift from direct FDI into the US to debt, then goes on to observe

In a typical emerging markets crisis, this deterioration would go two steps further. Investors would require ever shorter maturity debt, which then has to be rolled over. And increasingly they would demand that the debt be denominated in a foreign currency, which removes any chance that the country inflates away the problem by printing money. The US doesn’t have the latter problem. But the steepness of the yield curve does suggest some investors are turning to shorter-term bonds.

Furthermore, as State Street strategists point out, the US is not an obvious home for value-conscious bond investors anyway. For one, the Federal Reserve has a high tolerance for inflation, at least compared to the European Central Bank. That suited the US when equity capital flows ruled the currency markets. But it doesn’t in these risk averse, bond-driven days. From that point of view then, it doesn’t matter for the euro that the European economy is struggling. Indeed, quite the contrary is true. The euro will probably continue to rally against the dollar, despite a worsening eurozone economy, simply because euroland bonds are a safer bet.

This is all spot on, though I don’t rule out the final stage of a resort to the printing press and a flight from dollar-denominated assets.