According to Fred Bergsten  we will soon see that Nouriel Roubini and Brad Setser have been right, so right, about their dollar-disaster scenario (here and here, for example).  Yesterday's article at  David K. Smith's web site has this:

Fred Bergsten of the Washington-based Institute of International Economics argues, as do others, that America’s reluctance to confront its budget and trade deficits is the big danger facing the world economy. Bergsten said: “The US deficits are unsustainable in domestic-political and trade-policy terms, as well as in international financial terms"...

Stephen Roach at Morgan Stanley, who admittedly has built a reputation for being the most bearish analyst of the American economy, agrees — and more. The dollar’s fall, on its own, will not be enough to curb America’s current account deficit — now running at an annual rate of more than $700 billion (£370 billion). Austerity, caused by a sharper rise in interest rates than the markets are assuming, will be needed. American consumers, who have raised their spending to the equivalent of 71% of GDP against a long-term average of 67%, will have to cut back. So will the Bush administration, which last week added $80 billion to its Iraq spending and $855 billion to its projected budget deficits over the next decade.

Bergsten sees the possibility of a dollar crisis “within weeks”: a combination of dollar selling by the foreign-exchange markets, coupled with the abandonment by leading central banks of their policy of accumulating dollars. Who, after all, wants to hold a declining asset? A dollar crisis, a sudden drop of 20%, 30% or 40%, could force American interest rates up sharply — the Federal Reserve being unable to ignore the inflationary consequences. This, in turn, would reinforce the risks to US growth underlined by Roach.

And here, according to Smith, is the list of all the really bad things that will happen. 

A combination of a dollar crisis and sharply rising American interest rates would, for a start, hit global stock markets hard. Investors are betting on the gradualism of the Federal Reserve — a quarter-point rise every six weeks — continuing. Any change in that pattern would go down like a lead balloon.

The second big effect would be on Europe... A dollar slide that pushed the euro to $1.50 or $1.70 would guarantee a recession in the eurozone....

A third effect will be on trade more generally... Currency turbulence is never good for world trade, which has been enjoying a good recovery. A dollar crisis would not only undermine that but would put at risk the important World Trade Organisation Doha trade round, on which progress needs to be made this year.

Fourth, a sharp dollar-related rise in American interest rates would change the global interest-rate climate. It would raise the spectre of inflation. here is no automatic read-across from the Fed to the Bank, but a rise in inflationary expectations would affect everybody. A sharp dollar decline, after all, marked the start of the great inflation of the 1970s.

At this point I just have to comment.  That last statement -- that a sharp dollar decline marked the start of the great inflation of the 1970s -- is a complete red herring, confusing cause with effect.  The dollar depreciated in the 1970s because the U.S. monetary authority was running an inflationary monetary policy -- and had, off and on, since that last half of the 1960s.   That is what led to the depreciation of the dollar (and the breakdown of Bretton Woods), not vice versa.

And, once again, of course U.S. interest rates are going to rise.  Real interest rates -- that is, interest rates adjusted for expected inflation -- have been at anomalously low levels for years now.  (Here's my opinion why that has been so, in case you are interested.)  Furthermore, when interest rates start heading north, they often do so at a pretty good clip. (Some examples: Between October 1993 and November 1994, ten-year treasury yields rose by about 250 basis points. Between October 1998 and January 2000 the same yield rose by over 200 basis -- while the government surplus was rapidly expanding!)

So all of these predictions about falling bond prices are not the least bit fearless.  The real question, in my view, is why the process has taken so long.

As for the doomsday scenarios that seem so popular, I'm still not buying it.  I will not, however, hold Nouriel and Brad to Bergsten's "within weeks"  window.