> Isn't this situation likely to create something like a
> dollar bubble in which eventually the value of the dollar will crash?
It's not so much a dollar bubble as the fallout of an imploding bubble -- private interbank lending has basically stopped (some of the indicators got a little better this week, but now we're headed back into the soup), so there's a worldwide rush to the safest of all assets -- T-bills and cash. This is driving up the value of the yen and dollar, for the time being.
As for what it all means - well, it's definitely the end of neoliberalism. 35 years of insane free market fundamentalism is now turning into its dialectical negation -- the biggest socialization of credit markets by states in human history. The EU and East Asia now have to step up to the plate and spend like mad to get the wheels of consumption started again.
-- DRR