Is US Twin Deficit Sustainable

There are various schools of thought on this subject but the majority believes that this state of affairs cannot continue for ever. It is true that the US imports much more than it exports and the US government spends much more than what it collects as revenue. The government deficit is easily taken care of by printing more dollars but the trade deficit has to be additionally financed by capital flows. Why would the capital flow into an economy which is not competitive to begin with. Anyone with money to invest would look with expectations to the returns that are likely from this investment. If the productivity of US capital had been high the economy would have been more comeptitive and therefore the Trade Deficit would be a surplus instead. So where is the paradox. It is true that huge net Capital flows are happening from rest of the world to the US. It is also true that the money garnered from these capital flows is being spent on consumption by US citizens fuelling the current growth in the economy. But it is true also that the foreign capital is earning poor ROI. It is increasingly likely that the Dollar will depreciate and the foreign Capital sunk there will evaporate in value. It is likely that this may trigger withdrawl rush of capital which would further depreciate the Dollar in a downward spiral till the Trade Deficit corrects itself. But life would never be the same again. Dollar as the premier global currency would have lost that status for ever. Global economic center of gravity would have shifted elsewhere. American enterprises with surplus capital would in the meanwhile also shift their investments to more productive destinations leading to a hollowing out from within and strengthening the flow of capital away from US. It is unlikely that the Returns on these foreign investments by American Capital would adequately compensate for the Capital flight which would take place. In a free market economy driven world there are no permanent rents to be collected and returns on capital employed are a direct function of real value creation. If American capital finds better returns outside of US it underlines the fact that the state of US productivity and value creation is not competitive globally and therefore US capital has no choice but to become dependent upon external value creation. Some benefits would trickle down to some US investors no doubt but that will not lift the fortunes of a nation.