The federal deficit may soon cause a “collapse” of the dollar, Stanford University economics professor Scott S. Powell writes. In an opinion piece in The New York Post, Powell notes that the ratings agency Fitch just cut Portugals bond rating to AA negative — a clear sign that the insolvency crisis that began in Greece is far from over. “And dont think its merely a problem for the European Union. In fact, a debt-driven collapse of the dollar may be closer than most Americans realize,” he writes. Before the government bank bailouts, gross federal debt was 70 percent of gross domestic product GDP. “Its now estimated at about 90 percent of GDP. Add in the $1.6 trillion debt liability of Fannie Mae and Freddie Mac, and were already at that 100 percent debt-to-GDP tipping point,” writes Powell. “No, the United States isnt Greece: For a host of reasons, we can probably get away with higher debt. But our problem is about to grow worse.”Right now, low interest rates make federal borrowing seem cheaper than it actually is — because those interest rates wont stay at zero forever.“And when rates head back to normal, Uncle Sams borrowing costs could easily double. We spend 11 percent of the current budget — $382 billion — on debt service; that could rise two- or three-fold to more than $800 billion, warns the CBO,” says Powell. Adding to the pressure on the dollar — inflation related to new job creation once the economy really starts to expand, reports CNNMoney.© Moneynews. All rights reserved.