No matter what the cause of the eye-popping US deficit - tax cuts, recession, the war on Iraq, the inability of the US voter to be responsible - the long-term effect is clear. Getting access to funds will become more expensive. That is a problem for all countries in a globalised capital market, but it has critical implications for the United States. Underwriting the cost of the US empire will be increasingly difficult, perhaps impossible. Imperial overstretch has been a hard sell since Paul Kennedy's The Rise and Fall of the Great Powers made its debut in 1987. Kennedy's theory of inevitable decline gained some traction amid the national angst of the late Reagan years, but it has been pretty much forgotten. The US government deficit has refocused attention on the parlous state of America's finances. The possibility that the government will be more than US$2.4 trillion in debt in a decade is too jaw-dropping a figure to ignore. Incredibly, economists warn that if you add in pensions, social security and other 'hidden' obligations, the net present value of unfunded liabilities over the next 75 years is more than US$50 trillion. A good chunk of that debt is funded by non-US investors. Stephen Roach, of Morgan Stanley, has estimated that foreign investors hold 45 per cent of the outstanding volume of US Treasury debt, 35 per cent of US corporate debt and 12 per cent of US equities. By one estimate, central banks of East Asia hold about US$1.6 trillion in reserves and they put virtually all of that in US government securities. This has led some to speculate darkly about those governments holding America 'hostage'; they would threaten to dump the securities to punish Washington for decisions they do not like. Don't count on it. Selling securities would trigger huge losses for them. In particular, it would cause the dollar to plunge in value and wreck havoc on currency markets. The rise in the selling countries' currencies would severely damage their exports. But dismissing the paranoid scenarios does not mean the US position is sustainable. It is unlikely to get those funds because the global economy is changing and creating new investment opportunities. And rising interest rates spell real trouble for an empire that is already knee-deep in debt. Today, the US is the beneficiary of global investment because the currency is considered stable and the returns promising. The massive debt erodes thoughts about future stability - and re-evaluation appears to be underway. To my mind, more important is the growth of other investment opportunities and a mindset that favours putting money to work at home - wherever home is. Europe's enlargement and the need for structural reform in EU economies should encourage European investors to keep their money in the neighbourhood. But the real growth should come in Asia. South Korea and Japan must embrace economic reforms if they are to retain their dynamism. Throughout Asia, greater attention to domestic demand will shift policy preferences. Why should those governments hoard dollars - essentially to subsidise American demand for Asian exports - when Asian consumers can use the funds? There are already signs that shifts are occurring. Last week, The Wall Street Journal reported that South Korea could give as much as US$20 billion of its foreign exchange reserves to private fund managers next year. Taiwan wants to use some of its reserves to help local companies, as does Thailand. Then there is China. It, too, is discovering that many of its funds are needed at home. Beijing has used tens of billions of dollars to prop up overextended state banks. Even without the government's ambitious plans to develop the west - which should demand substantial funds - economic dynamism will shift investors' thinking. Why should China give privileges to US investments when there are plenty of opportunities at home? Currently, it needs to help exporters. But China's middle class will eventually provide the demand, and economic reform should eliminate some of the political risks associated with domestic investment. Of course, growth should increase the pools of funds available for investment, but the scale of the US debt - five times its gross domestic product - and the growth that is being unleashed elsewhere means that America will have to work hard to win investment funds. Economics tells us that interest rates are the best vehicle for that, but that only slows growth and increases debt repayment. It is a vicious cycle and an ugly picture. It is also the most dangerous threat to an overextended nation with ambitious plans. Brad Glosserman is director of research at Pacific Forum CSIS, a Honolulu-based think-tank bradgpf@hawaii.rr.com