Who would have thought that we needed to look at the economy of Iceland for clues? Random Roger has been on the case, but now Craig Karmin in the Wall Street Journal notes the downside of the carry trade.

"That's a new feature of the global economy," says Nouriel Roubini, an economics professor at New York University's Stern School of Business. "With few exceptions, it's the advanced economies with the biggest economic imbalances these days." In the U.S. economy, Mr. Roubini points to the large trade deficit, and a dependence on foreign central banks to finance the nation's debt, as making it potentially vulnerable to financial shocks.

That is indeed the big question for the US economy. Will the massive trade and current account deficits lead to a similar outcome? A pullout of foreign capital leading to a markedly lower dollar and higher interest rates. We are seeing long term interest rates back up to levels that have been expected for some time.

Justin Lahart in the Wall Street Journal notes the steepening yield curve and the rumors swirling around the Treasury markets in regards to foreign central bank selling.

This has been attributed to stronger than expected economic growth, but we cannot know that with certainty. Barry Ritholtz at the Big Picture wonders whether there already isn't some kind of "risk premium" for U.S. bonds versus those of other developed countries.

James Picerno at the Capital Spectator has an interesting Q&A session up with Lakshman Achuthan that highlights his decidely contrarian view on the economy. Rather than looking for further economic strength and higher inflation, Achuthan is actually looking for economic weakness as the year progresses. Achuthan has a good track record and it this piece is definitely worth a look.

macroblog notes 5.00% is looking like a lock for May Fed meeting, but June seems kind of like a crapshoot at this point.

One fallout from a rising interest rate complex could be the utility sector. Gregg Greenberg at TheStreet.com notes rising rates could be a "headwind" for the sector.

Mark Thoma at Economist's View points to an op-ed that tries to explain the divergence between global macroeconomic growth (good) and the satisfaction with growth (bad). Any post that includes a definition of "ennui" is worth a look.