DislikedMarkam we know that China has USD reserves in huge amount. Do you think they will at one point start selling? Do you have scenarios for that too?Ignored
The real issue are treasury notes and the continued buying of treasury notes. China has been financing our debt, and their expansion, by taking much of there trade surplus and buying our debt issues. This has allowed the lopsided trade deficit to continue far beyond the point it should have. Now they (along with Japan) are stuck with hundreds of billions in treasury notes that they cannot do anything with. If they try to sell them, they crash their value, send interest rates through the roof in the US, plunge the US into depression/recession, and screw up their favorable balance of trade.
Up until now, their only choice has been to hold the notes and continue to buy new ones. I believe that we are approaching the point where that strategy is no longer viable, or even desired by the Chinese. It will not be pretty when this house of cards collapses.