corrente

[T]he fulcrum of a future creditor-based revolt probably rests in Beijing rather than in New York or Washington.

Because China's monthly trade surplus of $10 billion-plus with the United States implies a $120 billion annual addition to its dollar reserves, there will come a time when its hundreds of billions in holdings of U.S. notes and bonds look a tad too risky. In turn, the hundreds of billions that Japan and other Asian countries have been buying to keep their currencies competitive with the Chinese yuan and the U.S. dollar will be subject to a sanity check as well. At some point our Asian creditors will wake up and smell the coffee. Perhaps there will be dollar or Treasury note sell-offs or a revaluation of the yuan and then the yen. In any event, we pay the price: higher import costs, a cutback in spending on cheap foreign goods, rising inflation, perhaps chaotic financial markets, a lower standard of living.