In all of these threads related nervousness over China holding our T-bills, there is never any mention that China feels it HAS to buy our T-Bills in order to keep the dollar HIGH. We keep trying to depreciate the dollar in order to finance our debt with cheaper dollars, and China keeps buying T-Bills to keep the dollar strong. If the dollar were to go down, the price advantage Chinese goods have in the US would quickly erode. The end result is that we buy their cheap goods and they keep buying our paper.
Actually, that point has been alluded to, but you do well to raise it now.
China is now a part of the 'dance', and has no interest in seeing the music stop.
Imho, China wishes to parallel the American succession to Britain, and unlike Imperial Germany, be patiently prepared to let nature take its course and allow the 'mandate of heaven' to descend upon them in due course through diligence and enterprise.
Plus, it's illegal for anyone in China to hold American dollars except for the Chinese government.
China makes its businesses turn over American dollars to the government in exchange for less than a fair amount of Yen.
And thus American jobs move overseas.
Not because the American worker doesn't work hard enough.
Not because the American worker isn't as smart as foreign workers.
But because the American worker gets paid with overvalued American dollars, whereas Chinese workers get paid with undervalued Yen.
The American worker is the victim of an economic jiu-jitsu.
Actually has been mentioned, the trick is figuring out how long that will last. China's economy would be in for a rough landing if they pulled the plug on their weak yuan policy. But inevitably they will pull the plug and the dollar will go down the drain. The giant sucking sound will be the world divesting dollars as the politicians here blame everyone but us for the crisis.
I do. I have mentioned countless times that they expend the collossal sums of $195 billion annually to sustain their currency peg.
They regard it as merely a temporary strategic sacrifice.
They are willing to keep their price advantage only so long as it continues the black-hole 'event-horizon' that keeps sucking in still more U.S. industry, capital, technology, etc. Once the snake has swallowed the vast bulk that there is to relocate, then they will dispense with their exports to us as well...and turn the capacity over to their own national agendas. If the U.S. self-implodes due to the import-lobbyist-induced Federal government bankruptcy, so much the better, in their opinion.