[Edit35]

..what a mess the Chinese and Japanese have got themselves into. They can’t afford to have the U.S. go belly up over debt.

Exactly. I never understood people who think it awful when other countries sink their money in American real estate or entities like FNM or FRE.

China or Japan cannot transfer that property to themselves, and they are basically stuck holding the paper... hoping America doesn't default on its loans.

It's like that old proverb:

'Borrow $10 from the bank, and you are beholden to the bank. Borrow $10 BILLION, and the bank is beholden to you.'

Or something like that. China and Japan's worst nightmare would be for America to go into default.

[wildbill]

At best they can start a slow withdrawal of funds denominated in dollars.

And possibly join a movement to change the global funding medium on oil from ‘petro-dollars’ to ‘petro-euros’.

But that assumes that Europe will be spared the worst effects of a global recession.