You have put your finger squarely on the issue there. These countries (many of whom have a trade and account surplus with the US) now have a really, really hard choice to make:
1. Buy US paper at pitiful yields, thereby allowing the Fed and Congress to possibly reflate the US economy, only to see a prolonged period of mediocre US consumption of their exports, or
2. Bail on the US as the engine of their economies by refusing to buy any more US paper (they don’t even have to sell the paper they have — just stop buying the flood of new paper), turn their account surpluses inwards and stimulate their own economies, but guarantee that the US consumer is nearly a non-existent factor in their exports for at least five years, possibly as much as 10 years.
CompSci people have a term for this type of “resource contention” in concurrent programming systems: “the fatal embrace.”
The ultimate in codependant relationships....
The population of these countries are going to feel (if they are not already) mighty enraged against the West even though they helped fuel the problem and allowed their trade balances to go seriously out of whack.
There is another crash downward in the markets starting to happen. The bond prices are going to continue to increase, commodities are going to spike and we are all uck-fayed.
Took me an annoyed hour or so to figure out what I'd done.
It's well named.
If these nations stop buying our paper a large portion of the globalized economy turns in on itself. In short order they will have to find dependable trade partners for the things they don't do and a restructuring will occur with us on the outside.