There is no reason to believe that the PRC bandits cannot use another currency to function as they use the dollar. (Euro).
And yet there are plenty of reasons why they will not.
- America has financial problems, but Europe's are even worse (Greece being the latest expression of that), making ?-bonds less attractive.
- They have more capital bound up in US bonds than anyone else, and thus have a relatively high interest in not dumping and thus devaluing them.
- Their trade surplus with America will evaporate. Indeed, America has pressured China (but not too loudly) for years now to let the Yuan rise for just this reason.
That is because they have no free internal credit mechanism and consumption to soak up excess production. 1927 America in a nutshell repeated. Wonder if their real estate base and agriculture is as messed up as our own was/is. (It is.)
This lack of economic strategic depth also makes it extremely unlikely they'll engage in overt economic warfare, especially not with a nation as economically resilient as the US.
They have enough undervaluation to soak up the 10% difference. We can't afford the added 1 or 2 points of interest. Can't you see this?
Higher interest on the debt would be more than offset by a resurgence exports across the board and in American manufacturing in particular. Both are paths to a more sustainable economy anyway. This is again why American policy has been for some time to "encourage" China to allow the Yuan to rise. It is in no one's interest for China to suffer an inflationary crash, either.
No there isn't. Who has a slave labor command economy that can feed the debtor fix? Nobody.
To borrow a phrase, There is no reason to believe that Americans can't absorb the added cost of cheap toasters from Maquiladores vice Beijing.
And you read the the money flow exactly backwards.
The flow is in parallel, not series.
Their preferred condition is economic chaos, not stability.
Given that they simply don't have the internal resilience to absorb large scale volatility I find this unlikely at best. The rest of your paragraph is so thoroughly uncontroversial as to be tautological. You could accurately describe nearly every nation in existence this way: selfish, self-centered, ruthless, opportunistic. What else is new?
Don't for a second
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