Firat Ünlü

Chinese Are Likely to Halt Purchases of U.S. Treasury Debt

I'm surprised that nobody's mentioned the political side on this issue so far, as it's all intertwined. Bascially, from a foreign-policy point of view, there is no way the US can afford to significantly default on the debt, should high inflation occur it would be considered as a partial default. Should this happen China will make life for the US very, very hard. There will not be any meaningful cooperation on issues like North Korea or Iran, in fact they will make sure to strengthen their position. Any analyst has to be fully aware of the political situation an understand that it would be utter madness to have the Chinese in rage.
I don't like this situation one bit, far too unstable.
Having said that, things nearly never pan out as bad as feared and I'm sure they'll find ways to cooperate (Taiwan is huge to the Chinese...).