Writing about economics isn’t easy, but Gordon Chang has a highly understandable piece in the Weekly Standard here on what would happen if – as some chicken littles are screaming – China stopped buying all our debt.
The theory goes that Pres. Obama is sending us into the land of huge debt (he is) and China at some point will stop buying that debt thus bringing us to our economic knees. Chang explains how it will actually bring China to it’s knees.
It’s a good example of the fact that you can’t control markets (for long) and you especially can’t control currency markets. Also, why is the dollar the foundation of world markets? It isn’t that our economy is huge. It isn’t that we exercise hegemony over the globe. It’s because we have a stable politic system (compared to the rest of the world). There’s no worries that we’ll become a Italy or Argentina with chronically wobbly governments that play around (too much) with our currency. We’re responsbile…which just goes to show how bad the rest of the world is.