Quote Originally Posted by DuncanONeil View Post
I will give you this! You seem to understand the complexities of global actions.

There is one thing that does bother me a bit in your treatise. With an open conflict and the likely composition of the allies, to whom would China be able to sell those debentures? Most of their allies would not have the resources!
That's the point- it costs Beijing nothing to ruin America's economy (in a war scenario) by dumping 1/7 of the US national debt on the markets for next to nothing- the other creditors, faced with ruin, would begin to dump theirs or demand payment or rescue (50% of government debt is held in private hands- a lot of that in the US itself).
The other scenario is that off-shore governments seize Beijing's assets- Singapore would be a likely ally of the US and is home to about a quarter of Chinese holdings; the UK is home to somewhere between 1/6 and 1/5. Even a neutral country like Russia might take advantage of the situation and seize Chinese assets.
When dealing with China's economy it must always be remembered that it relies on the US to spend, spend, spend. It keeps at least 50% of its reserves (valued at nearly $US3trillion)offshore to keep its domestic economy under control- it buys US dollars on all markets to keep its own currency artificially depressed- it buys up US debt in all markets in order to keep US enemies from threatening the US economy. China's is an export economy with little domestic consumption (relatively speaking) so if it could not export the economy is ruined regardless of whether it holds or liquidates its debt holdings. America would probably (90%) win any war with China, but its economy would be in tatters.