Finally, on the issue of what would happen if China "dumped" its treasuries. To do this would require a buyer, there are none who can absorb the amount that China presently holds. Furthermore what would they pay for them with, dollars?

It is true that there is only an actual market price if transactions take place.

But this misses the point, because China's motive in selling would not actually be to sell, but to fuck the US economically.

Such trading conduct - aimed at wounding its target economically - was essentially the "Economic Terrorism" which was the subject of a conference I attended of the Geneva Centre for Security Policy (www.gcsp.ch ) three years ago - a conference sponsored by the US Dept of Homeland Security, with the CIA and lots of Euro Spooks there.

My thesis was (and is) that the energy market is dangerously exposed to "market discontinuity" by the concentration of risk in "single points of failure" aka Clearing Houses. I went on to say that the only difference between hedge funds and economic terrorists is motive.

I digress.

Whenever a buyer emerged, China would sell to them, and then on to the next bidders (who would rapidly dry up)

The result would be a market "discontinuity" on a cosmic scale.

China would make known (to everyone) that they are massive sellers (the opposite of prudent trading where you try and hide big orders).

So in fact China probably would not ACTUALLY sell that much because who would buy knowing they are going to be instantly losing?

The result would be a fucked market, with who knows what consequences.

"The future is already here -- it's just not very evenly distributed" William Gibson