The Chinese authorities find it hard to explain to its domestic public why a relatively poor developing country is lending so much to one of the world’s most affluent economies.

Luo Ping, a director general at the China Banking Regulatory Commission, said “We hate you guys. Once you start issuing $1 to $2 trillion … we know the dollar is going to depreciate, so we hate you guys but there is nothing much we can do.”

Whether or not the dollar will maintain its pole position, and whether or not the U.S. will preserve its “exorbitant privilege” of being able to finance its current account deficit in its own currency, remains mostly in the hands of the U.S. administration.

As long as it will resist the temptation to inflate away its debt, markets will have little incentive to replace the dollar as the world currency with another currency, be it the euro, SDRs, or any other newly created multilateral or supranational currency.

Forget that - the only way Obama & Congress can ease the deficit is by inflation and or extremely high tax increases which Obama says he will not do - but then again, he pretty much says one thing and does another.

I wonder if China will take California in exchange for debts we own. Hopefully they’re that stupid.

I say we let them hold Pelosi as collateral until we pay up.