would hurt the US. It would kill whoever started dumping the currency.
Number 1. Japan is reliant, as is most of the world, on the US Navy keeping the sea lanes open for trade. If the US were to blockade Japan, they'd be out of oil in days to weeks, and they'd be starved for grain in months.
Number 2. China needs exports to fuel it's economic growth. Key to that is keeping the US markets open. The rest of the world simply cannot consume enough Chinese goods to allow the increasingly urban population of China to continue in the lifestyle to which they have rapily grown accustomed.
Number 3. Both countries rely on their US dollars to buy oil. Virtually every oil producing country in the world values it's oil prices in US dollars, and charge a premium for any other currency. Iran is trying, with little success, to create an exchange denominated in Euros.
Number 4. The US could simply declare the debt held by these countries to be worthless. This would raise interest rates in the US for a decade or so, but given the size of the US economy and it's status as the consumer of last resort, it is unlikely that other nations would refuse to do business with the US as a result. |
