China has threatened to invoke a mass sell-off of US dollars; of which they hold over 1.3 Trillion dollars in what they term, The Nuclear Option. If they liquidated their USD holdings this would lead to the dollar plunging in stability and the American economy possibly slipping into a state of "protectionism".
So, why would the Chinese want to do such a thing as this? Currently there is legislation set to go before Congress in which the Yuan's exchange rate could be looked into and re-evaluated. It could also be to counteract comments made by Senator Hillary Clinton concerning the US's national debt. She stated that with foreign interests holding over 44% of the national debt leaves America "acutely vunerable".
Here are a couple quotes from Chinese officials:
Xia Bin, finance chief at the Development Research Centre (which has cabinet rank), kicked off what now appears to be government policy with a comment last week that Beijing's foreign reserves should be used as a "bargaining chip" in talks with the US.
He Fan, an official at the Chinese Academy of Social Sciences, went even further today, letting it be known that Beijing had the power to set off a dollar collapse if it choose to do so.
You can read more here or here.
-What are your thoughs on China's "Nuclear Option"?
-What would be some ways to counteract such a measure taken by the Chinese?
-How could America protect against such threats in the future?
-With the rise of global markets, does this just come with the territory or does America just lend itself to situations like this due to lack of fiscal responsibility?
-If the Chinese follow through with such measures, would you personally do anything different with your money?
-Do you think that such an action would lead to a military conflict?