> <i>the likelihood that the American economy is beholden to Chinese financial machinations is an oversimplification of an complex issue</i><p>Interesting analysis and thank you for this qualifier. It's important because the Fed Funds rate is an explicitly manipulated rate.<p>America loves to buy Chinese stuff. This leaves China with lots of dollars. From a monetary policy perspective, a dollar that isn't moving might as well be dead. When China buys Treasuries, they pump those dollars back into the global economy. This pushes down the Fed Funds rate, which presently promotes the Fed's monetary policy.<p>If China started dumping Treasuries, a deflationary sucking sound would be heard as dollars left the global market (ex China) to go chill with China. If China then sat on those dollars, the Fed could inject new cash into the market (by buying Treasuries from anyone, including China) to replace them. If they spent it, nothing really changed--dollars went from someone who wanted to buy Treasuries to China to someone who sold something to China.