Of course, the Dollar Dump might be a way of reducing the huge quantity of foreign currency reserves (US treasuries) that China holds.<p>China wouldn't want its huge reserves confiscated just like the Russian ones were.<p>There's a limit to the amount of commodities that can be stockpiled by buying them up with excess foreign reserves.<p>And the way that US Dollars are declining due to inflation (well over 10% a year) the longer you hold them the more they evaporate away. That trillion Dollars in Chinese reserves will only be worth 900 billion in 12 months - effectively a loss of 100 billion in buying power. It's the old, old story of "Use it or lose it."
Would these dollars come home? Last Saturday I had stacks of price increases to post for my employer's store.<p>What would the federal reserve do? Raise rates to try to get these dollars into bank accounts? I don't think that would work because these dollars are leaving the Chinese banking system and US savings accounts are still a useless place to keep money safe from inflation.