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to the tune of about $300 billion a year, give or take a few billion. They also have about two point something trillion in U.S. dollar reserves. They also have a real estate bubble, and some labor unrest to contend with. If they were to "put the screws to us", they stand to lose all or part of that $300 billion, and anything they do to make the $ decline in value makes their currency reserves, their assets, worth less.
They have spent the better part of the past decade holding the value of the yuan down in relation to the $ to keep those
export sales up. Given that, they have to be somewhat careful. The cheaper they make the dollar in relation to the yuan, the less their competitive advantage, the lower their asset value. That makes their imports more expensive and lowers their sales, which depresses their economy. Their housing bubble implodes, labor unrest boils over, then they have to drive tanks through the streets again, and that is always less a sure bet than it used to be. They would likely take over some businesses, some of them American and other corporations, to keep the doors open, and they rule by central committee. Business has little recourse in the event of a conflict, and owners can and do go to prison. People aren't exactly clamoring to settle international trades in a currency which can't be backed up by democratic laws
So while this is one little step, it is still just a little step. You are correct, I think, in your assumption that China would like to be the big dog, but they know we own the biggest chunk of food that fuels their economy.
That doesn't mean they won't try, but they have to think through it. Do they think we have become fat and lazy, that we won't rebuild our infrastructure, create the needed jobs, and continue to be a debtor nation, hardly in a position to challenge them? In that case they can do what they want. On the other hand, if we grow up, make the hard decisions and invest in our people, create the 10 million jobs we have pissed away over the last few decades and quit buying their output, they would be walking away from their cash cow. That would put them on a terrible economic diet and insure a recession for them. What is their thinking? Only they know...but they are a smart and resourceful people, who have equaled our manufacturing output in a mere 30 years, what it took us 200 to build.
As far as Bernanke and his "printing press", let's talk in real terms. We, the United States, are the sole provider and manufacturer of the dollar. One of the things we do is put zeroes in the accounts of the the reserve banks to put money into the economy. In normal times that is a good thing, because there is no other source of dollars other than our government. We also buy goods, another way of putting them out there. We also use it to pay unemployment, for social programs, for infrastructure. If it wasn't for those zeroes you would have no money to pay your taxes, none to buy cheap crap from China, none for your paycheck.
And there is another way. The government can create a work program like they did in the 30's, pay people to re-create the industrial structure we have pissed away in the past 40+ years. Rebuild the factories and teach people how to live in a globalized world, teach them where to spend their money so it won't wind up on a "pallet going to China" (actually it becomes "zeroes" added onto a Chinese account at the bank, but the imagery of the "pallet" is kind of useful.
I think you are correct in your assertion that there is some pain ahead, but we need to decide who is going to feel it. We should get rid of Bernanke (not a bad idea, since his solutions seem to always involve giving taxpayer money to his banking associates with no real return for the country), but we should keep the ability to create the zeroes. Lets put them to use by investing in our people and our country, into something that gives us a return on our money instead of insuring that investment bankers have enough for their next round of hundreds of millions in bonuses, for their second and third homes, for their cruises to, well, wherever. They will tell us they are feeling pain, but they likely have enough money to keep it from hurting too badly.
The worst and most painful decision would be to accede to their cries of woe and ignore the need and opportunity to address our challenges, and rebuild this country to what it could be. In that case there would be years, potentially decades of terrible pain and suffering by the people who it will hurt the most. And they have no defenses.
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