What exists is a sustained U.S. external deficit leading to increased stock of U.S. foreign debt, which accumulates in ever fewer hands, basically Central Bank of China, Japanese pension funds and sovereign funds of oil-producing countries. If any of these countries will stop accumulating U.S. reserves would have to close its current account deficit sharply and causing a slowdown in domestic and global growth and a dollar crisis, something that happened in the seventies and did blow up the system Bretton Woods. Won’t they let the Chinese go to U.S. Treasury auctions in 2013? They will be the losers and it’s natural that the usual process of gradualism follow Chinese politics. However, in July 2008 the Chinese stopped going to the auction of Fannie Mae and Freddie Mac and was the trigger for the collapse of Lehman and the Great Recession.



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