Like Blanche Dubois, the US has become financially dependent on the kindness of strangers. Brad Setser takes a look at this in The balance of financial terror, circa August 9, 2007 , quoting extensively from Former Treasury Secretary (and former Harvard President) Larry Summers:
Back in early 2004, former Treasury Secretary Lawrence Summers highlighted the emergence of what he termed the "balance of financial terror." China – and others – relied on the US for demand that their economies were not generating internally, and the US depended on China – and others – for financing. Summers defined the balance of financial terror as:
"a situation where we [in the US] rely on the cost to others of not financing our current account deficit as assurance that financing will continue."
China now holds about a trillion dollars in US debt - equivalent to 1/3 of its GDP.
China's growing dollar holdings, in turn, finance much of the US current account deficit. Summers noted the United States growing dependence on the discretionary acts of "political entities" in early 2004:"There is surely something odd about the world’s greatest power being the world’s greatest debtor. In order to finance prevailing levels of consumption and investment, must the United States be as dependent as it is on the discretionary acts of what are inevitably political entities in other countries? It is true and can be argued forcefully that the incentive for Japan or China to dump treasury bills at a rapid rate is not very strong, given the consequences that it would have for their own economies. That is a powerful argument, and it is a reason a prudent person would avoid immediate concern. But it surely cannot be prudent for us as a country to rely on a kind of balance of financial terror to hold back reserve sales that would threaten our stability."
Since then, the United States' dependence on a single political entity has only increased.
The rest of the article discusses in detail Chinas recent hint that its patience as a lender was not unlimited, and the arguments for why China might or might not want to continue extending its credit.
This looks to me like another calamity waiting to happen, brought to us as usual by Calamity Dick Cheney and Buffalo Brains Bush.