Would China Dump the Dollar?

Probably not, but its massive greenback holdings gives the nation a lot of leverage.


I found this to be the most interesting bit from the Pentagon-sponsored war game that simulated a global economic conflict. According to Politico, Yale business professor and war game attendee Paul Bracken said the event "left him questioning one prevailing assumption about economic warfare, that the Chinese would never dump dollars on the global market to attack the US economy because it would harm their own holdings at the same time. Bracken said the Chinese have a middle option between dumping and holding US dollars – they could sell dollars in increments, ratcheting up economic uncertainty in the United States without wiping out their own savings. 'There’s a graduated spectrum of options here,' Bracken said."

Me: And look at it this way, the Chinese may view our return to massive deficit spending as a form of accidental economic warfare on them since it could lead to vastly higher inflation and a plunge in the dollar's value.