After having sold thousands of our best companies to foreign interests in recent years, and having dismantled much of our industrial infrastructure in favor of outsourcing our manufacturing, America has increasingly become dependent on imports to maintain the standard of living it has become accustomed to, but at what cost?

Look at the computer you type on, the pen you write with, the cell phone you carry. These little things add up; in 2006 they amounted to a $765 billion American trade deficit.

These deficits are expanding. The U.S. government has accumulated nearly a $9 trillion budget deficit that it has been using to, among other things, fund the wars it fights all over the world. Japan, China and others buy large chunks of this debt in the form of T-bills to collect interest and allow the U.S. to continue its spending spree.

But what if China said no? What if Chinese and U.S. interests diverged in such a fundamental way that it caused China to pull the plug on its vast treasury allocations?

That option is now on the table after recently several high ranking Chinese officials threatened to use the so-called "nuclear option," the liquidation of their U.S. holdings, to counteract current pressure from U.S. congress over the Yuan. Such liquidation could cause the dollar to plummet in value and threaten to seriously destabilize the American economy.

For all America’s military spending, it is defenseless against this "nuclear" threat.

Presently America does not regulate the amount of debt foreign governments can purchase, allowing countries to accumulate greater and greater amounts of bonds with each passing day. As of December 2006, $350 billion belonged to China in the form of T-bills, and they hold up to $900 billion in a mix of other US bonds, according to a recent Forbes article. Foreign nations now hold a staggering 44% of U.S. debt, a powerful leverage against American interests.

For now this "nuclear" threat is limited to policy regarding China’s currency- but could easily extend to an array of other policy issues in the future.

Imagine if China, or any major loaner nation to the U.S., did not want America to fight in a particular war. These foreign nations could threaten to liquidate their holdings as a sort of ultimate economic leverage to prevent America from taking military action or support domestic needs.

The U.S. government needs this foreign funding to support its billions and billions of national debts that fund wars and other important military and domestic expenses. Without this funding, and barring a monumental tax hike on its citizens, America would be hard pressed to pay for its domestic and military commitments and other objectives.

It is the ultimate loss of sovereignty- a nation unable to do the things that are in its best interest or choose the wars it thinks it needs to fight to protect itself. It is a reflection of the path America is now forced to follow, with production declining, an over-reliance on imports, and towering debts and ever-increasing loans to sustain it.

Left unchecked America’s banker nations could have a veto power on U.S. foreign policy or totally destabilize our economy: Will America wake up before it is too late?

Jim Baird is the managing editor at EconomyInCrisis.org. He is a journalist and commentator. Mr. Baird studied in the Honors Politics program at the University of Edinburgh and a graduate of The Ohio State University where he studied political science and journalism.

E-mail editor@economyincrisis.org

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Article Comments From Readers guest says "The American mind is at fault... Followup" on 09/15/07 I agree with the following points of your post. 1. Political correctness is hurting us 2. Our education system is not what it should be 3. We allow others to manipulate us, based on blind trust and lack of information about the truth (among the common people at least) 4. Lack of understanding of outside forces working to destroy us and being enablers to a point 4. There are hard times coming 5. There are laws which are subverting the constitution at work bigtime. 6. Pride is a problem in our nation. But I do not agree about the Christianity issue. Truth and goodness was at the foundation of this nation, but the slippage of the same has led to the downfall. I would suggest to you the following: 1. Pride comes in different forms in every nation. 2. Deception covers the face of the earth and will continue to do so. 3. Any government that is formed on any ideology can slip because of the basic nature of man. 4. The problem is bigger than America, and if America falls, other nations will not be far behind. 5. The goal IS domination of the entire world through the forces of those who love power and greed. They will subvert any nation they can and not stop at ours. guest says "funding wars" on 09/15/07 Or maybe foreign countries will "pull the plug" so the USA cannot fight illegal wars, like its savage aggression in the invasion of sovereign Iraq. Sovereignty, indeed. guest says "The American mind is at fault" on 09/13/07 The roosters are coming home to roost. At last! It is the American mind that is at fault for all of this. It is the colonialist hypocritical Puritanish sheeplike mentality that is behind it all. It is the religiosity of Americans that makes them think in terms of black and white, good and evil, and which allows them to be manipulated by others. It is also their relatively low IQ which is not being helped by the educational system which dumbs down the populace to the lowest politically correct denomination. Like Germany, America will go down the path of fascism as Americans' mindset can only comprehend things simplistically like the Germans did in that era. They will not understand the causes of their problems and how even though there were outside forces at work operating to subvert the nation, Americans were the biggest enablers of that. Now the Piper is wanting his payment. Americans don't want to pay and so will go down and there will be total collapse: social and economic collapse. Like Katrina but affecting the whole nation. So at the root of America's problems are: 1) Lack of intelligence and distaste for intellectualism. 2) Sheeplike thinking. 3) Christianity. 4) Hypocrisy. 5) Blind arrogance. The economic model of capitalism was never a sustainable one and not a suitable one for a people who are socially backwards as the American. They cannot compete with their small-town mentality, their lack of knowledge of the world, lack of history as a people and with only a short encounter with civilization. But you cannot break through this mindset. Americans are hopelessly Eurocentric and will recite the values back to you of their 'strengths' as a people: free speech and so on. In this way they are completely blind. They do not have free speech. They have a whole bunch of laws that make it a crime to express free speech or even to assemble. For example, antisedition laws that were enacted during the early part of the 20th century forbid people to assemble for the purpose of promoting communism. This is just one of many examples and shows that the people have chipped away bit by bit at their freedoms or have allowed outside interests to do so. Instead of guarding these freedoms, they fell for the oldest trick and let fanaticism fueled by fear rule them and make laws antithetical to liberty. Thus the American people are hampered in their attempts to liberate themselves from their dire and soon to be terminal situation. They are forbidden by law to seek solutions. But the American is a very stubborn man. I have met many and even though they are open to hearing me out and give my views some merit, will revert to their original thinking and shout out the same slogans as before: the Chinese, Muslims, commies etc are at fault. America is the good guy and the other nations follow Satan. guest says "Total Dependance coming soon..." on 09/08/07 China has incentives at owning us. Globalism is leaving our people, not only economically hazarded, but think about this seriously, this is the worst time in the history of this nation because soon we will be completely dependant on foreign nations and entities offshore for virtually everything this nation needs to defend itself with and needs period. It is one thing to destroy a nation with bombs, another way is to destroy it's ability to survive in practically every other way.... We are heading there fast people. guest says "Time for Salary Caps has come" on 09/03/07 William McQuire: CEO of U.S. HealthCare has netted a salary (including stock options) of 1.6 Billion last year. How much of your health care premium went directly into his pocket? Lee Raymond netted a $397 million dollar bonus on top of his $51 million salary when he retired from Exxon/Mobil in April 2006. Every time you filled up your car/truck there he skimmed around $3-5 for the privelege of pumping Exxon gas. Michael Milken, Leona Helmsley, Dick Cheney, Michael Eisner, Ken Lay, Bill Gates, Dennis Koslowski,and many more robber barons have successfully stolen literally trillions of dollars from consumers who ended up overpaying these gougers from everything from junk bonds to intentionally crippled energy systems. Thanks to the 1995 Private Securities Litigation Reform Act not even shareholders of these companies can successfully sue to recover more than a token amount from CEO's who commit fraud or are overcompensated. What can be done? We need government regulation to insure fair play in the marketplace. A 25 year retroactive salary cap of $1 million dollars is a great start to reining in greed and fraud. This is a very generous amount and far more than enough compensation to meet the needs of any human being for a happy life. We should not forget that overpayment of CEO's does not increase their self reported happiness, nor their well being but demonstrably diminishes the happiness of other people earning far less, and greatly worsens the overall quality of life for the 99% of Americans who are denied access to the Bilionaire club. guest says "Economic Stupidity" on 09/03/07 America has nobody to blame but themselves. If she does not take the necessary measures to get her economic house in order she can hardly complain if others take advantage of the situation. A start would be to reverse every Bush tax cut. Start to pay your way instead of borrowing your way. guest says "Fight fire with Fire" on 09/02/07 The recent guest is mostly right as is the author Jim Baird. Folks, we must fight fire with fire. Since China pegs its currency artifically low to undercut America, and imposes unfair tariffs and quotas on American goods, we should do the same to them. Fight fire with fire. If the Chinese are imposing a 25% tariff on certain goods, we should impose a 30% tariff on their goods to keep our edge and protect our workers and flaggin industries. If the Chinese are setting quotas of say $5 billion in imported American goods, we should out do them and impose a quota of $4 billion maximum in Chinese goods. Let's not forget folks that Chinese Prosperity comes at the expense of American Prosperity. Why? There is simply not enough material wealth and jobs to go around. Hence China's fortune is in inverse proportion to America future. The richer they become the poorer Americans become. Why is this so? Because our world is limited. There is simply not enough to go around. Natural Resources: Clean Water Timber Oil Food All are in great diminishment and depletion and cannot be maintained at their present level of overexhaustion. Jobs: American jobs outsources to China and India (as well as imported Mexican workers in the USA) all some at the expense of genuine American workers families and employment. It would be nice if there were enough to go around and everyone could share in the wealth. But we live in a fitie world, and those to naive to understand nature's and man's limits are only being played as fools by our foreign competitors. guest says "Bush proud to destroy America for a quick buck" on 09/01/07 Thanks to the Bush administration's unprecedented stupidity, unchallenged arrogance, criminal violation of our Constitution, and mindless mismanagement of our economy, we are now seeing the lights of our once shining city on the hill flicker and grow dim as America's blackout approaches. The greatness of America forged in 230 years of creative industry, sweat and energy is being sawed down to dust and will be only be a memory as the decade closes. Is there any hope of America's redemption from bankruptcy and poverty? How did this happen? *Deporting American's jobs to China, India, and wherever cheap labor can be found *Allowing businesses to shop the world for tax havens and cheat the American government of taxes even while the overrich got tax breaks. *Importing low quality illegal aliens to steal worker's jobs, overburden our schools and hospitals. *Failing to rein in the obscene cost of health insurance driving more and more families to poverty or being unprotected. *Spending foolishly on the unwinnable quagmire in Iraq and Afghanistan. *Allowing the 9/11 attackers to destroy the WTC towers DESPTITE 52 warnings that summer of 2001 *Selling away the rights to National Security by giving up port control to Dubai,and fighting against shipping container inspection *Allowing the Chinese to unfairly peg their currency to burn the American dollar and undercut American businesses *Allowing Japan, Korea, and China,to have quotas on American imports and impose a 25% tariff on American autos while they only have to pay a 2.5% tariff to sell in the U.S. *Failing to protect our environment and workers from forseeable and preventable hazards such as the cole mine disasters and ruination of New Orleans. What can be done? What should be done to save our people and our nation? 1: Immediately halt all trade with China. 2:Immediately return all troops and equipment from Iraq and redeploy them to the U.S. Mexican border to halt the ongoing invasion. 3: Round up and immediately begin deportation of all illegal aliens from our nation and heavily fine employers who hired them 4:Impose a 25 year retroactive tax law on U.S. businesses and wealthy individuals to reclaim the trillions of unpaid dollars rightly owed (and currently borrowed) to the U.S. government. We as citizens have the choice to take the drastic measures necessary to save our country instead of allowing it to implode. I hope Americans will choose life and a bright future for our nation and not give her over to the death and despair. guest says "Don't worry about China, worry about Europe" on 09/01/07 Although the debt held by the Chinese is growing and ultimately could become a problem, they still lack the polictical clout to have an impact. The same can not be said of Europe and more specifically the Euro bond market that is just now starting to grow. The real threat to the U.S. debt financing is when the 45% holding U.S. debt decide that the Euro bond debt offers a more acttractive return with more stability. The biggest problem to date has been the relatively small amount of Euro debt available, but this is changing rapidly and will continue to do so as the EU attempts to raise the economic standards of its new members guest says "GET OVER IT!!!" on 08/31/07 Can you name one country that is not affected by U.S policies in the world? No! So, other countries are gaining on the US. Big Deal! Thats globalisation. The playing field is just equalizing. GET OVER IT!!! I think that Americans are just beginning to realize that the status quo established on the globe after WW2 cannot be maintained forever. For more than half a decade, the American society has lived at an artificially elevated standard of living, at the detriment of other countries. For example, a middle-class American works a 40 hr week for about $1000 while an African works the same amount of time for about 1/20th the pay. The current downward pressures being felt by the U.S middle-class is due to the fact that a similarly skilled middle-class willing to do the same job for less is growing in other parts of the world. I personally feel that everyone out there crying foul is just pissed because China is beating the U.S at the game that the U.S invented. Don't you just love CAPITALISM:) The U.S invented Capitalism (ie competition), they will have to live with it because the 2 billion people in China and India are here to stay. I see the current economic standoff playing out in 2 possible outcomes: 1) The U.S gets over it, and finds a way, through technological advances to create a more efficient society to compete. 2) Or keep up the current rhetoric and keep trying to remain at the economic pinnacle of the globe by pushing other countries down, which will ultimately lead to an economic "tit-for-tat" conflict between the U.S and China, and devastate both of their economies and maybe give the other countries a chance to play catch up! guest says "recent recalls" on 08/30/07 Didn't a Chinese official state that these recent product recalls stem from a "reliance on American standards"? - an ominous quote - if one is assuming that in the future - "Chinese standards" are the desired outcome. guest says "COLLAPSE COMES FROM WITHIN " on 08/28/07 OUR MASSIVE DEBT WILL MEAN LESS BUYING SPECIALLY NOW WITH THE END OF EQUITY WHICH MEANS STOP LENDING BY OTHER COUNTRIES AND COLLAPSE guest says "China Is Not Our Problem" on 08/28/07 Historically, China is a great and rich nation. China was occupied and looted by the British and the French imperialists. China is interested in competing against other countries rather than dominating the world. In my opinion China will never threaten any country in the world. Chinese think US imperialists try to control China by controlling the sources of oil. It follows China needs oil and must protect this resource. The outcome is very simple, which is the necessity to have bombs and armies (militarism) to respond to any threat in order to protect the country’s interest. Fundamentally, during the beginning of the 1970 many countries dumped the dollar and changed their asset holdings. The outcome was a recession. Dollar is worth 4 cents to print, and it has been used to purchase Chinese products and oil, to mention a few. It is really a big deal, because many other nations cannot do that. In other words, China holds about one trillion dollars in cash. The Chinese are doing us a favor but we do not acknowledge that. They buy our assets to finance the wars. At any rate, the conclusion is that our problem is not China; our basic problem is the imperialist wars, because our ruling (leisure) class is too greedy. Our trend will continue as such because cutting cost will push our country to go global. Globally, our business enterprises can cut cost and make huge profits. Our infrastructure is collapsing and our education is becoming global; our economy has been de-industrialized, and our workers have been deskilled. All of us we hear just speeches and slogans. What we need is to become very productive and compete with other nations such as China and India, a way than can be achieved by forgetting wars. War is sabotaging progress. Wars in the Middle East will be very costly for us: All imperialist occupiers have lost in the Middle East. Best Regards, Adil Mouhammed; Springfield, Illinois. guest says "China Our Banker" on 08/28/07 China has no incentive to liquidate their perfectly good securities any more than anyone else would sell off their perfectly good securities. If they did these securities would bde purchased at a reduced price. If China should take action that we deemed a threat to our national security we could take action like freezing payments on our securities. Furthermore this threat has been hanging around for a long time now, but it never happens. Why do you think that is?

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