I am by no means a currency expert, so I am just explaining how I understand this to work.
The $2.5 trillion is already being spent, so if they sell their Treasury notes, then we either need new buyers, or we’ve got to print so many dollars that we would devalue the dollar very quickly. Likewise, converting $2.5 T into any other currency would cause a dollar glut, making its value go down further.
The dollar is going to fall unless we resolve this imbalance, but I”ve learned this things can take many years to play out. However, as much as I want this to be over with quickly, I realize that China has much to lose by stopping their Treasury purchases, or even cashing them in. Their export economy will suffer, and the dollars they already hold would lose value.
My limited understanding of this topic comes from Richard Duncan, former IMF banker and author of The Dollar Crisis.
