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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. Foreign nations now hold a staggering 44 percent 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.