I alluded in a recent post to the possibility of China using its vast reserves of American dollars as leverage over American policy. The rationale is simple: should the Chinese dump the dollars they own, the American currency would take a nose dive. Now, it seems that China is threatening to do just that. Note that in normal circumstances, these threats are just that, threats. As I mentioned in the previous post, I find it highly unlikely that China would want to hurt their primary customer and large source of foreign investment. Nevertheless, these developments do illustrate in vivid colours how a ballooning debt has made the United States very vulnerable. So much for that hyper-power arrogance.