An Article On Upcoming US Economic Collapse

Ian Welsh at FDL explains the when-not-if circumstance that will bring about the end of the U.S. as we know it: When the Chinese people can afford to start buying their own products and become a consumer-driven society.

[T]he US needs massive inflows of money from nations like China and Japan in order to finance both the government and private consumption. China and Japan, and other countries, for that matter, have amassed holdings of US securities, cash and so on, in the many trillions, as a result. They have been willing to buy assets that they know they will probably not see a full real return on because the US buys their exports, and in China's case, is busily shipping American jobs to China, thus industrializing China.

The world needs the US because the US is the "consumer of last resort". It buys everyone else's stuff, issues a pile of securities and dollars in exchange, and exports industrialization to China in exchange for deindustrialization and cheap consumer goods at home, which kept down inflation for a very long time.

When China has a large internal market which has reached takeoff, it can sell mostly to itself, and will no longer need the US as much. Neither will any other country, since they can sell to China, with a much larger market. Sure, everyone'll be happy to sell to the US, but they won't need to. At that point, when the US has a financial crisis (and it will, unless things are cleaned up) China doesn't have to keep buying up treasuries or see its own economy crash out. It can say "no thanks". It can even start offloading all the crap securities it has. If it, or other countries do so, the US dollar crashes the floor.

At that point China has the US over a barrel.