This whole idea of China being "forced" to hold dollars in order to protect their own economy is short term at best.

The pressures of depletion will very soon create enough incentive for China to view economic disruption as the necessary course of action. In fact I suspect they have been planning this path for ten years or more.

The United States will then find itself tossed aside like a used-up whore. (a very appropriate metaphor, I think..see "whore of Babylon")

China's program for the next 36 months:
1. Crash the Petrodollar.
2. World oil consumption crashes by 1/4 to 1/2, with the US providing the bulk of the reduction.
3. Have all the resources, infrastructure, and contracts in place to rebound rapidly. (this is exactly what China is doing right now, world wide)
4. Emerge as the new dominant economic force.

You ever wonder if the US will "give" Taiwan to China in order to buy some time against the inevitable?

How can they,we buy the vast majority of their 2 bit junk?If we go into the toilet about 80% of their trading partners will go in the toilet with us destroying their export market.Who else will consume the utterly worthless junk they peddle?There is a good reason they are loaning us 2 billion a day,cause we consume 5 billion a day.Who can be as dumb as us to replace us?

They produce,we consume.How is it to the interest of the crack dealer to see his junky with no money for crack...

Maybe they'll just sell us cardboard boxes to live in.

Disagree. China will be selling its junk to the oil exporters that will be getting extra revenue for their oil. It will not need the US anymore. But it amazes me why the US dollar has been gaining against euro in the last few weeks.

The dealer's product eventually kills the customer. It appears your analogy has just made my point.

I don't really see Saudi, Norway, Venezuela etc. making up for the US' junk imports. Then of course there's Russia, but I'm not sure to what degree the buying power of the general public will be affected by increased oil revenues...
It's a very interesting situation though, and the petrodollar certainly seems to be "under attack" on several fronts.

That's just my point again. China will no longer need or want a customer like the United States in order to drive it's economic machine.

China produces "junk" because we buy "junk"...there would be nothing to stop them from re-tooling the industries to produce high quality products...not the big problem for the rest of the world is food...if the US is not producing & exporting food, there will be a LOT of skinny people out there.

Good point, MD.

China doesn't really need the U.S. consumer if they ignite domestic demand. Which they're doing....

Food production may keep the US in the game for a while longer if agribusiness receives the bulk of our remaining petro resource.

MD, you've presented some outcomes without a course of action. How is China going to accomplish this? Presumably they could unpeg their currency from the dollar, but isn't that what the US wants them to do anyway? Why would they want to destroy their biggest market?

China wants to grow without limit, but they are taking the wrong approach. You have to invent your way to prosperity, not just whore your way there. Technology has always been the key throughout human history.

There seems to be agreement that disconnecting the Yuan from the Dollar will cause an immediate drop in the Dollar. If the Chinese government then dumped their dollar holdings, financial meltdown would occur. Their reason for taking such drastic action is contained in my original post. Simply put, they want the oil that we currently consume.

As for technology, I am involved in manufacturing and globalization. You should see the new manufactuing infrastructure in China. It is stunning both in scale and in complexity. They have leapfrogged American manufacturing in many ways.

The Chinese have openly declared their intent to be the "world's manufacturer". In order to achieve that goal, they will have to remove the US from it's oil supply.

Assuming that they will "protect their biggest customer" is naive and very dangerous.

Peak Oil will hit the United States first, and very soon. I am absolutely convinced.

Much of the evidence is available here and on other PO, financial, and economic sites. The rest comes from my own personal experience. The conclusion requires an inductive compilation, thus you may feel free to reject it as you like.

My own assessment leads me to agree that China has a clear agenda. Primarily I rest my judgement on China's history. Regardless of who is in power in China the cultural makeup of the people condition them to think and plan in much longer periods. The Chinese people have retained the ability to think and act beyond their own lifespans. This has been lost in the West.

What this leads me to believe is that the Chinese elite are quite willing to initiate what on the surface appears to be counter-productive to their future, ie: crash the US economy, but if you look out a couple of decades China has the best chance of being the dominant country in the world.
With peak oil occurring now China now has a timetable.
From my understanding at the moment of PO the tank is not half full. I believe the remaining recoverable reserves are overly optimistic. Much of the oil left in the ground is going to stay there, which means the decline will be much steeper than most are willing to admit to.