It's not that China alone could cause a "run" on the FRN$, it's that they could precipitate a run by all holder's as they scramble to get out before they lose all purchasing power. A self feeding cycle.
The other problem becomes the lack of purchasers on future sales. If the largest purchasers such as the Chinese and Japanese refuse to buy any more of our paper-which they seem to be doing-who will? The Federal Reserve. That's monetization, and that is highly inflationary.
The reason that we haven't seen the results of the current monetization as price inflation across the board is because the Fed is paying the banks interest to keep the money as excess reserves on account at the Fed, and the multiplier effect hasn't occurred. When this ends, and the banks start to put this money into circulation looking for higher yield, that's when the game becomes interesting. If the Fed tries to "soak up" or buy back this excess liquidity, it must sell the collateral which it has taken in to do this. Since most of the collateral is FNM/FRE mortgage bonds of questionable value, this may be problematic. The inability to get 100% of their "worth" on the market could cause a Fed insolvency crisis.
It's a Scylla and Charybdis moment for the Fed, and our financial system, with no good options.
If the American People allow private banks to control the issuance of their currency, first by inflation, then by deflation, the banks..., will deprive the People of all their Property,...Thomas Jefferson
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