The Empire State Building in New York City recently had a light display commemorating the 60th anniversary Communist Chinese revolution.  This may be a sign of things to come in the rest of America. 

As the US budget and trade deficits continue to free-fall, our financial system becomes increasingly dependent upon the good will of our creditors – one of the most important being the People’s Republic of China.  The Chinese are aware that their huge investment in America is vulnerable to 1) America’s ability to repay, and 2) dollar inflation.  China has and continues to search for currency alternatives to the US dollar, but no obvious solution exists at this time. 

What happens when the bonds mature and China and Japan and Europe decide to cash in?  With unfunded federal budget liabilities approaching the $100 trillion mark, the US Treasury will simply be unable to pay, at least in cash.