My thoughts turn to scenarios, upon considering the China "nuclear option."  Then I think of Taiwan, one of the more likely friction points.  If China seeks military re-unification by taking over Taiwan, then does the U.S. intervene?  If so, China sells its Treasury Bonds, our economy tanks in a time of war.

Someone else had this thought in the Harvard Magazine:

“The nightmare scenario,” says Mohamed El-Erian, who as chief executive officer and president of Harvard Management Company (HMC) oversees the investment of Harvard’s $30-billion endowment, “includes the possibility, for example, that Taiwan does something to upset China; the U.S. allies itself fully with Taiwan; and you have a political crisis with economic implications.” A conflict over the Taiwan Strait, agrees Abdelal, “could lead China to diversify quickly out of dollars. I think that things could turn out very badly, very quickly.” 

Idle speculation?  We did it to Britain in 1954.  With revolutionary consequences.

That last idea—that nations can wield power through their accumulation of currency reserves—is rooted in our own history. When President Dwight D. Eisenhower learned in 1956 that Britain, in collusion with France and Israel, had invaded Egypt without U.S. knowledge, he was infuriated. “Many people remember Suez,” notes Jeffrey Frankel, Harpel professor of capital formation and growth at the Kennedy School of Government (KSG), but few recall “the specific way that Eisenhower forced the British to back down.” At the time, there was a run on the pound sterling and he blocked the International Monetary Fund (IMF) from stabilizing the currency. With sterling on the verge of collapse, says Frankel, “Eisenhower told them, ‘We are not going to bail out the pound unless you pull out of Suez.’” Facing bankruptcy, the British withdrew. This incident, notes Frankel, “marked the end of Great Britain’s ability to conduct an independent foreign policy.”

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