the sudden advent of China as a major holder of U.S. treasury bonds has clearly altered the dynamic. Some might question why, if these really are tribute payments, the United States’ major rival would be buying treasury bonds to begin with—let alone agreeing to various tacit monetary arrangements to maintain the value of the dollar, and hence, the buying power of American consumers.23 But I think this is a perfect case in point of why taking a very long-term historical perspective can be so helpful. From a longer-term perspective, China’s behavior isn’t puzzling at all.
