In the 1700's the British Empire lacked the foreign exchange necessary to purchase the vast quantities of tea from China that British citizens were consuming.  The British arrived at an ingenious idea to solve their dilemma - they plied the Chinese coast with opium traders and managed to convert a large percentage of the Chinese population into opium addicts.  The British East India company was able to obtain the opium from India, and then transport it to the Chinese coast, where it could be traded for tea, which was then sent on to England and sold to the British population.

The current relationship between the United States and China mirrors the earlier dependency, though now the Chinese have managed to create the addiction in their trading partner - this time the drug is cheap capital rather than opium.  Provided with extremely low interest rates brought about by China's massive purchases of US treasury bonds, US consumers are able to live on inexpensive credit and consume at a level beyond their means.  Much of this consumption involves imports from China, as the US trade balance with China is a deficit of approximately $160 billion.  Meanwhile, China continues to accumulate US treasury bonds, and now has a stockpile of close to $200 billion.  Given such a reliable buyer, the US treasury market continues to provide yields that are historically very low, to the point where real interest rates are effectively zero.

In an ironic twist, the US executive and legislative branches, fearful of declining US manufacturing activity, have begun to hector China about its undervalued exchange rate, seeking a revaluation of the renminbi to alleviate pressure on US manufacturing.  Some in Congress have threatened protectionist legislation in the event that China refuses to strengthen its currency.  If successful, their efforts could very well prick the US economic bubble, for with a stronger Chinese renminbi, the US trade deficit with China would likely fall, and the Chinese would no longer have to purchase US treasury bonds at the rate that they do today.  Without this recycling of US dollars from China, the US government's budget deficit will be more difficult to finance, leading to an increase in US interest rates through the process of "crowding out".  Without China's continued extension of easy credit, the US property and consumer sectors will be hit with a jump in interest rates that might very well push the nation into difficult economic times, given the importance of the housing industry and consumer sector to the overall economy.