any bank can lose reserves, but not the banking system as a whole

if the foreign “carmaker” has only an account at a foreign bank, and the foreigners hoard dollars, but do not buy US assets, would then a continuous trade deficit not lead to a continous loss of reserves of the US banking system? And is this not one of the real problems of Greece, Spain and Italy, that their banks lose reserves because of a continuos trade deficit, and the lack of buying of assets of these countries?

read ‘the 7 deadly innocent frauds’ yet?

“Say China wants to exchange their trillion dollars for real goods. Then they realiza that they cannot really buy much with it. ”

Say they don’t.

Primarily because if they do, then the US won’t be able to buy any Chinese goods with it.

Leading to economic collapse in China.

The problem is analysing China as though it is outside the system. It isn’t. It is in a symbiotic relationship with the US and the rest of the world.

Any action it takes will reflect back on its economy. It cannot act in isolation.

There is no evidence there is an issue, so how can you be making it worse?

Fear is not evidence.

I think you are missing the point. The dollar is only worthy as long as you can actually exchange it for real goods and services.

Say China wants to exchange their trillion dollars for real goods. Then they realiza that they cannot really buy much with it. Thats when the dollar becomes worthless. It loses value. Now people see the dollar devaluating, so they try to exchange it for real goods before it loses more value, but nobody wants dollars anymore because its losing value. So hyperinflation kicks in.

Notice if the dollar devaluates you wont be able to import much goods, because nobody will acept dollars. So you will have to produce your own goods. But you cannot reestructure your whole economy in a short time.

I dont believe military will be the first consequence. I think the chinese know that they will never get paid (in real goods), thats why they are pushing for a new world currency. That is obviosly not good for USA. Now if someone oposes that, things might blow up.

I think the best thing you can do is gradually reestructure your economy in order to actually produce more real goods, becase thats what gives value to your currency. But it might be too late. As soon as investors and lenders realize they are losing value, things will get ugly, not just for USA, but for the whole world.

Also i dont belive im worrying about the wrong thing, i have some savings that i would lose if your currency crashes.

That would be reasonable except when the actions you take are making the issue worse. In such case its better to take the right actions instead of let it go worse.