China should cap forex reserves at 1.3 trillion U.S. dollars: China banker

China just forced our hand, or more correctly, the Fed's hand.  With Japan about to step away from the US Treasury bond table in order to rebuild their homeland in the wake of the disasters, and now China pledging to be net sellers of USDollars and dollar-denominated assets, the Fed will again have to be the largest buyers of US Treasury debt.  This cannot be good for bond prices, in my opinion.  QE to infinity could very well be a plausible scenario.

If the Chinese follow through on rhetoric of diversifying away from the dollar, interest rates and inflation in the US will rise (not necessarily in that order).  Inflation is already upon us, if anybody who eats food or fills up their gas tank hasn't noticed.  If indeed China, Japan, European and middle Eastern buyers drastically reduce their participation in US Treasury bond auctions, the lights are about to be turned out on America.  Good luck to everyone. 

http://news.xinhuanet.com/english2010/china/2011-04/23/c_13842843.htm