Other countries that trade with the US have no practical choice but buy US debt to keep their currency from rising too high. This forces them to support the US's ability to grow our economy through massive debt.

That doesn't keep China from buying more then the minimum as a way of keeping the Yuan well below it's natural level. This lets them grow their own economy through massive exports.

The problem is that it isn't a stable situation. To keep this going we have to sell an ever expanding spiral of debt, and at some point it doesn't work any more.

Jay

Think of it as a situation where taxes effectively force people to take some action because the action is cheaper then paying the tax. People who want to take that action anyway may go well beyond the minimum needed to avoid the tax, but everybody is going to do that minimum amount.

Other countries have to buy a certain amount of US debt* or suffer greatly in trade.**

Countries like China that want to encourage trade with the US can gain further advantage by pushing their currency down further.

Jay

* Theoretically they can buy anything the US exports. But we import far more then we export, meaning they have to buy US debt or buy US properties (buildings, companies, land, that sort of thing). And the second is much more complicated.

** And it's not just trade with the US. In an ideal economic model, where countries trade in their native currencies, countries can shift exports and imports around to avoid such imbalances. But the US domination of global finance is such that most international trade is denominated in dollars, no matter what countries are involved.