"Back in the early stages of the financial crisis, wags joked that our trade with China had turned out to be fair and balanced after all: They sold us poison toys and tainted seafood; we sold them fraudulent securities." So says Paul Krugman, in an editorial in the New York Times, April 2, 2009. And he goes on, very interestingly. Imagine having so much of some thing that you effectively can't sell it — because to do so would drive down the price and turn your remaining holdings of that thing into a net loss. That sums up China's relationship with the U.S. dollar, in particular, that form of the dollar known as U.S. Treasuries.
So all the doom and gloom about China taking over the world economy is much exaggerated, but that doesn't mean the U.S. (or Japanese or European) position is any safer. It's ALL messed up, everywhere. I had a negative income last year, at least on paper. I have arranged my life in such a way that that is not a tragedy for me — it hardly affects my decisions or lifestyle at all. Nevertheless, it's annoying and painful in an abstract sort of way.