MEGAN MCCARDLE: What A Crisis Looks Like: “The real issue starts, not when China starts selling our bonds, but when China stops buying our bonds. As soon as that happens, we’re in big trouble. . . . A lot of people tend to assume that there will be warning signs telling us that we need to get our fiscal house in order: China will slow down its bond purchases, interest rates will gradually rise. But in fact, the lesson of fiscal crises is that the ‘warning signs’ we’re watching for often are the crisis. Unless interest rates increase (or debt buying decrease–which is really the same thing) in a very gradual, orderly fashion, then by the time your interest rates rise, it is already too late to do anything easy; your debt service burden forces you into dramatic fiscal measures, or default. . . . People are willing to lend at decent rates, until suddenly they’re barely willing to lend at all.”

Yes, looking around the world it’s obvious that when things start to fall apart, they tend to do so very rapidly even when that happens after a long period of apparent stability. And yet that always seems to come as a surprise. What we’re seeing now are the warning signs. . . .

Plus, as a commenter suggests, what if the Chinese economy collapses and they’re no longer able to buy Treasuries? That’s hardly inconceivable.