C. Redmond,
You just don't get it. The Europeans and the Japanese do not "own" America. They give us their money because we know better what to do with it than they. The American credit machine is simply moving more currency than any other. That's why the recent fast rate of money creation has not led to inflation - American financiers need that money and all the rest they can get to fuel the fire. The people who are in trouble are the Japanese who are now giving away their money because nobody wants to borrow Yen. Consider what shape an economy must be in when 1 percent interest rates find no takers. It means that you can't figure out a yen-denominated inverstment that will pay, not that yen-denominated investments are paying so much there is a surplus of cash. There is *never* a surplus of cash. It is a logical impossibility.
People who start their reasoning with the idea "if the Japanese and Europeans didn't want our bonds.." are forgetting that there is a very good reason the Japanese and Europeans want our bonds. The reason is that they aren't idiots. They can compare two investments and figure out which one will pay. Do *you* want to be a holder of Japanese bonds? Do you think Japanese interest rates are going to go down? Is that even possible?
What is really happening is the U.S. is expanding the money supply for the entire world because we have the only capitalists who know how to do it (and have the power to). Our banks and other financial institutions are vastly more sophisticated when it comes to lending money and spreading risk. While Japanese savers are hording cash under their pillows, American bankers are figuring out how to syndicate, securitize and swap every credit relationship that exists. The Japanese might as well go back to the gold standard, if indeed there was ever a Japanese gold standard.
Your thesis relies on the idea that there is something superior and more "real" about Japanese and European money. The fact is that money (and you can ask any Marxist on the list about this) is essentially an illusion and the underlying commercial relationships are all that matters. The reason an economy attracts foreign currency is ultimately because the commercial relationships denominated in that currency are undervalued relative to the other currencies. That is the similarity between the American economy and the developing ones you cite. The difference is that the U.S. has the most effective credit creation mechanisms in the world and developing countries the least.
Clearly there will come a time, and reasonably soon, when the United States credit creation mechanism will outstrip the value of the underlying commercial relationships. At that time there will be trouble and foreign currency will flee. However, the flight of that foreign currency will be incidental. It will be the breakdown in the underlying American dollar-to-dollar credit relationships that will create the problem, not the foreign-currency-to-dollar relationships. The crisis will come because U.S. lenders have lent too much generally and not because foreign lenders have lent too much to the U.S..
peace