Are foreign holdings of US debt a security threat?

Last week came the news that foreign holdings of US securities (including Treasury bonds) have exploded.

Foreigners now hold more than $13 trillion in American securities, a record set as the U.S. seeks to assert itself as the safest port in troubled global waters.

China and Japan combined owned more than $3.4 trillion, including $2.4 trillion in debt, a number that has grown since the data set was compiled.

. . .

Foreign holdings have more than doubled since 2005 and are getting close to the $15 trillion total size of the U.S. economy

. . .

The totals compare to about $60 trillion in total U.S. debt and equity holdings, meaning that foreigners hold about 20 percent. The greatest percentage of any class is in marketable Treasurys, which are owned 52 percent by investors outside the U.S.

There's more at the link.  This is very worrying for a number of reasons.

1. The reason so much foreign money has poured into US securities is that, parlous though the state of our economy may be, that of overseas economies is even worse.  The US dollar is seen as a relative 'safe haven' - which is absurd if one considers just how much 'money printing' is going on, and the loss of value of the dollar on international exchange markets that has resulted.  Nevertheless, US securities are the 'least bad option' out there;  hence the surge in foreign investment.
2. We're dependent on foreign investment for no less than 52% of our current outstanding Treasury bonds.  The Treasury continues to sell new securities every month, and uses what buyers pay for them to fund current US government expenditure.  (The Fed is currently buying $45 billion in long-term Treasuries every month, largely because there isn't enough investor demand for so many of them!)  If foreign investors stopped buying new issues, the Treasury wouldn't be able to sell enough of them to fund ongoing government expenditure.
3. This means that a country that has amassed a large position in US Treasuries (for example, China or Japan) might use it to effectively 'blackmail' the USA.  In so many words, if the US doesn't do what it wants, it can sell several hundred billion dollars' worth of Treasuries on the international market at a loss.  That will be costly to the seller, but many times less costly than a war would be, while causing no less economic damage to the USA.  The offer will instantly attract buyers who would normally purchase new-issue Treasuries, because they can get more bonds for their money by buying from the new seller.  Demand for new Treasuries would therefore collapse, which would cut off funds to the US government.
4. The Fed might try to compensate by printing even more money with additional 'quantitative easing', but that would further weaken the value of the dollar on international markets, making the cure potentially worse than the disease.  It would be a vicious circle of the nastiest and most insidious kind.

All those who say that the current exorbitant levels of US government debt 'don't matter' clearly haven't taken their geopolitical implications into account.  They matter very much.  One hopes we don't find out the hard way just how much . . .

Peter