The relationship of co-dependency between the United States and China is worrying and dangerous. American consumers buy Chinese-made goods, China piles up billions of dollars from US trade and buys US debt. That has flooded the market with cheap money and contributed to today's financial bloodbath.

The New York Times magazine recently had an interesting piece examining this co-dependency which it compares to relationship between an addict and a drug dealer where Americans became hooked on cheap goods and cheap money, and China depends on the income from selling those goods. The consequences, the piece warns, are truly frightening. It will damage both countries, and the world.

"It's not especially pleasant to think about what the global economy will look like if China and the United States fail to fix their dysfunctional relationship. The frequent flares of social unrest in China could spread, and the government could decide that its short-term problems take precedence over its long-term ones. It might then try to stimulate its economy at the expense of everyone else - the beggar-thy-neighbor approach - by reversing the recent rise of the renminbi, lavishing new subsidies on exporters and restricting imports ... For China, such a strategy would resemble a doubling down. It would benefit the same parts of the economy - the industrial sectors, the coastal south, the wealthy - that have already done the best. Living standards for the rest of China would continue to grow more slowly than the pace of economic growth suggests they should. For the rest of the world, China's retreat would mean slower growth. The much-anticipated day when the Chinese middle class became a global economic force would be pushed back. If China remained committed to a smokestack growth policy, the efforts to slow climate change would become all the more difficult. China's energy needs have already caused it to become closer to the governments in Iran and Saudi Arabia, and if China moved even closer, it could further complicate the already complicated balance of power in the Middle East. Here in the United States, we could delude ourselves into thinking that our consumer economy really was sustainable. We could put off the hard choices, and sacrifice, that will inevitably be part of building a new one. There may not be a single one of the world's most vexing problems, in fact, that isn't aggravated by the imbalances between the United States and China."

One of the key drivers of this troubled relationship is the US addiction to debt. As this piece from the Knowledge@Emory series, Attached At The Wallet points out, the big worry for the Chinese is that a soaring US deficit will lead to higher inflation, which means the value of their bonds falls which means they will lose money. Which also means they will start to look elsewhere for investment. What it requires is a rethink of the attitude that there is nothing wrong with debt. The days of cheap money are over. "