Dollar Crisis in the works?

The signs are there. There is a higher probability of a dollar currency crisis in the next few years than there was before. Increasingly, reports coming out of the Chinese government point to a reappraisal of investing foreign reserves in dollar assets. With the Chinese reserves approaching $1 trillion, a new nervousnous has arisen that points to a shift in investments away from dollars. This trend has predecessors. With Saddam's government trying to get a lift in sanctions and hinting it might sell its oil using euros instead of dollars, the country was invaded. When South Korea and Japan (the largest holder of dollar denominated, U.S government debt) announced plans for "diversification", the dollar plunged and the countries were forced to recant. However, with China, not an ally of the U.S. reliant on the U.S. military for security, promising (at least unofficially) a re-evaluation of its investments (at least its future investments) in dollar-deminated debt, the USD could be in for rocky times ahead. It makes sense in terms of our fiscal and trade balance position, but when will politicians in Washington realize the severity? With a Republican controlled Congress focused on the Abramoff scandal, it will probably be too late.