[Been on vacation, thus the delay in responding.]
"I believe China is no longer as eager to loan us money not because the dollar is weak but because lenders make money on interest and interest rates are near zero."
My point was simply that I don't see China having any interest in sinking the dollar, which would only hurt their exports and drive up unemployment. (Providing employment is part of the social contract that under-girds the Communist regime.) Whether they or we like it, we're tied at the hip.
I do see them trying to protect their favorable trade balance against pressure from the U.S. and Europe for them to appreciate (or strengthen) the Yuan. That their response to a weaker U.S. dollar has been to further weaken the Yuan reflects that concern.
Making trade agreements such as with South Korea, allowing transactions using the two countries' currencies rather than the dollar makes them less vulnerable to a weaker dollar. I do think their motivations are primarily defensive, rather than aggressive.
I do think that inflation in the U.S. is inevitable, which equates to a weaker dollar. Yellen signaled she'd be prone to let inflation run without raising interest rates, as long as real unemployment remains high.
I'm far from claiming I have a clear picture on all this - just trying to connect a few of the dots.
