Although you probably won't read it too widely in the US media, the Chinese lobbed a shot across the bow of the United States by asking for an implied assurance that the US will be able to guarentee its debt that China, among others, has been increasingly shouldering. Quite an interesting scenario, where China's purchase of US debt instruments has allowed the US should loose credit terms that consequently fed its economy buying increasing amounts of cheap consumer goods from China. A win-win situation.
But once the reality of the US ever being able to make good on its debt payments sets in, the party is over, and foreign governments begin to either buy hard US assets (versus debt or currency) or reinvest in their own economies - the RMB being pegged to the US dollar so it will have little impact upon the subsequent fall in the US dollar or increase in interest rates (hyperinflation?) to attract foeign investment. (There is no level of savings in the US to accomodate the huge debt funding requirements of our government - we rely entirely upon Asia countries with whom we have significant trade imbalalnces, or countries like Saudi Arabia, awash in petrodollars, but primarily the former.)
Basically the only way out of this trillion-dollar deficit mess is to drastically collapse the value of the US dollar, or through hyperinflation - neither being mutually rexclusive - to reduce the debt obligations to the rest of the world.
Three interesting links that are more thorough than what I wrote are here, and another, and another. Oh, and here is the source blog I frequently read.
Oh, and the picture is of Cornwall Avenue downtown about ten blocks from home.