However, China which presently holds more that $1 Trillion dollars in FX reserves, remains a critical contributor to dollar stability going forward. A newly elected Democratic Congress and more belligerent attitude from Fed Chairman Ben Bernanke, who in a recent speech in China suggested that the country’s currency policy resulted in an effective export subsidy, could spur a diplomatic as well as a financial conflict with one of the US’s largest trading partners. Should China simply stop purchasing new US government and agency debt obligations, the safety margin between the TICS surpluses and the trade deficits could narrow dangerously and reignite worries about future US financing capability. Therefore, the US China relationship may well be the single most important geo-political factor facing the US dollar next year. As long as Chinese and Persian Gulf countries continue to recycle their surplus dollars into US securities – a process some analysts have dubbed “Bretton Woods II” - the dynamic should generate global growth and relative stability in the currency market. However, if this process is somehow compromised for political reasons the greenback could face serious turbulence in the year ahead.