Amid the global economic carnage, one winner has emerged. In a perverse turn of events, the currency of the country that started it all has gone up in value. But the U.S. dollar’s day as king may be nearing an end. Nations are beginning to worry that America’s vast debts and money-creating machines are threatening the greenback. Is a dollar revolt brewing?

News out of the Far East last week suggests that anti-dollar sentiment is flourishing among U.S. enemies and allies alike.

Mei jin used to be the Chinese term for the U.S. dollar. Translated, Mei jin means “American gold.” It came from the dollar’s reputation as a stable store of wealth. The belief in “American gold” was so strong that it even withstood the de-linking of gold and the greenback by President Nixon in 1971. The Chinese shunned local currency when owning dollars was an option.

“Comrades, just imagine!”, Deng Xiaoping, the leader of China, said to an audience of powerful policymakers in the late 1970s. “One day we may have a foreign reserve as big as $10 billion!” According to the New York Times,a hushed awe filled the room because the number was so astronomical, seemingly so impossible. “Comrades, just imagine,” Deng continued, “with 10 billion American gold, how much China can do!”

Back then, owning “American gold” was a status symbol in China, even after the U.S. dollar could no longer be officially exchanged for real gold. Chinese horded Mei jin as a hedge against inflation—willing to purchase dollars at extravagant exchange rates—if they could find anyone willing to sell. Businesses eagerly sought it from tourists. The government sought “American gold” to back the Chinese currency.

That gigantic demand for Mei jin played a huge role in supporting the value of the dollar and keeping interest rates low in America, despite the fact that the U.S. ran huge trade and budget deficits.

Forty years later, a very different story is emerging.

China is now the world’s largest foreign holder of dollar bonds. It owns approximately $2 trillion worth. China is also America’s most important creditor.

China has all the Mei jin it could have ever hoped for—and a whole lot more. China is overflowing with Mei jin, but like anything else that becomes easily attainable—Weimar reichmarks, Argentine pesos, Turkish lira, colored paper—as scarcity dwindles, value plummets. The implications for America are ominous.

“No one knows for sure when the tide started to turn, or the exact moment when American gold started its slow but seemingly irreversible loss of luster,” Victor Zhikai Gao, a former interpreter for Deng Xiaoping, said. But now, “[m]any Chinese people increasingly fear the rapid erosion of the American dollar.”

Many shops no longer accept dollar-based credit cards, and there are quotas on how many dollars can be converted to renminbi. Those who still keep large amounts of U.S. dollars are those who need it to send their children to U.S. schools, or to travel in other countries that still use U.S. dollars.

For the most part, Chinese multinational corporations still happily accept U.S. dollars as a form of payment—but Mei jin is on its way to becoming a derisive anti-American joke, even a dirty word. China’s appetite for holding dollars is turning into revulsion.

“China’s near-$2,000 billion in reserves, the world’s largest, are often viewed outside the country as a great strength—an insurance policy against economic turbulence. But within China, they are increasingly seen by the public and even some policymakers as something of an albatross—a huge pool of resources … that will plunge in value if the U.S. dollar collapses,” reported the Financial Times (February 23; emphasis mine).

China is stuck in a dollar trap—at least that is what U.S. policymakers are telling the gullible public. China has lent so much money to America that if it ever tried to sell its U.S. treasuries, it would cause the rest of its treasury holdings to plummet in value. Thus, China would never dare sell. We have them in a Chinese liquidity trap—or so the theory goes.

China plays along, allowing U.S. officials to save face. Meanwhile, the U.S. trade deficit alone continues to send tens of billions of dollars to China each month. “We hate you guys,” Luo Ping, a director general at the China Banking Regulatory Commission, complained on a visit to New York in February. “Once you start issuing $1 to $2 trillion … we know the dollar is going to depreciate, so we hate you guys, but there is nothing much we can do.”

There you have it! China has admitted that it is stuck in the dollar trap—case closed. We can all get back to fearlessly sending China more money.

But it’s not China that is caught in a dollar trap—it’s America.

How? China is already making moves to diversify its holdings away from the dollar. In April it was reported that China had almost doubled its actual gold reserves from 2003 levels to 1,054 tons. Although as a percent of its foreign exchange savings, China’s gold stockpile is small, from a global perspective, it is huge. China is now the world’s largest producer and fifth-largest holder of refined gold (on a par with Switzerland)—but that is only counting the “officially” reported numbers. True gold holdings may be much higher.

China is also “pushing hard to put the dollar out of its misery as the currency of international trade,” according to the Shanghai Daily. China has negotiated currency swap deals for bilateral trade with Argentina, Malaysia, South Korea, Belarus and Indonesia as a way for these countries to conduct trade without relying on the U.S. dollar. Similar arangements are in the works with Brazil and Russia.

China also pushed hard (along with the European Union) at the G-20 summit earlier this year for the International Monetary Fund to issue Special Drawing Rights (sdrs), so that countries suffering from the global economic slowdown could have access to credit markets. sdrs are, in effect, a form of global currency outside the control of any single nation that acts as a supplement or alternative to the dollar for global trade.

Does this sound like a nation caught in a trap?

“The notion that the Chinese have accumulated this massive U.S. debt portfolio and are only now wondering what to do about it is so naive it doesn’t warrant consideration,” Adrian Douglas of Market Force Analysis said. Douglas suggests that China has been using its U.S. treasury portfolio as collateral for the massive resource buying binge it has embarked upon lately.

If some day China was “forced” to announce it was selling significant portions of its U.S. treasuries—what Chinese state media have referred to as Beijing’s “nuclear option”—and the U.S. bond market consequently melted down, China could simply default and hand over the worthless U.S. bonds. Meanwhile, China would still have its accumulated stockpiles of strategic resources. Douglas says China is currently importing 70 percent more copper than it consumes, and is busily creating and filling a strategic petroleum reserve.

But China isn’t the only Asian country to show public disdain for the U.S. dollar.

Ii eh, domo. That is essentially what the chief finance spokesman of Japan’s opposition said concerning the U.S. dollar on April 12. Ii eh, domo means “no thanks”—as in, dollar-denominated U.S. treasuries? No thanks.Masaharu Nakagawa told the bbc that he was worried about the future value of the dollar, and that if his party were elected in the upcoming national elections it would refuse to purchase any more U.S. treasuries unless they were denominated in Japanese yen.

“If it’s [in] yen, it’s going to be all right,” Mr. Nakagawa said. “We propose that we would buy [the U.S. bonds], but it’s yen, not dollar.”

Since World War ii, Japan has been a stalwart supporter of U.S. policy and the dollar. Japan is America’s second-largest creditor, after China.

As a U.S. ally, Washington officials don’t often talk about Japan being stuck in a dollar trap. But this recent announcement illustrates the clear weakening of U.S.-Tokyo relations.

“We have come to assume that Japan under the Liberal Democratic Party (ldp) will always cleave to America, if only to safeguard U.S. protection against Chinese naval expansion,” writes Ambrose Evans-Pritchard in the Telegraph. “But crashes have a habit of bringing regime change.”

Brian Reading, a Japan specialist at Lombard Street Research, says Japan may experience a “seismic shock,” as voters revolt. Will Japan soon have new leadership that is less accommodating to Washington? Even America’s strongest allies are questioning the wisdom of lending money to a nation that has so much debt.

According to a recent unconfirmed report, Germany may be in the dollar skeptic camp too. Economic Analyst Jim Willie quotes an unnamed source saying that the Germans have demanded the “return all their gold bullion held in custodial accounts on U.S. soil.” Dubai has recently sent the same request to London (which is also facing a currency crisis). According to Willie, Germany is acting as a “hidden archenemy” toward the U.S. and UK “on all matters pertaining to gold bullion.” He says Germany is also acting as an adviser to the Chinese on currency and gold issues.

When America’s allies, let alone its enemies, publicly question the viability of the dollar, we can know that things behind the scenes are even worse.

“We’re going to have a currency crisis, probably this fall or the fall of 2010,” said famed commodities investor Jim Rogers on May 12. “It’s been building up for a long time. We’ve had a huge rally in the dollar, an artificial rally in the dollar, so it’s time for a currency crisis.”

The dollar is in big trouble.

If the dollar goes down, America’s standard of living—and other, far more important implications—can’t help but follow. The dangers of debt are about to be brought home to America. Skyrocketing interest rates, plummeting currency, escalating import costs and three-digit oil prices will be just a few of the consequences.

Mei jin has lost its luster. And soon, more than just the Japanese will say “no thanks” to the U.S. dollar.