As the longest and most levered expansion cycle in history draws to its inevitable close, a world that borrowed heavily in US dollars over the last decade now becomes shorter and shorter of the currency needed to pay their bills.

The bulk of global debt (over $244 trillion-plus today) is owed in US dollars. (See Global debt monitor devil in the details.) As US spending and imports fall, so does the inflow of US dollars to foreign exporters who need greenbacks to make their payments. This naturally prods them to buy more US dollars, and traders pile on for the ride. These factors compound rising U$ costs and shrinking free cash flow for foreign borrowers and exporters. At the same time, China is needing less imports than in the past, and with its fiscal and monetary levers weaker than in 2008-11, China’s power to boost the global economy is fading.

The discussion below, particularly at 3:20 on the play bar, is on point. People cite China’s capital reserves as a sign of financial liquidity without appreciating that they have levered and loaned them out many times over through their financial system and other global asset markets. This is the stuff that liquidity crunches and forced selling cycles are made of.

Hedge fund manager and Hayman Capital Management founder Kyle Bass said on Monday that without state support, China’s currency would plunge.“What’s happening in China is they have to have dollars to sell to buy their own currency to hold it up. If they were to ever free float their currency, I think it would drop 30% or 40%…And the reason is they claim to be 15% of global GDP in dollar terms, but less than 1% of global transactions settled in their own currency.”