That doesn't really seem to follow, to me. The worst a single creditor could do is not bid, or bid for higher rates in future treasury auctions. The terms of existing debt are fixed. The impact of this wouldn't be large unless other creditors followed suit - there are many parties interested in buying up US debt.
Furthermore, if a holder of US debt declared war on the US, I wonder if that wouldn't be viewed as a credible reason to default on that outstanding debt - certainly doesn't make much sense to be sending interest coupon payments to someone invading your country.
The creditor could dump the bonds on the open market, and depending on the level of pain they were willing to feel, could crush the us bond markets. The fed can only stand in and defend for so long until we have to go inflationary to defend the dollar. Its actually a good thing that china controls a large chunk of US bonds, they can't dump without taking a huge hit themselves, MAD (for you cold war buffs). The countries you need to worry about dumping are ones with large amounts of hydrocarbons, Russia. They could theoretically dump, and then they have the hard asset to trade (oil) if they truly wanted to cause pain, however doing so to the US would send the entire world in to a free fall and they would probably end up worse than before, however everyone would be worse than before. It would be a large global reset.
Exactly. If China dumps their bonds rates are going to go to the sky and the US currency will depreciate. No one wants to do this but no one will want to sit on the sidelines holding billions of US bonds if this starts happening. It's not that different than a run on a bank that does not have enough reserves. (well, it's a little bit different, a bank can't print money)
What everyone is trying to do is figure out a way to unwind this slowly and/or grow out of it. I think a lot of past growth was fuelled by population growth and "free" resources (oil, coal, etc.). Population isn't growing as fast and resources aren't as free any more.
Furthermore, if a holder of US debt declared war on the US, I wonder if that wouldn't be viewed as a credible reason to default on that outstanding debt - certainly doesn't make much sense to be sending interest coupon payments to someone invading your country.