(snip)"This week Steven Roach wrote a missive about Trade Relations with China, that politically they are past the "point of no return" outlining dangerous protectionist plans, rhetoric and actions coming out of Washington DC. And that this rhetoric no longer was limited to China, as Japan has emerged as an additional poster child of irresponsible Trade and currency behavior. America's two biggest creditors are having spitballs lobbed directly in their eyes (try spitting in your bankers face sometime, see where it gets you), US politicians behaving locally in a global world. It appears that if the Chinese don't prick the bubble themselves the US congress will! It is a disaster, and a pop that will be heard around the world. It threatens to make the problem in Chinas stock markets much more unmanageable as if fundamental expectations for future business are punctured by these "Public Servants", the mis-pricing that the big money is currently resting at, in the US and in China will become even wider to the fair value of the holdings. Since business prospects will be severely diminished.

Do you realize what could materialize if these idiots light a fuse while the broad Chinese public is out on the limb of the previous Tedbit? It will be like sawing it off, do you think the Chinese government will see this as anything but an act of brutal aggression? The US consumer will be also be hit hard as the price they pay for everything Chinese will skyrocket.

Nothing fails to amaze me more than the economic ignorance that is Washington DC, they are oblivious to history, fundamentally sound accounting and fiscal policies, and fiduciary responsible behavior. They encourage the American people to spend beyond their means, save nothing and punish personal initiative and wealth creation with high taxes and mind bending micro management through overregulation. Then they pick a fight with the someone's (China, Russia, Japan, etc.), that can in a heartbeat pull the rug out from underneath the economy and their spending plans. Daring them to do so, a giant game of chicken with our financial livelihoods and futures as the wager they are placing. Our asset based economy where systemic deflationary problems await any appreciable pullback in asset prices, as billions of dollars of loans inch towards diminished expectations. Asset prices that are dependant on 3 billion dollars a day being imported from abroad and foreign lenders. I hope Washington has recently added a number of new printing presses for all the money they will be forced to print as they are forced to become the lender of last resort.

In Conclusion, We are seeing a Rotating bubble syndrome as outlined in "Fingers of Instability" (see ,archives) as global Central Banks and Financial authorities continue the experiment with fiat money and credit creation begun decades ago. As they pile dollar on top of dollar, yen on top of yen, Euro on top of Euro, British pound upon British pound, Yuan upon Yuan, Ruble upon ruble, etc. Every increasing sand piles of stimulus. Now the man on the street Chinese citizen has joined the fray. Global fire hoses of hot money created now and in years past bounding around the world seeking "ALPHA", creating bubble after bubble which when they burst are met with? What Else? More money printing. This money can no longer sit in the bank as that is guaranteed confiscation via printing press.

The source of this money in this case is of course the Chinese merchandise trade surplus, and the wages the Chinese public has received as it has emerged as manufacturer to the world on a scale that has dwarfed previous industrializations in history, and is joined by the rest of the BRIC's.

The management of the blow-ups is predictable. No matter how bad the crash the financial authorities will be forced to "make good" on the money that was lost by the most important players, and in this case it will have to include a big part of the public. See what's emerging in the Sub prime space in the US? Legislation is being brought forth to bail these people out. They may have raised credit requirements as responsible lending would require, but liquidity is still very abundant in the United States. I am still being bombarded with offers to borrow money. The psychology of deflation must be nipped in the bud before it can become self fulfilling. It is going to be interesting to see the coordinated reflation and fire containment that will be required to meet this potential threat to the Global economy."(snip)

from