Thursday, January 03, 2008


Just a forty percent rounding error. China is a little smaller than previously thought. Off by about the size of Japan's economy as previously covered here. More thoughts on American security implications (or lack thereof here).

That doesn't mean that there isn't still a bubble. As a friend notes: "whenever there is too much money in an economy two things happen: inflation and bad capital allocation." As Tom Burnett, a policy analyst notes in his Foreign Policy Wish List for 2008, #1: "What goes up too fast must come down even faster. This is a question of when, not if. The real uncertainty is how locals will handle the setback. If the G-8 doesn't have a plan, it should get one fast."

It's like some sort of weird Vulcan 3D chess. With the political appetite cooling for global trade, the push to pop the bubble through currency revaluation, and the solvency of China's financial institutions still questionable, China prices could get a lot cheaper after they get a bit more expensive if some American policymakers get their wish.

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