American demand for Chinese exports drive jobs in China, and jobs in China drive legitimacy for the Chinese Communist party.. When you have a 12-hour-a-day job making stuff to sell to Americans, you have no energy left over to protest local corruption or national oppression. Also, it’s far easier for the rulership to maintain control over cities than spread themselves out across relatively-thinly populated rural regions. Additionally, the under-the-table migration of peasants from poor rural regions to job-center cities puts them in a quasi-legal status, since China doesn’t permit the same freedom to travel internally that Americans take for granted. These “illegal” peasants work to send their children to private schools, since they’re not legally allowed to enroll them in urban schools as they’re not supposed to technically be there in the first place.

(Hukou system, Chinese Apartheid)

So… The communist regime’s economic policies may not necessarily make economic sense, but they’re a political necessity… They’ve behaved as an inflationary heatsink, and will continue to do so for as long as they can… The question is, can they build internal consumer demand for goods and services while suppressing consumer demand for liberty and freedom? Can they become Singapore Plus? Because when they can sell things to each other instead of the US, _that_ is when the party will _really_ be over and done..

Or will the heatsink become so overloaded that it melts down?

1) My understanding is the retail sales down 2.8% is still a concensus estimate at this point in time. It will probably end up lower than this number with high end sales, home furnishings and auto down significantly.

2) TBP and commentors have argued the inflation point before. Core inflation is no way to measure actual inflation. It’s a nice way for the gov’t to keep cost of benefit payments down and that’s it. What we see today is the result of such unmonitored inflation. Many had argued that deflating prices is a negative self fullfilling cycle. I would argue that it’s a necessary correction for incorrectly monitored inflation and without a mass public panic will have a healing effect.

3) Some banks are broke there’s no two ways about it. Just like the ridiculous leveraging before The Great Depression they have repeated this same exact prophecy. But this also doesn’t necessarily lead to a severe contracting of the economy. I argue it’s impossible for history to repeat itself if everyone has a previous playbook to guide by. When has history ever repeated itself when it looked like it was heading in a certain direction?

4) Consolidation needs to occur. There are many industries which have entirely too much competition. The auto industry is one of them. Bankrupties are inevitable.

5) Asia and Middle Eastern countries are stuck with the US. They are dependant on us. They will continue to lend us all the money we ask for or they are done for themselves. If they are lucky, we might pay them back.

6) Bear market ralleys can be incredible painful for traders. The problem is no one knows whether the next point we hit will be DOW 6000 or DOW 10000. Although, I may be indecisive in making a trade once I’m in I stick to the plan. There’s nothing worse than in my earlier trading years pulling out winning trades early because I thought I might be wrong. If you pull out a trade at a loss you’ve guarenteed you are wrong whether or not your thesis ended up right or wrong. Always enter a position counting that a total loss is one of the possible outcomes and give it enough time to work. Making day to day trades following market mojo using margin is an excellent way to drain yourself of your entire portfolio in this kind of market in a few days. I personally make trades that are investments. If the trade goes bad it become an investment. That trade money is no longer available to use in the portfolio. In this way you can find out if you are really a good trader or it’s just not your thing.