This is the funniest video I've seen in awhile. I hope you enjoy.

I am not an enemy of Wal-Mart and I don't think we can blame our current economic situation on the Chinese either.

But there is always truth to these things.

What happened is that the the US dollar is the reserve currency of the world due to an accident of history and also the drive and power of this great nation.

We are now exporting dollars and importing goods. Those dollars have to be invested somewhere. The Chinese and the Middle Eastern nations are taking our dollars and for a long time, they were investing in mortgages.

This is known as "dollar recycling."

That drove interest rates down and made mortgage money very easy. The result was a lot of us got in over our heads. Prices rose and rose until one day they didn't.

Now, the banks are going broke. Bank of America is swallowing up Countrywide, and another big bank JPMorgan Chase will probably buy WaMu. And so it goes. Even Switzerland's biggest bank is in big trouble.

Credit will not be easy to come by for awhile. And that means real estate prices, which are a creature of credit, will fall.

I do expect that things will pick up. Houses will start to rise in value again and will once more become a good hedge against inflation. I think we are several years from there. Meanwhile, imports at "Big Box Mart" will probably cost a lot more. That will start to create more American jobs and things will even out.

 

Added Saturday, 12 January 2007:

Citi hopes to raise $14 billion from Chinese and Middle Eastern Investors

They just raised a bunch of money I think last month but they are looking for more…to try to avoid going belly up.

The deal highlights China’s growing importance as an exporter of capital. The Chinese government has emphasised a policy of investing abroad to keep the ample liquidity in China from feeding a bubble in shares and property.

“They want to recycle money as there is too much in China,” says Fred Hu, a China-based managing director at Goldman Sachs. “Because of capital con­trols, only the government can take the money and put it offshore.”

The most likely Chinese investor in the Citigroup deal is probably a bank such as China Development Bank, which in addition to funding infrastructure projects at home also finances Chinese companies as they expand abroad. The company, which is not listed, also has taken shares in financial institutions such as Barclays.

Another possibility would be an investment arm of the government, although the distinction between government and quasi-private money is often blurred in China.

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