I think the Chinese have both a short and a long-term strategy.

Selling “cheap” low-end goods to the US to gain foreign exchange is part of that short-term strategy. They know they could not compete with the US, Germany, and Japan in the high-end sector for now.

With the start of the China-ASEAN Free Trade Agreement beginning 01 January 2010, China is posed to gobble up that South East Asian market in no time. These relatively “poorer” nations would love to buy the “relatively sub-standard” Chinese household goods such as washers, dryers, stoves, microwave ovens, bicycles, motorcycles, computers, printers, and other household goods because of the enticing low-price. That is why they adamantly opposed appreciating the RMB (Yuan).

Many people may also have underestimated our vulnerability too. They now hold over $1T US Treasuries and if they even drop a hint of not buying as much, you know what would happen.

Folks, it all depends on ourselves. My view is that we are now rapidly spiraling downward after a long straight-line decline. Guess what? Most Americans don’t even want to believe in this.

- Teutonic Knight

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• On the basis of one time honored metric that I rarely see discussed, the market is extremely over valued.
• Must-Read: The age of hope follows the day of reckoning.

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