The article Stocks Tumble on Weak Dollar and Oil Prices by Michael M. Grynbaum in today's NY Times is just a typical story about the noise in the stock markets. You can always count on newspaper editors coming up with meaningless explanations for the normal gyrations in the stock market.
However, the following quote caught my attention: "Investors were alarmed by a report this morning that a top Chinese government official said China would shift its foreign currency reserves away from the “weak” United States dollar, further eroding confidence in the currency and sending it to a new low against the euro."
All you die-hard Republicans who want to keep taxes low and spending high (translation: nation-building), probably never gave much thought to this modern version of the much-reviled "free lunch". (That would be the "free lunch" programs Republicans talked about in the same breath as "welfare queens" a few decades ago, when the GOP was apoplectic about runaway Demoncrat spending.) Well, it would appear that the bill may have to be "paid" sooner than a lot of experts thought. If the market thinks we are being fiscally irresponsible, one of its options is to devalue the dollar, and that has been happening for years. But if the Chinese start selling the mountain of dollars they have accumulated, the tumble of the dollar could easily turn into the crash of the dollar. And if that happens, as they say, "all bets are off". A stock market crash would be the least of our worries.
Stay tuned.
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