Good News/Bad News

David Barboza reported in the New York Times that China’s inflation is hitting American price tags.

“The higher costs in China could spell the end of an era of ultra-cheap goods.”

The good news is that importing countries like the U.S. might very well look within their own shores for at least some manufacturing again. The bad news is that if China sees its income from exports fall, the pressure on Chinese leaders to lash out will skyrocket.

The bad news is serious. We have long predicted that, on the day after the Beijing Olympics close, China will nationalize (read “steal”) many of the manufacturing plants that U.S. and E.U. companies are nicely building for them. Now this Perfect Storm of shoddy or dangerous goods, rising prices, and internal growth may sink China, Inc. If the global monies pouring into China slow to a trickle, that gives China an excuse to move troops into its “economic resource centers” in Eastern Russia and Southwestern Asia.

It may be a good thing we’ve built new military bases in Iraq but what can Mr. Putin do?