When Cheng Siwei Speaks, the Dollar Bindeezes

Today the market fell a whole bunch of 2.5%, or more, and you could pick your poison:

• Chinese officials making wise points about not putting your money (all 1.5 trillion of it) into depreciating assets (the dollar), while simultaneously selling us still more multipurpose toys (Bindeez) that you can either play with or comatize yourself.



• Various companies, from Washington Mutual to Morgan Stanley to General Motors announcing slightly massive losses, reaffirming a central thesis (as in, OUR central thesis) that the head of Merrill Lynch is owed a collective apology for not being uniquely incompetent, but well in line with the collective incompetence.



• Certain ambitious New York attorney generals deciding to put pressure on various financial firms for possible fraud in their evaluation and dispensation of loans to the masses (masses who, we might add, are all innocent, having had no hand in the massive body blow to our nation's financial posture).

Who knows really what makes enough people come to embrace their inner sense of "oh no!!" and realize that we are in an unpleasant confluence of events.

The more worrying factor is that people probably have not realized how iffy and topsy things can get. The last thing you really need, on the way to a financial meltdown, is the inability to do anything constructive, from a Federal Reserve action perspective. And yet, we are fast approaching that point.

If the dollar was stronger, and the United States was the only game in town, and it's not, and it's not... we might be able to be somewhat cavalier and contemplate more central bank liquidity drippings. The Fed could lower rates, and we could sit around and wait for everything to work itself out. Creating a comfort zone for financial firms might be the GED version of getting the economy to graduate to normal productivity, but it has been done before.

But we stand at the point now where the world is in competition, and where money not parked here, can be parked perfectly well in other places, like Euroland, in Europlaymoney. Other nations in Asia and the Middle East now have the types of pools of capital worthy of preservation and active management.

Which is to say, while we don't necessarily need their money (aside from its handiness in proping up our government budget, staving off complete collapse, and us all taking to the fields to eat grass for dinner), they are fast hitting the point where they don't need our money or investments, and that is new, and not entirely helpful given our nation's budget contraints and debt binges.