Tuesday, October 14, 2008

What Scares Me

What could still cause a complete meltdown of the global financial system? Economic growth in Asia slowing so much that the Asian central banks -- particularly the People's Bank of China -- decide that monetary policy should be focused on fighting possible recessions rather than intervening in the foreign exchange market (i.e., buying U.S. government debt). Yes, China would just be hurting itself, and it would be an objectively irrational decision. But that doesn't mean they won't do it anyway. That scares me. And it should scare you too.