Good news and bad news 2

As promised, I am going to tell you the bad news today. It was not about Detroit auto bailout thrashed by senate - I don't have that gift to be so prescient. It was about China. China GDP growth can slip to around 7% but the more pessimistic calls for 5%. The export and import activities have just collapsed and even more severe than 2001.



Trading partners related to China will be dragged into severe slow down - Taiwan for example. Taiwan exports to China shrunk tremendously in November.



Sometimes, we need to be careful what we wish for. Many months ago, many worry about China inflation, now we got to be more fearful - deflation !



With deflation running around, it will create some road blocks complicates recovery. Deflation will cause people to hoard cash and not spending. That will create downward spiral to the economy, the bad news that I am talking about. The world is already running out of covers for too many woks, if China gets into trouble, we will be in real trouble.

This is one of the pretty significant developments that we need to pay attention.