must admit to being a bit obsessed with the possibility of a USD bounce and how to manage risk going into 2010
this "S&P is tracking the Depression years" is still one of the best shows in town tho'
anyway here's another take on ChiMerica:
"A very low probability scenario − China floats its currency. That means the Chinese economy is in for dramatically slower growth and the world is in for inflation — higher costs of production and higher final prices on goods. This scenario is a path toward creating sustainable economic growth for world economies. But it would result in a slow rebuilding process with a lower standard of living.
A high probability scenario − China doesn’t play ball. China either resists all together or it attempts to pacify the world by returning to its slow crawl toward appreciating the yuan (the most likely case). In this scenario, I expect the world to quickly grow impatient, for political tensions to mount, and for major tariffs to hit Chinese goods. I think this has the ability to sink the global economy back into recession, and probably depression.
Both scenarios are major disappointments for those who have anticipated a sharp recovery in global economic activity. That’s a major blow to risk appetite. And a blow to risk appetite is bad for global stocks, bad for commodities and likely good for the safe haven appeal of the U.S. dollar.
