Chinese inflation and US bond ratings will have an impact on our economy and the economies of many nations of the world. The result will be to slightly accelerate the fall into a Greater Depression. By greater I mean greater than the great depression, with even higher unemployment and significantly lower GDP than we currently have.

First to China and the Chinese Inflation. To read about the China inflation see Inflation in China Poses Big Threat to Global Trade. The bottom line is that China is manipulating currency to maintain high exports. As a result prices on everything in China are going sky high. Combine this with a decline in commodities such as food and a higher demand for commodities such as energy and China is facing serious problems. And that even includes, guess what, a housing bubble. Oh my. To reduce inflation China is using the tried trick of raising interest rates. Raising interest rates will mean that the poor will have to not only contend with inflation, but also lose jobs due to lower investment in China. Also, people may choose to invest in Chinese securities as opposed to the US. Inevitably Walmart, Apple, and everybody else will end up spending more to acquire Chinese exports, resulting in, you guessed it inflation here and the rest of the world. The world will reap what China has sewn.

Now on to the bond ratings. See S.&P. Lowers Outlook for U.S., Sending Stocks Down. After the recent financial fiasco at the end of the Bush years one would think ratings agencies are completely discredited. Let's face it, they all really fucked up big time. The market for treasury bills is great, right? Well that is true, but there is one slight problem. The US has a distinct, though very low, probability of defaulting on those bills. (Not counting of course on the planned default on the bills owned by social security, but that is a story for another time.) Forget that none of the ratings agencies noticed this with mortgages, they did notice this with the US debt. Why would they notice, well everybody is talking about defaulting. The republicans want to leverage the threat of default into further austerity which will fuck the economy big time. While the democrats and the administration in the form of Tim Geithner and others, are yelling about what a catastrophe a default would cause. So guess what, stocks fell. In and of itself that means little.

But, if people do not invest in the US bonds at low interest rates and inflation sets in for similar reasons to what is happening in China, then the economy if fucked. By similar, I mean higher commodity prices, particularly in food and energy.

In essence China and republicans are drawing the US and the world economies into a black hole. Without investing trillions to start pulling us out we are being pulled even harder. As this continues and other commodities such as water become a problem, there will inevitably be war on a global scale. Or to put it in Ayn Rand terms "Atlas Dies."