Sense on Cents

“Those who do not learn from history are doomed to repeat it.”

George Santayana (Spanish born American Philosopher, Poet and Humanist who made important contributions to aesthetics, speculative philosophy and literary criticism. 1863-1952)

The economic boom of The Roaring Twenties here in the United States was closely linked with the massive financing of debt provided to post WWI-Europe. The U.S. was the envy of the world given its economic engine and subsequent economic surplus. Economic historians are well aware that the excess capacity in the United States precipitated The Great Crash of 1929.

Fast forward 80 years. Is China 2009 the equivalent of the United States 1929? Is the United States 2009 the equivalent of Europe 1929? How will the relationship between the People’s Republic of China and the United States play out? I addressed this critically important dynamic this past January in writing, “Prisoner’s Dilemma.”

I recently read and reviewed a fabulous piece produced by Black Swan Trading addressing this topic. This short piece, entitled Currency Currents, is strongly recommended. I submit:

Therefore, I think the key macro event i.e. major sustained risk event, will likely flow from protectionism. Rebalancing is the trigger for protectionism in a world when the major player, China, suppresses its currency. (more…)