BANNED IN BEIJING!

My really smart friend Larry called this morning.

"I have some really great news for you!"

"Frubbbegh...at 0700 nothing is good. Where are you?"

"Beijing and quess what? They've blocked your blog!

"That's good?"

"Of course. Anything blocked by the government is automatically read by 200,000,000 Chinese!"

"I'M RICH!!!!!!!"

"No, you're probably dead. If they really don't like what you write, you disappear."

So much for fame...

Any way, Chairman Ben, following on his triumph of yesterday felt obliged to explain himself and his actions in an op-ed piece in the Washington Post this morning. The reason seems to be, "The Congress made me do it!" or some sort of nonsensical reading of the Fed's mandate from Congress topromote a high level of employment along with stable inflation (somewhat of a contradiction in it self but who's reading). If there was ever any doubt that he got his head handed to him last week this removes any such notion. That the Chairman of the Federal Reserve feels he need explain himself to the great unwashed shows how far we have fallen. Further, it points out in stark detail how not-of-this-world these economists are who direct this nation's monetary policy. Unfortunately, they have created a laboratory to test theories that no one else believes (save Paul Krugman) that will have the effect, if there is to be an effect, of wrecking once and for all America's leadership in the financial world.

To make it worse they seem to convinced themselves that the views of others do not count--they have sole authority to act in what they believe to be the domestic market without any regard for possible consequences world-wide. Nothing could be further from reality.

I never thought I would see the day when the Fed would have convinced itself that a happy stock market fell within their area of responsibility but there it is in black and white. Further, they have managed to convince themselves that somehow this expansion is to be contained within the U.S. market losing all sight of the reality that we are globally liked and the spill over into markets while large in themselves, pale in comparison with ours, in in so doing the effect of the unstoppable spill-over can affect these markets severely. Brazil, for example, has seen the value of it's currency rise by 49% in two years; they have no need for further "hot" money but as the past two years has shown us, flows to the emerging markets have if anything increased--and not just to the BRICs--but to others as well causing severe dislocations and no little real anger at our policies. Forget about who we have helped in the past; it is who we are perceived to be killing now and in the future that counts. This bunch is clueless, I think. Convinced of their own brilliance and importance they wade into the unknow of their experience convinced they shall prevail. I doubt it.

But while all of this is troublesome, what is terrifying is that they have managed to convince themselves that they can determine, the appropriate time and manner to unwind the policies set into place with little or no disruption. They will get it wrong. Mr. Murphy will be alive and well and they will run smack into his first law JUST LIKE EVERY OTHER FOOL WHO THOUGHT HE COULD TIME MARKETS. God knows what the consequences will be. Hubris will destroy this mob just like those that went before them and the American people will suffer. One can but guide markets, one cannot direct them and that is true more so every day.

And so as we mach down this insane path, quietly but yet steadily, our Chinese friends are building, one nation at a time, an acceptance of Yuan through trading and sale patterns, local usage agreements and financial aid. This belief that transparancy and free exchange of the currency and govening changes in China--believed to be decades in the future--must be achieved before free convertability is total crap. All that is needed is trust in the currency and the issuer and the Chinese are working industriously and intelligently to achieve just that. We are doing exactly the opposite. When that will be I do not know but it will be sooner than our guys realize. And when that happens...

See fellas, that wasn't so bad. DON'T BLOCK THE BLOG! DON'T BLOCK THE BLOG! DON'T BLOCK THE BLOG! DON'T.......