The central bank issue is interesting. I am of the opinion that Asian central banks are currently in a holding pattern regarding accumulation of US Treasury debt. This is supported by TIC data. However, that could change, although I tend to doubt it.
My feeling is Asia is slowing moving towards its own free trade zone, but I think they will approach it far differently than NAFTA or the EU. I also think thier zone will be more effective in the long run.
We'll have to wait and see with the trade numbers. If it does turn positive, remember we are dealing with a fundamental alteration of our trade relationships that will take several years to change completely.
Missed the Billmon article, although I am a huge fan of Volcker. He took the helm of the Federal Reserve and did what needed to be done. He took the heat for it and stood the course. And, thanks to him, inflation was killed. Not that the course was easy, but I couldn't think of a better way to do it.
The housing situation is very scary for several reasons.
1.) The total amount of mortgage debt in the US increased from 5 - 9 trillion from 2000-2004 (from Prudent Bear Website)
2.) The US has lost 2.5 million manufacturing jobs. According to the BLS, these jobs pay roughly 17/hour. The economy replaced these jobs with hospitality jobs that pay between 9-12/hour. There has been a large increase in construction jobs that pay 19/hour. But, these jobs will go away when the housing market starts to cool.
3.) There are a lot of people who are now making less. But they continue to live in their former lifestyle. As a result, they take out home equity loans to but things etc....
4.) The new bankruptcy bill makes it harder for people to declare chapter 7 bankruptcy and instead declare chapter 13 where their timeline to repay debts will be extended.
The bottom line: this could be a very scary fall when interest rates start to rise.