The summer blockbuster 2008
Everything starts in Asia, more particularly China, who will be even more brilliantly embarrassed tomorrow in San Francisco than they were in Paris and London.
This summer, just around September, I predict the United States will face the most significant surge in prices since the 1970's. High oil prices in US$ will leave Americans more exposed than anyone else. Coupled with high US$ priced oil, cheap goods coming out of Asia will surge in prices as off shore economies increase prices to adjust for oil costs and improved local living standards. The adjustments will hit Americans harder than any other developed economy because of the undervalued dollar.
The Fed, now largely sidelined and lacking any credibility whatsoever, will have no tools in hand to control the inflationary surge, forced by protectionist Democrats and a weakened Republican Party to keep interest rates low so as to save voters' homes and investments. The result will more than likely lead to a run from the US$ to the Euro, Yen, and Pound, as well as our relatively significant Canadian Dollar (yes it helps to be a resource giant).
Add to the fact that the US has successfully shipped its empowerment offshore by allowing Libertarian MBA maniacs to outsource everything from the production of toilet seats to Barbie and Ken. Yes, there is no free lunch, and outsourcing is no different - if only Libertarians remembered their grade 12 science classes. In their obsession to achieve absolute profit and economic liberalization they have handed Americans economic shackles to the whims of off shore manufacturers such as the Chinese.
The combination of a run from the dollar with a surge in global inflation will result in an evaporation of liquidity in the American economy, something I have been predicting for some time. Now add in a pissed off China and things just get all that more interesting...