Ah, nothing focuses the mind that a good ol’ fashioned stock market sell-off. Nothing is more likely to cause people to decide that Bush is a really bad president, or inspire pessimism about the future. One might think that a war in Iraq and US equity valuations have politically nothing to do with each other, but when portfolios show declining cash value, blame flies in unexpected ways. Depending on how long this lasts, we might find that brutal criticism of all this president’s policies will become even more ubiquitous.
Meanwhile, looking through my email archive from yesterday, I see this alert from Frank Shostak: “The central bank of China’s tighter stance runs the risk of creating a financial accident, which could have serious effects on US real economic activity.”
So let us make another prediction: Republicans will blame China for its reckless monetary policy. And while the data seem to suggest that there is merit to the idea, Frank himself says that we must distinguish between the bullet (bubble in the US) and a trigger (China’s inflation). 
