3.1.2007: What happens in Shanghai...

now leaves Shanghai and travels the globe in an instant.



The globalized economy was on dramatic display again this week.

First, the newly created Chinese stock market was hit with a massive 9% loss in value on Tuesday. Through the course of the day, the ripples of this loss became a tsunami in both European and U.S. markets with the Dow Jones Index dropping hundereds of points in an instant.

The Chinese stock market had been sizzling. With these huge increases, the new market was beginning attract ordinary investors who were borrowing large sums to speculate on this market. (Think U.S. stocks in 1929.)

The Chinese government, now more well versed in macro and micro economics than in Marxism, saw the stock market bubble rising quickly and moved pre-emptively on Tuesday to announce restrictions on buying stocks on margin.

This shot was heard ‘round the world in a nano-second and it triggered a global sell-off of stocks and equities.

Meanwhile, you've certainly seen those gas prices creep higher and higher.

Oil had been trading at $49 per barrel 5 weeks ago is now trading at above $60 thanks both to American driving habits and the unquenchable need for oil by the growing industrialization in China and India.

We’ll hear many promises in the coming year from prospective presidential candidates about improving the economy and lowering gas prices, but let’s be sure to check in on Asia before we buy any of these presidential promises.