I don't think most people realize the power of China. Chinese exports hit $103 billion in June, their first month over $100 billion. Their official foreign exchange reserves now stand at $1.333 trillion dollars. But what is really amazing is that their quarterly inflow is accelerating. Just like the 1800s, when the UK was the manufacturing floor to the world or the 1900s, when the U.S. held that title, the cash is pouring in the door to the manufacturing superpower of the 2000s -- China. Here is the recent quarterly growth in their foreign reserves:

Q4:05 +$49.9 billion
Q1:06 +$56.2 billion
Q2:06 +$66.0 billion
Q3:06 +$46.8 billion
Q4:06 +$78.4 billion
Q1:07 +$135.7 billion
Q2:07 +$130.6 billion

During the first half of the year, they have accumulated $266.3 billion in U.S. dollars, more than all of last year ($247.3 billion). They are banking half a trillion dollars a year, which they have to put somewhere.

So, it was with a mixture of sadness and amusement that I read that our Housing and Urban Development (HUD) Secretary is in Beijing, asking (begging?) them to buy U.S. mortgage-backed securities. So, let's see, we want them to buy securities in a collapsing sector, and then the U.S. Congress is demanding that they revalue the yuan by 20%, guaranteeing China a 20% purchasing power loss on whatever they buy, on top of whatever the credit losses are. If the HUD Secretary can have this conversation with a straight face, it certainly explains why he is qualified for his job and I am not.