I told you and so did my friends at The Daily Stirrer. As demand in the west for China's manufactured goods dried up due to falling economic activity in developed nations the Chinese economy would crash.

Well the depth of the recession in western nations might have been disguised by printing money (aka quantitative easing) but that inevitably results in inflation which erodes the value of earnings and savings.

Ergo people have less to spend on cheap tat from China.

So how does that affect us? It means China will have less money to buy the bonds western governments must sell to underwrite the value of the bonds they sell. Which will mean the value of money will fall further. Which will mean peoples' earnings and savings will buy less. Which will mean economic activity will fall further which will mean ... oh you should know how it works by now.

Anybody fancy a weekend break in Weimar?

China heads for deflationary shock