Watch for higher interest rates to come.

The news today is that China is getting tired of buying US treasury debt.  This is a bigger deal than most people seem to understand.  WHY?  Well, first off it means that China will not be taking up the new supply that the fed hopes to allow to enter the markets as it tries (in vain) to unwind its massive balance sheet that is just loaded with bad US debt (AKA treasuries).  I say its bad debt but we are still making the payments so many would argue with me.  But when you have to take out more debt to live on going forward that means that you are taking out debt to pay the interest on the existing debt.  That is the very definition of a Debt Ponzi.  So yes, the debt is bad but it simply hasn't been realized by the masses yet.

Well if the fed is not buying treasury debt (and in fact are a net seller) and China doesn't want it then who will?  Who is big enough to take up the slack?  NOBODY, that's who.  They still have some tricks up their sleeves but the Debt Ponzi is getting very long in the tooth.  If nobody buys the debt, interest rates will have to rise to incentive buyers.  What's that going to do to housing prices?

One more thing.  When China runs a trade deficit with the US, it send real goods over in shipping containers and accepts paper dollars in exchange.  Those dollars need to be stored somewhere so China puts them into treasuries.  So China's back down on treasuries will also be accompanied by China accepting less paper money in exchange for their goods and the typical way for that to happen is via higher prices.  In other words, prices will be rising as a result since everything comes from China these days.