China has traditionally bought US debt to finance the economy of the country, and so that there will be more Western consumers for goods manufactured in China. However, decreasing demand from these quarters may leave China with the only option of exporting less and focusing more on buying at home. This is a wake up call for China, Roach said to CNBC.

In Roach’s words, China will no longer be able to be hooked onto the American consumer bandwagon, and stay on the export led growth course. With heavy focus on exports, China the massive foreign exchange reserve accumulation, current account surpluses and trade surpluses.

Two thirds of which have been reinvested in dollar based assets. China’s foreign exchange reserve accumulation is reinvested mainly in dollar based assets.

As China’s internal demand and consumption gets a boost as it is planned, domestic savings will go down, and so will accumulation of foreign exchange. Thus, China will no longer need to buy dollar based assets, as said by Roach.

China has been expressing concern in the past regarding the level of debt that the US economy carries, and what this will mean for the country’s heavy investment in US treasuries.

Meanwhile, Vice President Joe Biden has told Caijing Magazine from China that the administration has a deep commitment to maintain the fundamentals of the economy of the US, and will ensure the value, liquidity and safety of the US treasury debt for all investors, as reported by Bloomberg.

Other markets in Asia were not even as promising.

The S&P / ASX – 200 in Australia saw a loss of two percent early on in the day’s trading. In addition, New Zealand indexes fell upto three per cent.

The reports are mixed, and this would not be helpful in reducing the rising concerns that this could lead to a crisis in the global markets. The S & P downgrade of the US credit rating was from AAA to AA+.

Efforts have been going on all over the world so that markets are calm in the aftermath of the downgrading.

The lowered credit rating of the US has been responded to by the White House in some strong language, using such words as “breathtaking” and “amateurish”. White house officials have been fighting the downgrading all this weekend.

There has been no statement from the President Obama himself, though. Obama, along with his team of economists are meeting with leaders the world over.

Even though the administration has criticized the rating agency heatedly regarding the downgrading, S&P has not only stood by the decision, but also said that if the United States does not solve its debt problem within two years, there could be a further lowered rating.

The key is to identify these expenses and present them accordingly in a way that the task is deeply required for the running of the business. This is not a trick to waive taxes, but rather a way to make you understand the value of your work in details.

Freelancers don’t work within an office where daily training and other self development activities are constantly imparted. A freelancer is thus required to upgrade his or her knowledge through attending conferences, reading books and going through research materials on a constant basis. This will help them to rub shoulders with their office brethrens in terms of skills. All expenses like ticket for attending conferences, buying of books and research materials or magazines are significant for tax deduction and thus the bills and receipts should be preserved carefully.

Retirement options are good way to reduce the amount of taxable income. You need to choose the retirement option according to the income you have and thus you can have the tax deduction on either the present year or in the year when you withdraw from retirement account. There are generally two different retirement accounts: traditional IRA and Roth IRA. The former offers tax deductions on the year of contribution and the later offers deductions in the later year of making contribution.

Freelancers conduct their monetary transactions for their projects through agencies like PayPal. The fees charged by credit card merchant agencies and PayPal account can be deducted from the taxes you need to pay at the end of a year.

When a freelancer works from home he or she needs to maintain an office within the premises of the house, whatsoever small in size it may be. This is also a necessary cost of his business and can be deducted. You are allowed to deduct a part of your mortgage, renter insurance premium, utility payments etc. The deductions of this kind are depended on the area of your house that is used as office.

With all these tax deductions sources I am sure that the freelancer readers of my post are already finding their pockets stuffed.

How, you may ask? Well, the Asian Development Bank Institute recently released a study that revealed how high-tech products such as the iPhone are seriously hurting the American economy and widening the federal deficit. The researchers in question for this study kept a close watch on the entire manufacturing process for the iPhone and found out that the device had on its own added $1.9 billion to the federal deficit in 2009. The cause for this is the global process that sees the creation of each iPhone.

The components of the iPhone are created across several countries, China included. And so while several million more iPhone’s will be sold in the years to come, it won’t count as American exports. Nor will the several other iPhone’s that left our shores to wing their way to several happy owners the world over. Ironically, it is a case of America importing the goods that they themselves helped to create. America has clearly got the advantage when it comes to making the iPhone. The Chinese are still a (fast) developing economy and if anything we should be exporting phones to them. But that is not happening since so much of the manufacturing is done in China.

The parts for the iPhone are sourced from China, South Korea, Japan, Taiwan and the U.S. but the final assembly process is in Shenzhen, China. It is from here that the good are shipped all over the world. And so we have the ironic reality of China exporting something it has not got the know-how to create and further widening the federal deficit. It is an inescapable reality that American factories are key to the economy and if the manufacturing process were to be moved back home, costs would go up but the iPhone would still be profitable. And all of this would be done while creating jobs in America and boosting exports.

China gets all the credit for exports despite only really coming into play in the final leg of the process. China adds little of value to the iPhone. But the savings in monetary terms are ploughed back by Apple into their legendary engineering efforts to create such products as the iPad. There is no reason to go war with China, since trade has always benefited the U.S. economy on the whole. Instead, policies must be framed that help corporate America better take advantage of a new global reality that must see America change or perish.

But investors might not take very kindly to it. It is less an indication of steely resolve to work through a perilous issue and more of rank desperation and uncertainty about the scope of the worries that have beset Ireland. By comparison to Irish woes, the Germans are handling this situation very well and as the yield on 10 year Irish bonds soared to 7.6%, investors are still looking at Ireland warily. The Irish situation is a similar one to those faced by the Iberian peninsula and Greece; these countries too will find it a real challenge to rein in their budget deficits and avoid possibly defaulting on their debts.

Stock markets might have been on a high recently, but the worries in the bond markets were a stark reminder of just how grim a view investors have taken of the European debt crisis. A commitment of bailout money from the European Union, International Monetary Fund and China notwithstanding, the sheer scale of these debts scares the markets and sends jittery shockwaves through investors. What muddies the waters further is the fact that the issues being faced are both political and economic.

There are definitely concerns internationally about the high budget deficit in the United States, and the ease with which Washington sanctions quantitative easing as opposed to tougher debt tackling measures. Countries as widespread as Brazil, China and Germany have criticized American policy on such matters, and facing off against these stinging rebukes will be a major challenge for President Obama. But the criticism across the pond in Europe is quite different. The main worry represents Ireland. It’s woes have becomes so severely apparent of late that it seems a bailout from the International Monetary Fund becomes imminent. And that would kill off the Irish credit worthiness.

The saving grace is that seems improbable at the moment. For unlike Greece, Ireland does have cash in hand for it to finance its own operations at least until June 2011. And Irish officials insist that the bond markets do not reflect the true economic condition or worth of the Irish economy. To that end, they are correct. But the cut in spending and increase in taxes might not be enough to bring down deficits to a targeted level of 3% of GDP by 2014, and that is where Ireland does have a serious problem right now. The Euro zone, and the world at large, awaits with bated breath.

But because the official rate being offered is already near zero, the central bank is expected to instead turn their attentions to United States Treasury securities among other investments in an effort to inject cash into a flagging financial system. The Fed will act, this much is sure. What is unknown is how aggressively the Fed will react to the situation on hand, and there remain doubts over whether quantitative easing will truly make a difference to the economy at this point in time.

Pundits and onlookers are trying to second-guess the Fed’s next move, and many expect the bank to purchase securities from the open market, a move aimed squarely at easing credit flows in a throttled economic environment. Estimates on the extent of the program remain wide-ranging, with varying sources pegging its scope at anywhere between $500 billion to $ 2 trillion. As per usual, a terse statement that shrouds the intent from laymen can be expected from the Fed and as per usual, these words will be dissected with surgical precision by analysts intent on getting to the heart of the Fed’s true intent. A full statement is expected on Wednesday.

But while investors have been braced by this announcement for weeks now, the consequences of the Fed’s announcement remains largely uncertain. Think about the double barreled effect of it; just as Wall Street is mulling over what has happened in the mid-term elections and reacting to that, news of the Fed’s efforts at quantitative easing (and its scope) will trickle in at the same time. It could be a volatile day in the offing, particularly if investors get spooked by the happenings of the day. Back in 2008, the first round of quantitative easing was announced not soon after the financial crisis hit our shores and investors are waiting with bated breath for the sequel. In previous statements, Ben Bernanke has hinted that the Fed is likely to make a move after this upcoming meet in November.

With inflation running below 2% and unemployment alarmingly high, the latest estimated GDP of 2% for the third quarter of this year only adds to the clamor for action. Personal consumption remains low, and the Fed must move to assuage concerns. It is clear though that the Fed will act across a range of figures since they can constantly reassess whether their program is having the required benefit and adjusting their own game plans. If the amount of quantitative easing announced is less than expected though, expect markets to be disappointed and holdings to be divested, at least in the short term. The question remains as to whether the Fed’s actions create a sigh of relief or anxiety.

The IMF has taken cognizance of the fact that growth in the Asia-Pacific belt has far exceeded all expectations of it, even upgrading its forecast for this current financial year to the tune of 1 percentage point. That growth projection now stands at 8% as economies across the region show robust signs of growth almost entirely across the board. Unsurprisingly, China and India are at the very forefront of this economic charge with predicted growth rates for this year of 10.5% and 9.7% apiece. Indonesia expects a growth rate of 6% while Japan, for long a bulwark of Asia is expected to grow by a more modest 2.8%. That in itself is symptomatic of all that ails the developed world, with growth rates affected for most European nations and the United States as well.

But all is not hunky dory in Utopia; while the economic engines of these developing and emerging nations is still strong, there are new policy changes that must be implemented to reflect these new realities and it is unclear whether they will be put in place. Inflationary pressures continue to rise while real estate prices continue to swell like a balloon filling with helium. Property prices for these nations are growing at double digit rates in some places and their growth is largely unchecked, leaving some to fear of an asset bubble much like the one that cropped up in the western world.

Asia is the most attractive investment locale for almost any and all foreign investment and this influx of capital ends up bloating domestic prices and creates pressures all of its own. Perhaps the time is upon these Asian nations to act expeditiously and normalize their monetary and fiscal policies. Steps have been taken to ensure a system of checks and balances that hinders the growth of any financial sector vulnerabilities, but these measures are not enough in the light of continued growth in the region that defies projections by savants the world over.

Asia has succeeded like never before and one step that can be taken is to curb currency manipulation and allow the exchange rate to appreciate as it naturally should in these circumstances. The time to mollycoddle the export market is now past, and the fires of domestic demand need to be stoked as advanced economies will not consume as much as they did in the pre-crisis days. And that’s before other pressing needs are addressed, such as improving the infrastructure in place and easing access to credit lines for all. Asia has begun this new era brightly, but its work has only just begun.

When attempting to ascertain the value of currencies, risk and reward obviously comes into play, as does the weight or pall of expectations surrounding it. Reward is best described by the interest rate of a particular currency while risk (like beauty) lies in the eye of the beholder. It is hard to quantify risks that are being taken but it is a fair statement to say that a simple understanding of the balance of payments helps investors decide just how much of a risk a given currency is. Another measure is government debt expressed as a part of the Gross Domestic Product (GDP) of a nation. If both of these measures are fairly large, rest assured investors will find a currency to be more risky.

China have been the great currency manipulator of our times and for more than a decade now they have exported to markets such as the USA that have gladly lapped up the low priced products that Chinese manufacturers have offered up. As a result, the Chinese Yuan should have risen (not dropped) against the US Dollar in order to balance out the trade surplus that is existent. Instead the Chinese have pegged the Yuan to the US Dollar, meaning that a natural balancing has not taken place. What has thus happened is a game of political maneuvering and an economic imbalance that has made the dollar look stronger than it actually is given the state of the American economy.

Left to their own devices, the Chinese government might well have eliminated this peg of their own accord, but the Fed is not willing to wait around in the hope of this happening. They are not optimistic of the market naturally correcting and have turned to the printing presses in an effort to devalue the currency by the dint of their own strength. And so the tsunami continues to build up inside and outside the US economy, making an abysmal situation even more abject if such a thing is truly possible. Brace yourselves for a wild ride as the US now risks a potentially full-scale trade war between two giants, one the world’s largest consumer of products and the other the largest manufacturer of it all.

Take the case of Ireland. If you do hold any ten year government bonds issued by the Irish, you might have noticed that the yield on these bonds neared 7% on the 29th of September. That’s a record figure that towers above Germany’s yield by some 4.7% and Ireland has tried really hard to stem the rot, but they just don’t have the luck of the Irish at the moment. Public sector wages have been cut, fresh taxes have been implemented in order to raise money but as its ailing banks gobble up as much cash as they can, it seems as if Ireland is trying to dig themselves out of a hole that is filling up faster than they can empty it.

Greece, on the other hand, is just plain rotten to its core with corruption and inefficiency and its economy has more flab on it than a hotel full of elite sumo wrestlers. Yes, it has moved to address some of its most fundamental problems and only then has it received an early Christmas gift amounting to €110 billion ($145 billion) thanks to the European Union and the IMF. Greece is well on course to cut its deficit to a figure of 8% this year and Spain too looks at a contracting deficit and strengthening banking system and they are drawing some solace from this. Their Iberian neighbors though are not doing as well; Portugal’s budget deficit is most likely going to be higher than last year’s 9.3% of GDP and the opposition’s staunch refusal to support the minority government’s 2011 budget mandate is making bond markets jittery.

But it is Ireland that is grabbing all the headlines right now. As a clearer picture emerges as to just how much trouble Ireland’s banks are in (in a word: immense) the onlooking public and pundits realize just how much public money will be needed to save the Irish. Earlier in March, the Central Bank of Ireland stated that the country’s three biggest banks must somehow pull a rabbit out of a hat and raise €28.4 billion worth of equity if they are to meet fresh regulatory requirements of 8% core Tier-1 capital by the end of this year. This seemed like a job for Superman, and he might not be able to save the day.

Long story short, the Irish government had hoped to peg the budget deficit to 12% of GDP but the cost of capital that they have pumped into Anglo Irish Bank and INBS means that figure is more likely to be a knee-weakening 32%, making public debt a staggering 98.6% of GDP. To get out this, Ireland needs a sustained recovery and even that might not be enough or assured. As the winds of change continue to batter a weakening economy, an alternative could be to transfer bank losses on to creditors rather than the tax-paying public. But Ireland’s finance minister, Brian Lenihan, has recently ruled out the possibility of transferring any losses onto senior creditors, but lesser debtholders might not be as lucky. The Irish are riding their luck, and soon even that might run out.

In these dire economic times, exports and global demand is where the money is made by countries and currency intervention is one of the tools by which this can be more easily captured. That is just one of a host of measures that can be put in place though, such as tinkering with after-tax wages, keeping interest rates low (if the economy is dominated by the banking system) and import-export tariffs and quotas. Those countries that have a surplus of demand and a large trade deficit need not worry about artificially weakening their currency or trying to affect any trade balances or imbalances but if a country with poor demand does so, you can make sure that there will be a retaliatory gesture fired as a broadside by other countries.

It’s an international game of mice and felines and we all know the ending to this one quite well. Allow us to offer you a slight history lesson if you are in the dark. The year is 1930, a year in which Warren Buffett and Sean Connery were born. It is also the year in which the world’s pre-eminent trade surplus nations Okayed the Smoot- Hawley tariffs in the wake of France devaluing their currency in 1928 and Britain’s trade tightening. These tariffs were meant to be a very open attempt to gain a share of the global demand pie. But all Smoot-Hawley could achieve was a collapse of global trade and trade surplus countries such as the US were hurt most badly by this.

The similarities to today’s day and age are starting, and in a world where everyone is locked in a battle of attrition, any country that does not retaliate to currency intervention measures will suffer. The only thing that the pundits are asking is what sort of a retaliatory policy to follow. Those than can manipulate currencies and domestic interest rates will certainly do so (such as China) and those that cannot will use tariffs as barriers. Given that there is no central policeman to make everyone play nice, chaos might well ensue and a sub-optimal result is almost definitely on the cards in these trade wars of today.