There’s a lot going on – from FT Alphaphille, via AR, UBS economist Paul Donovan, a challenge to the notion that it will be possible for the U.S. to inflate its way out of expansive debt burdens:

The fundamental obstacle to governments eroding their debt through inflation is the duration of the government debt portfolio. If all outstanding debt had ten years before it matured, then governments could inflate their way out of the debt burden. Inflation would ravage bond holders, and governments (with no need to roll over existing debt for a decade) could create inflation with impunity, secure in the knowledge that existing bond holders could do nothing to punish them. In the real world, of course, governments roll over their debt on a very frequent basis. As a result, governments are vulnerable to higher debt service costs if market interest rates change. If markets move to price in the consequence of higher inflation by raising nominal interest rates, then the debt service cost will rise and increase the debt. Thus a period of high inflation will tend to raise both the numerator and the denominator of the debt: GDP ratio.

That makes sense. Meanwhile, Andy Xie, former former Morgan Stanley analyst (via Ritholtz) says China is “one giant ponzi scheme,” that will come crashing down as soon as U.S. interest rates go up:

While China is experiencing weak exports now, the weak dollar allows China to release the liquidity saved up during the boom in the past five year without worrying about currency depreciation. How far would the bubble go and for how long?

It is not too hard to understand when the bubble would burst. When the dollar becomes strong again, liquidity could leave China sufficiently to pop the bubble. What’s occurring in China now is no different from what happened in other emerging markets before. Weak dollar always led to bubbles in emerging economies that were hot at the time. When the dollar turns around, the bubbles inevitably burst.

There’s also the notion that a weak dollar is driving commodity prices (again, from Ritholtz). There’s been a lot of fanfare about China’s stockpiles, since metals are more tangible than IOUs. Roubini warns:

“My concern is that China might have accumulated an inventory of commodities that is probably excessive to the growth of its economy,” …