I should not be a fan of Dr. John Rutledge (left).

His economic prescriptions are unrelentingly right-wing. He's a social Darwinist, a raging bull.

But he's not an idiot. He understands money. He knows trouble when he sees it. And, on his blog this week, he sees it.

As I've written in my novel, the name of this big trouble is little China.

The process of China's inevitable Yuan revaluation has begun.

In a series of blog entries Rutledge ticks off what's happening.

• The housing boom is over.
• U.S. interest rates are headed up.
• America's wealth is headed down.
• Chinese monetary policy must tighten.
• Chinese growth will go down and unrest will increase.

Rutledge makes up a quote from James Carville (and spells his name wrong), writing "It's the assets, stupid." He adds, "This line of thinking forces you to focus on the capital stock (which determines productivity) rather than on spending. And it forces you to focus on who wants to hold the existing assets, not on who wants to buy the new assets (flows of funds analysis of saving, budget deficits) when thinking about interest rates."

Rutledge knows in his gut that the boat must be turned around, that China can't keep buying dollars indefinitely, and that Paul Krugman has a point when he compares America's current policies to those of Spain's Philip II. Writes Krugman, "Right now America is a superpower living on credit - something I don't think has happened since Philip II ruled Spain. What will happen to our stature if and when China takes away our credit card?"

Well, China just did. And that credit card is tied to our economic, um, uh, naughty bits (as Monty Python would say). This day had to come. Economists on both sides agree on its impact.

Now we'll find out how this story really turns out.