Former Morgan Stanley (NYSE:MS) star Andy Xie says he thinks China is ready to crash.

"I think it's going to be bust very soon," Reuters reports Xie saying, laying the blame on the usual suspects: excess liquidity, rising inflation and rich valuations.

"People will be surprised. When the end comes, it's going to be pretty bad," Xie said.

Well, we won't be surprised. What surprises us is that the crash is taking so long to get here.

How DO you say 'bubble' in Mandarin?

Last night, we dreamt that the Dow was crashing. We woke up and wondered if it had been a dream…or a prophecy. We'll have to wait and see, but for now we keep our Crash Alert flag flying here at the Daily Reckoning headquarters, just in case. Dreams foretold Caesar's death on the Ides of March…maybe they'll foretell the Dow's demise.

Meanwhile, more evidence that China is readying as a crash cometh - in a letter from a Chinese reader, sent to colleague Porter Stansberry:

"All the people I know in China now gamble in stock. On one of China's TV stations yesterday, was the report that out of the 16 million people in Shanghai, close to 11 million now put money into the stock market. Almost everyone - you name it: taxi driver, security guard, mini fruit-shop owner, high school student, retiree. But in the long run, a lot of this will end in tears, no matter how quickly China's GDP grows. There is simply no decent research to educate Chinese people on how investing is different from speculating out there."

What do we care what happens in China?

Well, the Chinese central bank has a cash hoard of U.S. dollars mounting up towards $1 trillion. What will happen to all this money when the country goes into an economic crisis? If the Chinese chose to, they could send the U.S. dollar into free-fall, force American interest rates up sharply…and drive the U.S. economy into a slump. More than 80% of the U.S. budget deficit is financed by foreigners…and much of it by the Chinese.

Or maybe China will use its money to buy weapons. That would be interesting, wouldn't it?

Or, they could try to corner the market on the key strategic supplies of modern economies - such as oil, uranium and granite countertops.

Yes, dear reader, it is free cash flow that makes the world go 'round…and China's got it - because China makes things that people want to buy.

Meanwhile, back in our beloved homeland, mommas send their children to the very best schools so they can get jobs in finance! Ah…that's where the money is…not in making THINGS but in making MONEY itself.

Harold Macmillan once described Britain's post-war service economy as one in which "we take in each other's wash [laundry]." But in the 21st century U.S. economy, people don't even get their hands wet. They take in each other's money; one manages his neighbor's money…another lends his neighbor money for a house…and another takes his neighbor's company, 'restructures' it, and sells it back to him.

The United States, for example, used to be the world's largest steel-maker. No more. Where the United States used to make steel, now it gambles. Literally.

Here, another message from Porter Stansberry:

"'I'm not making this up. Beth Steel's flagship iron works in Bethlehem PA - where the steel in the Golden Gate Bridge was made - has been purchased by Las Vegas Sands Corporation and will be turned into a casino.

"…I've never been more willing to buy gold."

The AP Story:

"A sprawling 130-year-old steel plant that armored hundreds of U.S. warships and provided the raw material for the Golden Gate Bridge, Madison Square Garden and many other famous landmarks will become a hive of activity over the next few days as workers start preparing some of its buildings for demolition.

"More than a decade after its towering blast furnaces went cold, Bethlehem Steel's flagship plant is being transformed into a $600 million casino complex run by Las Vegas Sands Corp., owner of the Venetian Resort Hotel Casino in Las Vegas.

"…State gaming regulators awarded Sands a slots license in December. The company plans to open a casino with 3,000 slot machines by the end of 2008, a 300-room hotel and 50,000-square-foot convention center three months after that, and a casino addition with another 2,000 slot machines in summer 2009.

"'It will be one of the most unique economic development projects in the country, and people will come far and wide to see it," [Mayor John Callahan] said. "It will be a national model for the redevelopment of an industrial site.'"

The whole U.S. economy has become rather gloriously mad, in the sense that none of it really makes any economic sense. Glorious in the sense that Deng Tsiao-ping must have had in mind when he said: "To get rich is glorious"; for the illusion of wealth has never been easier, faster or closer to hand. Just step on into the casino!

Central banks all over the planet are serving helpings of money like McDonald's cheeseburgers…over $2 trillion served in the last five years. Maybe they should put that up in lights. All a smart investor has to do is to get in line.

In the late '90s, the way to make money was to start a dotcom and take it public. Investors would give you millions. Then…take the loot and speculate in property. Better yet, start a property fund. Who didn't want to be in property in 2000-2006?

And after that, it was a good idea to sell the property fund before lenders started asking questions, and move into private equity. Borrow a lot of money to buy a company. Then, have the company borrow a lot of money so it can pay you big fees, because you are such a genius. Then, sell the company to the 'mom and pop' investors in the public market.

But after that, get out of town - because each get-rich-quick era is followed by a posse with revenge on its mind.

After the tech bubble blew they strung up Bernie Ebbers and Frank Quattrone. Now that the bubble in subprime has blown up, they're chasing New Century (OTC:NEWC) and other lenders. It won't be too long before the bubble in private equity goes up too. And, not too far behind will be a mob clamoring for some kind of rough justice.

Already, we read in today's paper that French presidential candidate, Nicholas Sarkozy, is threatening 'predator' hedge funds with a tax on their speculative investments. It probably won't be long before his Anglo-Saxon confreres pick up the rope.

*** Ethanol producers in the Midwest have to use 4 gallons of gasoline in order to convert corn into 5 gallons of ethanol. Not sounding much like a viable solution to our oil dependence…

Kevin Kerr, writing for MarketWatch, reports from the front line of the ethanol boom…at a farm in Knox, Indiana:

"I couldn't help noticing all the ethanol plants springing up along the road to Knox from Chicago.

"The average ethanol plant uses 100 million gallons of water or so. Now pile on top of that when farmers start having to irrigate this summer (those that can afford it) and you're talking about a severe water shortage potential.

"Lawrence [farm-owner] showed me his vast irrigation system. Of course most of these systems are run on diesel fuel or natural gas, another major problem as these commodities will skyrocket this summer, in my opinion."

The ethanol boom has done more than dump extra costs on already stretched farmers - it has sent the price of corn skyrocketing. One helpful reader pointed out that in his local grocery store, you can buy two ears of corn for $1 dollar…when last year you could have bought ten for the same price!

And while this may put a crimp in your backyard BBQ, the high price of corn has almost tripled the price of tortillas - a major food staple in Mexico.

Back in January, hundreds of thousands of Mexicans marched in protest against rising tortilla prices, spurring the government to cap prices of tortillas to control inflation.

Even with the price control, the poor in Mexico are still having trouble affording tortillas. The Washington Post reports, "The typical Mexican family of four consumes about one kilo - 2.2 pounds - of tortillas each day. In some areas of Mexico, the price per kilo has risen from 63 cents a year ago to between $1.36 and $1.81."

Here in the United States, even the Department of Labor's own bean counters say food costs, for average Americans, are already nearly double what they pay yearly for energy. Could a coming corn "crunch" force those costs even higher?

What happens if that trend continues…or even stays at a high price plateau?

Bill Bonner is the President of Agora Publishing. For more on Bill Bonner, visit The Daily Reckoning.