I am glad to read my co-contributor midtowng's latest contribution to this site's coverage of the oil and commodity crisis. In the last few days, other bloggers -- Calculated Risk, Russ Winter -- have run stories on the collapse of the Shanghai stock market, but readers of this blog got the story first, becuase two months ago I was already telling you about the importance of the Shanghai stock market crash.

Indeed, the pivotal importance of China in the parabolic Bull market for oil, and for commodities in general, has only been confirmed by more news stories in the last few days.

China's out of control inflationary boom continues:

China's money-supply growth accelerated to the fastest pace in four months in May, adding pressure on the central bank to prevent cash inflows from fueling inflation.

M2, the broadest measure, rose 18.1 percent from a year earlier to 43.6 trillion yuan ($6.3 trillion), the People's Bank of China said today on its Web site, after gaining 16.9 percent in April....
....
Inflation slowed to 7.7 percent in May from an almost 12- year high of 8.5 percent in April. Producer prices rose 8.2 percent last month, the biggest increase in more than three years.
....

"Speculative capital inflows are rising and adding liquidity to the financial system,'' said Ben Simpfendorfer, an economist at Royal Bank of Scotland Plc in Hong Kong. "The increase is keeping the central bank cautious of the risks that inflation may rebound.''

And in the category of, Americans aren't the only speculating idiots, be sure you're sitting down for this. Chinese banks have been making large loans for use in currency speculation

China's banking regulator barred finance companies from offering customers loans to trade foreign exchange, saying 90 percent of the investors have lost money in a service that resembles ``gambling.''

``The ability of banks' clients to fully identify risks in this service and the banks' risk control capabilities are still inadequate,'' China Banking Regulatory Commission said in a statement on its Web site today. Banks failed to select qualified clients, ``blindly'' granted larger loans and lowered entry requirements to compete for business, the statement said.

Bank of Communications Ltd., partly owned by HSBC Holdings Plc, was the first to offer margin trading in currencies starting in 2006. Transactions were typically more than 20 times the amount put down by investors as a deposit, and mounted to as much as 50 times in some cases, the statement said.

!!!!!
I mean, really, what else is there to say, but "holy s**t !!!!!!!!!!"

Readers of this blog were also the first to pick up on the importance of subsidies to Asian consumers in sustaining the commodity boom. The drumbeat continues. According to bloomberg, producer and consumer inflation may cripple demand:

``Rising inflation is a clear and present danger,'' said Paul Joseph Garcia, chief investment officer at the Manila unit of ING Investment Management Ltd., which oversees $565 billion in global assets. ``Inflation will compress margins of companies and slow consumer demand. We could see another wave of earnings downgrades if oil prices stay elevated.''
....
A measure of raw-materials producers sank the most since Feb. 6 on concern rising inflation will lead to higher borrowing costs, cutting demand for copper, steel and aluminum.

The reaction by Asian governments and central banks to the crisis vary, and continue:

India's central bank made a surprise interest rate hike:

The central bank increased its repurchase rate for the first time in 15 months to 8 percent from 7.75 percent yesterday, seven weeks before its scheduled monetary policy meeting.

In South Korea is having serious inflationary and credit issues, as

bank lending to households rose for a fourth month as people borrowed more to buy homes and holiday gifts.

Loans to households climbed by 2.75 trillion won ($2.68 billion) to a record 373.6 trillion won last month, the Bank of Korea said in Seoul today. Lending to companies rose by 5.89 trillion won to 430.4 trillion won.

Rising debt is burdening South Koreans, who are already struggling with soaring fuel and food prices that are driving the fastest inflation in seven years. The government plans to provide 10.5 trillion won in tax rebates and subsidies to protect consumers and companies from record energy costs.

South Korea is facing its most serious crisis in 10 years as South Korean protests ostensibly against importing US beef mask a far deeper concern:

What started as fears over BSE has spread to a broad campaign against the government over a host of grievances against Lee, who came into office promising more than he could deliver, including 7% economic growth.
....
Truck drivers, following the lead of unions in countries across Asia and Europe, voted yesterday to go on strike over rising fuel prices. They ignored the government's $10.2bn (£5.2bn) financial aid package announced a day before, designed partly to cushion the impact of soaring energy costs.

The country's main KCTU trade union and four car unions were voting today on whether to back a call for a general strike next week against government policies. The mass protests have derailed, for now, attempts at economic reform by the conservative government, including tax cuts, mass privatisation of major state-run firms and banks and efforts to open the country further to foreign investment.

The new parliament has been unable to sit because the opposition has boycotted its opening....

China, Japan, South Korea and India now import as much oil collectively as does the US. Of these, China is the largest at 9% (to the US's 25%), and so far has put aside any imminent decrease in oil consumption subsidies. But the signs are, it may change soon, perhaps after the August summer Olympics:

China will likely hike fuel prices when the food prices stabilize, says Yuwa Hedrick-Wong, economic advisor at Mastercard Worldwide. He gives his analysis of the Chinese economy, with CNBC’s Martin Soong.

The world's 4th largest, and fastest growing economy is caught in an inflationary, credit soaked boom. The bursting of the Shanghai stock market bubble is a warning that the boom may be bursting at the seams.
Shorter version: China is not decoupling from the US and global economy.
And more specifically, the day China substantially cuts back on subsidies for the refining and consumer sales of oil is the day that "China will shake the (commodity boom) world."