With yesterday’s Commerce Department release of a record $55.5 Billion October trade deficit, and today’s Treasury Department report revealing diminished foreign demand for U.S. assets, Asian central bankers must be tossing and turning in their beds. Because, as they sleep, the White House begins a two day economic summit, featuring a proposal for Social Security reform which potentially adds over $200 billion per year in federal borrowing.

Were it not for Asian central bank’s heroic and foolhardy purchases of U.S. government debt, such a ridiculous proposal would never see the light of day. Since America lacks sufficient domestic savings, the only way such a harebrained scheme could possibly succeed is if foreigners agree to fund it. Without such support, higher interest rates would make the short-term costs prohibitive.

If the administration’s Social Security reforms are enacted, it’s Asian central banks that will most likely be called upon to step up to the plate, big time. After all, who else has the means, and the proclivity to disregard the losses? The U.S. federal budget deficit may be a monster, but Asian central bankers are its Frankensteins. And like Mary Shelly’s character, they might find this abomination a bit more than they bargained for. As the primary enablers of U.S. profligacy, they must now be prepared to reap what they have sown.

The reality is that it is not Asia’s central bankers, but its citizens, who will make the real sacrifice. That is because it is their livings standards that suffer, as currency intervention transfers their purchasing power to Americans, and because they are the ones ultimately left holding a bag of worthless American IOU’s.

Perhaps the Bush administration believes Wall Street’s self-serving theory of “mutually assured destruction” which claims that Asian central banks will buy unlimited quantities of U.S. debt, rather than officially recognize the massive losses which would immediately ensue should they do otherwise. However, if Bush is truly set on putting this absurd theory to the test, he had better be prepared just in case the Banks flinch. After all, if he gives them a big enough abyss to stare into, the reflection could just be scary enough to shock them into their senses.