East Asia is a hot-money area. Speculators move in and out of it with swashbuckling abandon. As in any once volcanic, now cold-as-ice market, when the selling gets to be so great, the leveraged speculators have to raise capital to meet margin calls on stocks they bought on credit. This week the in-hock guys with the worst balance sheets liquidated, and markets worldwide got banged.

When I was at Goldman Sachs, I traded stocks and bonds for a lot of hot-money guys. When markets started to go against them, these types often doubled down. When the markets continued to go against...

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