For a goof, I decided to take a look at the inflation rate of China's M1. I took all the numbers from the Peoples Bank of China web site (data that only went back to 2004), and the inflation rates were eye opening. Prior to the recent economic crisis, the year-over-year rate of inflation went from around 10% up to around 25%. During the crisis, the rate dropped to 5%, but has since risen to over 30%. The US, by contrast, saw little inflation in those years prior to the crisis, and after a rate of 15% or so through the market crash, is now seeing the M1 drop back to approximately 5%.
This being the case, China is headed for a tremendous crash (or hyperinflation, if they hope to prevent it). How long this will take is uncertain, but I am amazed that China would push the inflation envelope so far.
The Rev
Lifes a piece of shit, when you look at it
Life's a laugh and death's a joke, it's true
Just remember it's all a show, keep em laughing as you go
Just remember that the last laugh is on you
I was reading a few days ago that the chinese government is trying to step in and halt an asset bubble in...housing I believe. Probably a direct result of said inflation.
I totally agree. Theres also been significant price increases in high order capital goods there, China is definitely in a serious bubble. And once again the Austrians can claim truth as the other idiots with their "Chinese savings created bubble" and "chinese protectionism created western bubble" and that crap will get debunked.
It is also alarming that the Schiff'ites arent talking about this so theyre up for a nasty wake up once the economy crashes.
Actually, Schiff doesn't invest in Chinese real estate or [something else I forget] because he considers them in a bubble.
My humble blog
It's easy to refute an argument if you first misrepresent it. William Keizer
He invests in Chinese energy companies, mining companies and other high order capital industries. Those are all gonna get totally hammered when the Chinese bubble bursts. And the sad thing is, Pete doesnt realize it. He is so obsessed with his production-good, services-bad dichotomy that he totally forgets the fundamental capital theory and its implications in the business cycle.
Let’s not forget that…
1) the Chinese spend (waste, rather) huge sums buying reserves to hold on top their lunatic peg. So form the M1 there one should take away such sums. Perhaps than one gets a less lunatic account.
2) if business in China is not financed form banks, but thorough reinvestment of profit, as I believe to be the case, than that means that no matter how aggressive the monetary expansion no boom will begin. The currency will go down the toilet and the division of labor shall erode, but now boom-bust cycle shall begin.
3) as already noted, the Chinese peg to the dollar. So if their M1 grows at those rates, than the dollar must too. Hence either the BoC or the Fed are lying about figures. Probably both are.
Why would China pegging the Yuan to the dollar have an effect on the dollar? If anything I think it would just destroy confidence in the yuan as people stop believing that its worth what the government tells them it is.
Also individuals can currently only exchange yuan for 50000 USD per year in China. Anyone have any ideas on how that will effect this situation?
Could the large purchases of short term US debt be fueling Chinas inflation?
You're close, John.
Exports to the USA are fueling inflation. When Chinese businessmen receive dollars from abroad the Chinese government keeps the Dollars and gives the citizen Yuan, at a set exchange rate (minus a 20% mandatory "savings"). The amount of Yuan increases as China's dollar holdings increase.
Peace
Quote Nandor:" And the sad thing is, Pete doesnt realize it. He is so obsessed with his production-good, services-bad dichotomy that he totally forgets the fundamental capital theory and its implications in the business cycle."
Or rather, you kind of twisted what he says about production-good, services-bad. Schiff never says that a service jobs are bad- he was saying that the US being a service-sector oriented economy in the past decade when it owes massive debt to the rest of the world made no sense. In essence, what he's saying is that ok the world lends us money- we take this money and go spend it on eating out at restaurants- so these restaurants have to hire more waiters. Those waiters are part of the service sector economy that creates the illusion of a true productive economy since the only reason those jobs exist is because we borrowed money and spent it all- and once the world stops lending we stop dining out and those jobs vanish.