Saturday, May 9, 2009

China Warns on Worldwide Infaltion

A policy mistake made by some major central bank may bring inflation risks to the whole world. As more and more economies are adopting unconventional monetary policies, such as quantitative easing (QE), major currencies' devaluation risks may rise.

This is not some gold bug talking. This is the People's Central Bank in its quarterly report.

It is, of course, a central bank that holds billions and billions of dollar denominated debt. But the dollar deno,inated debt buying spree is over for China.

China is now aggressively buying hard assets, i.e. commodities, that the United States can not print at will. And they will slowly move away from their dollar debt. This means, as the Chinese point out, huge inflation ahead, a crashing dollar and crashing stock market.

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