China's National Bureau of Statistics reports that China's consumer price index in June surged by 6.4% from a year earlier. This is a jump from May's 5.5% rate and close to the high hit three years ago. The real number, as opposed to the official number, is likely much higher.
This inflation is the main reason China will continue to slow money growth. The slowed money growth will in turn crash the economy and stock market.
drop the peg from 6.5 to 5 overnight. That would fix it(for now)
ReplyDelete@Anon 12:40pm
ReplyDeleteThat is exactly the problem with government controlling the exchange rates. How are exporters and importers supposed to make business plans if prices can change by 20% from one day to the next by government edict?
Sure, dropping the yen-dollar ratio would stop inflation for a while, but it would require a massive reallocation as half-completed business deals suddenly become unprofitable, which is the crash that RW refers too.