Saturday, March 12, 2011
Hyperinflation is right around the corner
China reported 4.9% price inflation for the month of February. With China now mimicking the U.S. Bureau of Labor Statistics and taking steps to artificially manipulate their consumer price index (CPI) numbers as low as possible, it is likely that real price inflation in China is now closer to 10%. China this week reported a $7.3 billion trade deficit for the month of February, its largest trade deficit in seven years. The Federal Reserve's QE2 along with China's destructive monetary policies, which artificially devalue the yuan, have led to a massive rise in China's raw material costs this year. I believe that in the upcoming months, Chinese manufacturers will raise the prices of their products that get exported to the U.S., to counteract rising commodity prices. Most products Americans use have been manufactured in China, this means Americans will soon see massive price inflation in just about all consumer goods they use. I project that by the end of 2011, we will begin to see the U.S. CPI increase by 4.9% yearly with real U.S. price inflation rising north of 10%.
The mainstream media is proclaiming that China's trade deficit will silence calls for the Chinese to allow their currency to strengthen against the U.S. dollar. The fact is, China's government has for long been making the major mistake of printing too many yuan in order to artificially prop up the U.S. dollar. Their fear was, if the U.S. dollar was allowed to decline too rapidly, prices of Chinese goods would rise in terms of U.S. dollars and Americans would no longer afford to import them.