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Henry Paulson's Holiday Wish List
Stephen Green, Shanghai-based economist for Standard Chartered Bank, points out the government is virtually unable to tighten the money supply to cool demand. "They are really stuck up the inflationary river without a monetary paddle," he said. That's because if China increases its interest rates while the U.S. Federal Reserve leaves its rates unchanged or even lowers them, more capital will flow to China, thereby increasing the money supply instead of tightening it.
Of course, the best way to get unstuck is to eventually experience a Great Depression based on excess manufacturing production capacity built upon a sea of unsustainable growth. Just a theory.
Real Estate Newsletter Articles this Week: Existing-Home Sales Increased to
4.15 million SAAR in November
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At the Calculated Risk Real Estate Newsletter this week:
[image: Existing Home Sales]*Click on graph for larger image.*
• NAR: Existing-Home Sales Increase...
15 hours ago
4 comments:
Stag,
A Chinese national I know told me that on a purchasing power basis, China was approximately 1/8 to 1/10as expensive as the U.S. This could be a great place for a shrewd stagflationist to hide out. A potentially appreciating currency, booming ecomomy, 10 times leverage on purchasing power, new culture, and the olympics to boot. Big upside here. Makes TIPS look boring. Just a thought.
MAB,
I am extremely bearish on China and have been since starting this blog.
Are we in for a China crisis?
http://news.independent.co.uk/business/analysis_and_features/article3221045.ece
Still, the sceptics are increasing in numbers – and in the starkness of their warnings. As the Chinese market was closing yesterday morning, Aberdeen Asset Management, the UK investment company known for its emerging markets expertise, became the latest industry voice to warn that stocks listed in the country have become dangerously overvalued – other sceptics having included the legendary investor Warren Buffett.
I think China's booming economy is just as much of a long-term illusion as ours is.
I have not studied valuations in China in any detail. I do believe that China's economy is distorted due to government planning/intervention. Can't help but believe the distortions will lead to dislocations. But as a place to live during an infationary or stagflationary period in the U.S. it has merit. If nothing else, it would offer a drastically reduced cost of living.
MAB,
I'm of the belief that China will feel it worse than we will. I don't think the stagflation will be contained. I might be able to buy cheaper goods currently (and into the future), but should a billion people decide things aren't going their way they might try to get me involved in the unrest and/or take it out on those who can afford food around them.
Just a thought.
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