Monday, January 25, 2010

Will China break the markets?

Gary Dorsch writes "... PBoC economists are worried that the consumer price deflation experienced through most of 2009, is quickly flipping to escalating inflation in 2010. If the PBoC doesn’t tighten its monetary policy, consumer price inflation could easily accelerate at a +6% clip in 2010. With food and energy accounting for half of China’s consumer price basket, soaring commodity prices are a ticking time bomb. Social unrest is the mainreason why the Chinese ruling authorities worry about inflation...."

 http://www.kitco.com/ind/dorsch/jan222010.html

Comment: The Chinese government, that is the Communist Party, is in a fix. It's legitimacy rests almost completely on the economic boom. As soon as the economic boom goes to bust, the Communist Party of China will go down the drain as well. Therefore, Chinese official will hang on to an unsustainable boom as long as they can. Till the crash will us part.

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