Tuesday, Dec 11, 2007
How much longer before the China effect goes into reverse?
Reuters: China's consumer inflation blazes to 11-year high
Hmm, I'd imagine this is going to crop up in our basket of goods sooner or later
Posted by surfgatinho @ 09:47 AM (237 views) Add Comment
2 Comments
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1. maddison said...
Something like high interest rates could choke off growth in China. I predict that after the Olympics the China boom will become more muted. This will put downward pressure on oil and commodities that could then temper inflation in the west. India is a bit more sophisticated and will manage their growth better.
2. sold 2 rent 1 said...
"On Saturday, the central bank raised the proportion of deposits that banks must hold in reserve by a full percentage point to 14.5 percent as part of its drive to tame credit growth and inflation. It was the tenth reserve requirement increase this year by the central bank, which has also raised interest rates five times in 2007."
With emerging economies IRs rising and western economies IRs falling we are looking at some big exchange rate movements.
What we could end up with is a gigantic carry trade between the east and west in one crazy blow-off phase.
We have SWFs bailing out western banks, who will then create more money to be shipped to emerging economies' currencies and assets.
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