People are going hungry in increasing numbers in China. Be prepared for increased social unrest. Below is a report from Reuters. Lincoln
Inflation "under-statement" sparks row in China
Thu, Nov 11 2010
By Aileen Wang and Simon Rabinovitch
BEIJING (Reuters) - With price pressures on the rise in China, a rare public spat has broken out in government circles about whether the statistics agency is suppressing the full truth of how high inflation really is.
Many Chinese have long harboured suspicions about the quality of official inflation data, saying that it does not adequately capture soaring property prices or food costs.
But criticism took a curious turn this week when the Chinese Academy of Social Sciences, a top government think-tank in Beijing, published a research article arguing that the consumer price index had been under-stated by more than 7 percent over the past five years.
The National Bureau of Statistics, which regularly defends the quality of its output, swung into action.
"Obviously, the article's conclusion does not hold any water," Sheng Laiyun, NBS spokesman, told reporters.
The think-tank report found a gap between historical inflation figures and those that can be calculated based on the supposed weights assigned to the various components of the consumer price basket.
The inference was that the NBS might have been massaging reported data by changing weightings without informing the public.
"While only publishing the sub-indices of eight categories but not releasing changes in basket weightings, there is an opportunity to adjust the CPI figure," wrote Xu Qiyuan, author of the report.
Friday, November 12, 2010
Thursday, November 11, 2010
"Justice," Chinese style
Zhao Lianhai, the parent of a child killed by contaminated milk who subsequently has campaigned for stricter food safety standards, has been sentenced to two and a half years in prison for "disrupting social harmony."
The message: No matter what happens, just keep smiling.
The message: No matter what happens, just keep smiling.
US says troops will remain in Afghanistan until at least end 2014
Suddenly dropping the 2011 withdrawal date, which has become "the beginning of a transition," Gates, Clinton and Mullen say that US troops will remain in Afghanistan "at least to the end of 2014." The White House says this is not a change in policy.
Does this change in policy have any relation to the recent Republican election gains?
http://www.nytimes.com/2010/11/11/world/asia/11military.html
Does this change in policy have any relation to the recent Republican election gains?
http://www.nytimes.com/2010/11/11/world/asia/11military.html
Wednesday, November 10, 2010
The storm is coming! Take cover.
BEIJING, Nov. 9 (Xinhua) -- The United States has lost its double-A credit rating with Dagong Global Credit Rating Co., Ltd., the first domestic rating agency in China, due to its new round of quantitative easing policy.
Dagong Global on Tuesday downgraded the local and foreign currency long-term sovereign credit rating of the U.S. by one level to A+ from previous AA with "negative" outlook.
The Chinese rating agency said the downgrade reflected the U.S.'s deteriorating debt repayment capability and drastic decline of the U.S. government's intention of debt repayment.
"The serious defects in the U.S. economy will lead to long-term recession and fundamentally lower the national solvency," Dagong said in a report.
The Chinese rating agency said the Federal Reserve's new round of quantitative easing would further depreciate the U.S. dollar and was entirely counter to the interest of the creditors.
The Federal Reserve last week decided to buy 600 billion U.S. dollars of U.S. Treasury securities and other assets held by banks in a bid to inject fresh funds into the economy and bring down long-term interest rates.
"The credit crisis is far from over in the United States and the U.S. economy will be in a long-term recession," Dagong Global warned in the report, adding a weakening greenback will cripple U.S. capability to attract dollar capital reflow.
The Chinese rating agency said the Fed's move would not substantially reverse the trend of increasing the U.S. federal government's fiscal deficit and debt burden in the long term.
"In essence, the U.S. government's move to devalue the dollar indicates its solvency is on the brink of collapse," said the report.
Dagong Global noted the potential overall crisis in the world caused by the U.S. dollar's depreciation would increase the uncertainty of the U.S. recovery and the United States may face much unpredictable risks in solvency in the coming one to two years.
Founded in 1994, Dagong Global is a pioneer in creating credit rating standards on industries, regions and sovereignties in China, and is also leading the credit rating market in corporate bonds, financial bonds and structured financing bonds.
Dagong Global on Tuesday downgraded the local and foreign currency long-term sovereign credit rating of the U.S. by one level to A+ from previous AA with "negative" outlook.
The Chinese rating agency said the downgrade reflected the U.S.'s deteriorating debt repayment capability and drastic decline of the U.S. government's intention of debt repayment.
"The serious defects in the U.S. economy will lead to long-term recession and fundamentally lower the national solvency," Dagong said in a report.
The Chinese rating agency said the Federal Reserve's new round of quantitative easing would further depreciate the U.S. dollar and was entirely counter to the interest of the creditors.
The Federal Reserve last week decided to buy 600 billion U.S. dollars of U.S. Treasury securities and other assets held by banks in a bid to inject fresh funds into the economy and bring down long-term interest rates.
"The credit crisis is far from over in the United States and the U.S. economy will be in a long-term recession," Dagong Global warned in the report, adding a weakening greenback will cripple U.S. capability to attract dollar capital reflow.
The Chinese rating agency said the Fed's move would not substantially reverse the trend of increasing the U.S. federal government's fiscal deficit and debt burden in the long term.
"In essence, the U.S. government's move to devalue the dollar indicates its solvency is on the brink of collapse," said the report.
Dagong Global noted the potential overall crisis in the world caused by the U.S. dollar's depreciation would increase the uncertainty of the U.S. recovery and the United States may face much unpredictable risks in solvency in the coming one to two years.
Founded in 1994, Dagong Global is a pioneer in creating credit rating standards on industries, regions and sovereignties in China, and is also leading the credit rating market in corporate bonds, financial bonds and structured financing bonds.
Monday, November 8, 2010
Chinese inflation getting out of control
Chinese consumers are suffering great pain from rising food and property prices, as indicated by the following excerpt from the Business Times of Singapore. Increasing the value of the renminbi would help.
"Published November 8, 2010
Chinese consumers feel pinch of inflation
Woes exacerbated as wage increases lag leaps in prices of food, property
By FELDA CHAY
(SINGAPORE) China's interest rate hike may have struck economists as unexpected, but it comes at a time when domestic consumers are becoming increasingly frustrated over soaring food and property prices, and it's not just those at the lower end of the economic spectrum.
'A normal meal in the financial district can now cost 20 to 30 yuan, and when they increase prices it can go up by 10 yuan at one time,' said a lawyer working in Shanghai's Lujiazui financial district, who declined to be named.
'Basic commodities such as pork and sugar are all selling out,' he said. And vegetable prices have soared and look nowhere close to returning to earth. 'For people who are used to buying vegetables at three jiao (30 cents) and it increases to eight jiao, it's a big deal.'
According to China's National Bureau of Statistics, prices of fresh vegetables shot up 19.2 per cent in August this year from a year earlier, and annual inflation rose to 3.6 per cent in September - a 23-month high. Pushing the index up were food prices, which were 8 per cent higher than a year earlier and make up one-third of the overall consumer price index.
What has worsened the problem is that wage increases for some have lagged leaps in the prices of basic commodities."
"Published November 8, 2010
Chinese consumers feel pinch of inflation
Woes exacerbated as wage increases lag leaps in prices of food, property
By FELDA CHAY
(SINGAPORE) China's interest rate hike may have struck economists as unexpected, but it comes at a time when domestic consumers are becoming increasingly frustrated over soaring food and property prices, and it's not just those at the lower end of the economic spectrum.
'A normal meal in the financial district can now cost 20 to 30 yuan, and when they increase prices it can go up by 10 yuan at one time,' said a lawyer working in Shanghai's Lujiazui financial district, who declined to be named.
'Basic commodities such as pork and sugar are all selling out,' he said. And vegetable prices have soared and look nowhere close to returning to earth. 'For people who are used to buying vegetables at three jiao (30 cents) and it increases to eight jiao, it's a big deal.'
According to China's National Bureau of Statistics, prices of fresh vegetables shot up 19.2 per cent in August this year from a year earlier, and annual inflation rose to 3.6 per cent in September - a 23-month high. Pushing the index up were food prices, which were 8 per cent higher than a year earlier and make up one-third of the overall consumer price index.
What has worsened the problem is that wage increases for some have lagged leaps in the prices of basic commodities."
Wolfgang Schäuble on Bernanke's foible
The German finance ministry accuses the US of currency manipulation through quantitative easing (part deux). He is right; the US is consciously destroying the dollar's role as a reserve currency. This is both inevitable and necessary.
Wold Bank suggests that a return to the gold standard may be advisable
This from the FT on Saturday:
"Leading economies should consider readopting a modified global gold standard to guide currency movements, argues the president of the World Bank.
"Writing in the Financial Times, Robert Zoellick, the bank’s president since 2007, says a successor is needed to what he calls the “Bretton Woods II” system of floating currencies that has held since the Bretton Woods fixed exchange rate regime broke down in 1971.
"Mr Zoellick, a former US Treasury official, calls for a system that “is likely to need to involve the dollar, the euro, the yen, the pound and a renminbi that moves towards internationalisation and then an open capital account”. He adds: “The system should also consider employing gold as an international reference point of market expectations about inflation, deflation and future currency values.”
His views reflect disquiet with the international system, where persistent Chinese intervention to hold down the renminbi is blamed by the US and others for contributing to global current account imbalances and creating capital markets distortions.
This week’s meeting of government heads in South Korea is likely to see yet more exchange rate conflict. A US plan for countries to sign up to current account targets has run into widespread opposition.
"Wolfgang Schäuble, Germany’s finance minister, has raised the temperature by describing the US economic model as being in “deep crisis” and criticising the US Federal Reserve’s decision to pump an extra $600bn into financial markets. “It is not consistent when the Americans accuse the Chinese of exchange rate manipulation and then steer the dollar exchange rate artificially lower with the help of their [central bank’s] printing press.”
Although there are occasional calls for a return to using gold as an anchor for currency values, most policymakers and economists regard the idea as liable to lead to overly tight monetary policy with growth and unemployment taking the brunt of economic shocks.
The original Bretton Woods system, instituted in 1945 and administered by the International Monetary Fund, the World Bank’s sister institution, comprised fixed but adjustable exchange rates linked to the value of gold. Controls to restrict destabilising shifts of capital from one economy to another buttressed it."
“The scope of the changes since 1971 certainly matches those between 1945 and 1971 that prompted the shift from Bretton Woods I to II,” Mr Zoellick writes. “Although textbooks may view gold as the old money, markets are using gold as an alternative monetary asset today.”
"Leading economies should consider readopting a modified global gold standard to guide currency movements, argues the president of the World Bank.
"Writing in the Financial Times, Robert Zoellick, the bank’s president since 2007, says a successor is needed to what he calls the “Bretton Woods II” system of floating currencies that has held since the Bretton Woods fixed exchange rate regime broke down in 1971.
"Mr Zoellick, a former US Treasury official, calls for a system that “is likely to need to involve the dollar, the euro, the yen, the pound and a renminbi that moves towards internationalisation and then an open capital account”. He adds: “The system should also consider employing gold as an international reference point of market expectations about inflation, deflation and future currency values.”
His views reflect disquiet with the international system, where persistent Chinese intervention to hold down the renminbi is blamed by the US and others for contributing to global current account imbalances and creating capital markets distortions.
This week’s meeting of government heads in South Korea is likely to see yet more exchange rate conflict. A US plan for countries to sign up to current account targets has run into widespread opposition.
"Wolfgang Schäuble, Germany’s finance minister, has raised the temperature by describing the US economic model as being in “deep crisis” and criticising the US Federal Reserve’s decision to pump an extra $600bn into financial markets. “It is not consistent when the Americans accuse the Chinese of exchange rate manipulation and then steer the dollar exchange rate artificially lower with the help of their [central bank’s] printing press.”
Although there are occasional calls for a return to using gold as an anchor for currency values, most policymakers and economists regard the idea as liable to lead to overly tight monetary policy with growth and unemployment taking the brunt of economic shocks.
The original Bretton Woods system, instituted in 1945 and administered by the International Monetary Fund, the World Bank’s sister institution, comprised fixed but adjustable exchange rates linked to the value of gold. Controls to restrict destabilising shifts of capital from one economy to another buttressed it."
“The scope of the changes since 1971 certainly matches those between 1945 and 1971 that prompted the shift from Bretton Woods I to II,” Mr Zoellick writes. “Although textbooks may view gold as the old money, markets are using gold as an alternative monetary asset today.”
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