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."
Monday, November 8, 2010
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.”
Wednesday, September 29, 2010
Singaporeans upbeat on death
The Lien Foundation has successfully launched its “happy coffins” campaign, with 733 coffin designs submitted from 37 countries by the dying. Said Lien Foundation CEO Lee Poh Wah: “We are turning the coffin from a supreme negative symbol of death into a creative canvas for reflection, inspiration and the positive celebration of life.” He added, somewhat ominously, “We’d also like to be a conduit for interested parties to explore further possibilities.” Bull market psychology is clearly in place in Singapore.
ADB raises Asian growth forecast to 8.2% for 2010
The Asian Development Bank has increased the forecast for Asia ex-Japan from 7.5% to 8.2%. China is forecast at 9.6%, India at 8.5%. Singapore’s forecast has been raised from 6.3% (April) to 14% (today.) (Straits Times, Sept. 29, 2010) This will lead to a gradual acceleration in Europe and the US.
Saturday, September 25, 2010
African growth ‘miracle’
Africa’s economies are expected to grow 5% this year. It is interesting that both resource-based and other countries are growing.
Net worth of American households still low
Household net worth peaked at $65.8 trillion before the recession. It bottomed at $48.8 trillion and is now $53.5 trillion. There is still a long way to go.
Subscribe to:
Posts (Atom)
Posts
