by Phoenix Capital Research
Let’s wind the clock back to 2008.
The world was thought to be ending. Lehman went bust. Markets were
plunging. Everyone was scared that growth was over. It was as though the
global economy was grinding to a halt.
But then China’s stock market bottomed. The Chinese Government
announced a massive stimulus plan to turn its economy around. And sure
enough the Chinese economy took off again.
A few months later, the US markets bottomed courtesy of extraordinary
stimulus from the US Federal Reserve. Three months after that, the US
economy was showing what everyone claimed were “green shoots.”
And the world began to gradually shift towards growth and increased confidence.
Why do I bring all of this up? Because it was China’s stimulus and
China’s economy that supposedly lead the world back towards growth
again. China is the proverbial canary in the coalmine, the economy that
most quickly reveals what’s coming and where we’re all heading…
Well, China’s heading for inflation.
BIG INFLATION.
China should be on “high alert” over inflation
after February’s figures exceeded forecasts, central bank Governor Zhou
Xiaochuan said, signaling a heightened focus on controlling prices.
Monetary policy is “no longer relaxed” and is “relatively
neutral” as demonstrated by a 13 percent target for money-supply growth
that’s tighter than expansion in the last two years, Zhou, head of the
People’s Bank of China, said at a press conference today during the
annual gathering of China’s National People’s Congress…
“The central bank has always attached great importance to consumer prices,” Zhou said. “Therefore we will use monetary policy and other measures to hopefully stabilize prices and inflation expectations.”
China’s new leaders including Li Keqiang, set to become premier
this week, inherit the task of sustaining a recovery from the slowest
growth in 13 years while reining in asset prices and credit. February
inflation, distorted by the weeklong Lunar New Year holiday, accelerated to a 10-month-high of 3.2 percent.
Source: Bloomberg
Bear in mind, the above story is greatly downplaying the REAL
increase in inflation in China. A recent study from shows that prices in
some Chinese cities are in fact higher than in NEW YORK. And China’s
per capita is income is less than 25% of the US’s!
A South China Morning Post survey of some commonly bought grocery items found that a 500
gram loaf of bread that sells for HK$8.60 in Hong Kong and the
equivalent of HK$9.93 in London, cost the equivalent of HK$13.52 in
Beijing.
The latest annual cost of living survey by the compensation-consulting firm Mercer
found Beijing and Shanghai to be pricier than New York and London.
Shanghai was ranked 16th followed by Beijing at 17th, ahead of London
(25th) and New York (32nd).
Source: SCMP
This is a MAJOR warning sign to investors worldwide. Indeed,
inflation is so out of control in China, that the country suffered 71
strikes in January 2013 alone.
The cause of these strikes?
Workers were demanding higher wages because prices had risen to the point that their old paychecks weren’t cutting it anymore.
China has sounded a warning bell, inflation is coming. And it’s going to be spreading throughout the globe in the coming months.
History has shown us countless times that you cannot print money
without prices soaring. There is not one single instance in which
currency devaluation has not done this. And the US Federal Reserve is
now printing $84 billion every single month.
I’m sure you’ve noticed prices have begun rising
already. This is only going to be getting worse going forward. Which is
why now is the time to be preparing ourselves and our portfolios for
this. Inflation can take its time to arrive. But once it does… things
move very very quickly.
If
you’re concerned about inflation… and want to learn more about simple
bit highly effective ways you can shield yourself from it…
Best Regards,
Graham Summers
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