Gary North: commodity bubble to pop when China rises its currency

[atreyu42]

http://www.contrarianprofits.com/articles/climbing-off-chinas-paper-money-tiger/


CONCLUSION

The worldwide commodity bubbles are being funded at
the margin by China and India. A recession in either
country will pop the commodity bubbles.

China’s central bank holds a trillion dollars worth of
foreign bonds. When its currency rises, these bonds will
fall in value, which is what a rising yuan means. If the
central bank sells foreign bonds to buy commodities, this
will drive down the value of the currencies of commodity-
importing countries even further. This will raise interest
rates (lower bond prices) in those nations whose government
bonds are being sold by China. This will spread the
recession, thereby lowering demand for China’s exports.

In an inflation-driven boom, the spiral is upward.
Everyone cheers. In a bust, the spiral is downward.
Everyone screams.

China is riding the monetary tiger. So are you. So
am I. The Chinese oligarchs do not understand enough
economics to climb off gracefully. They will therefore
continue to ride it until the bubbles finally pop.

This tiger is going to maul hundreds of millions of
people, not all of them Chinese.

I am taking steps not to be one of them.
Does this include gold?

Does anybody here recommend to buy dolar-pegged yuans sometime in the future? How?

[phirang]

http://www.contrarianprofits.com/articles/climbing-off-chinas-paper-money-tiger/

Does this include gold?

Does anybody here recommend to buy dolar-pegged yuans sometime in the future? How?

consider the following charity from myself:

gary north is so incredibly stupid that if there existed a derivative to short HIM, i'd lever myself to the hilt to buy that derivatibe.

anyone who dismisses the chinese like that is a rank amateur and deserves no attention.

[Jim Nickerson]

http://www.contrarianprofits.com/articles/climbing-off-chinas-paper-money-tiger/

Does this include gold?

Does anybody here recommend to buy dolar-pegged yuans sometime in the future? How?

CNY is an ETN for yuans (and me-ans).

MEAFX is a basket of Asia currencies. Both are new.

I just read a few minutes ago, that the Chinese officials are trying to slow the rise of the yuan because it is hurting them. Here it is below.

My opinion is that I would wait a while (I know not how long) before getting into the yuan, and there is some consideration that the ETN CNY is dependent upon the viability of JP Morgan--I believe it is. If JPM failed, then CNY might be worthless. There probably will be some more ways to buy the yuan in the near future.


Bloomberg: Yuan posts biggest weekly loss in eight months
“The yuan posted its biggest weekly loss in eight months on speculation the central bank will curb the currency’s appreciation as the economy slows.

“China’s currency snapped two weeks of gains as the state-run Chinese Academy of Social Sciences said the economy will grow 10.7% this year, slowing from a 13-year high of 11.9% in 2007 because demand for exports will weaken. Premier Wen Jiabao said last week the country will balance the risk of a slump in growth against the threat from inflation at an 11-year high.

“‘Government officials are worried about a slowdown in the economy just as inflation poses a headache to them,’ said Xing Ziqiang, an economist in Beijing with China International Capital Corp., the first Sino-foreign investment bank in China. ‘Textile companies and consumer goods producers are suffering quite a slowdown in export orders.’

“The yuan has dropped 0.24% this week, the most since the five-day period ended Aug. 17. The US currency has rallied this week, poised for the best week in a month against the euro.

“The yuan’s appreciation has been ‘too fast’ and the government should stabilize the foreign-exchange market, Market News International reported, citing a study by a government research institute. The State Information Center wrote in a report that one-way gains in the yuan are fueling expectations of further appreciation, according to Market News.”

Source: Kim Kyoungwha and Belinda Cao, Bloomberg (http://www.bloomberg.com/apps/news?pid=20601083&sid=aW_p87XKhcQc&refer=currency), April 25, 2008.