"The inflation that Chinese citizens are currently suffering from is inflation that China is needlessly importing from the U.S. The solution to China's inflationary crisis is simple, they should allow the yuan to appreciate in value. China's currency is currently artificially low because they are keeping it pegged to the U.S. dollar. As the Federal Reserve prints money, China's central bank also prints enough money to keep the yuan's exchange rate with the U.S. dollar stable. This is done entirely to help Chinese export companies, but it is causing Chinese citizens to suffer."
"The same food inflation crisis that China is currently experiencing will likely hit the U.S. in early 2011, only much worse. NIA believes it is only a matter of time before Congress places the blame for rapidly rising U.S. food prices on American "speculators" who are buying agricultural commodity ETFs and "hoarders" who have food storage at home. While China can easily solve their food inflation crisis by allowing the yuan to strengthen, the U.S. will have no way of solving its upcoming food inflation crisis. Despite the U.S. being a major producer of agricultural products and being mostly self-sufficient, oil is a very important commodity used in agriculture production and the U.S. needs to import most of its oil. Oil prices hit a new 52-week high last month of about $88 per barrel."
"If China wants to become the world's new superpower, they need to allow Chinese businesses that export to the U.S. to either go bankrupt or find new buyers of their products. Sure, the stock and bond holders will get wiped out, but the infrastructure will still be there. Those who are invested into gold and silver today will have the resources to buy up cheap Chinese assets out of bankruptcy years down the road. Although the first and second tranche investors in China may lose everything, those who buy up these assets out of bankruptcy will be positioned to prosper during what could be a future 25 year boom period for China when their citizens are no longer forced to prop up the U.S. economy."
To read the full article on the National Inflation Association's website , click here.
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