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-- Posted Sunday, 14 March 2010 | Digg This Article | | Source: GoldSeek.com
The Middle East could be enjoying another oil price boom much sooner than expected as Chinese inflation gathers pace after one of the biggest experiments in loose monetary policy in history. Once an exporter of deflation to the rest-of-the-world, a nasty side-effect of the record stimulus plan in China last year is a surge in inflation that jumped to 2.7 per cent last month. Officials claim this is ‘mild and controllable’. Veteran observers sense an inflation genie let out of the bag. Handbag shortage One Arabian money reader recently commented on shortage of handbags in China. This small example is illustrative of too much money pursuing too few goods. Inflation in prices is the inevitable result. Chinese officials blame rising international commodity prices for domestic price rises. Yet where is that demand coming from but China? The latest oil studies have all concluded that demand is surging in China and flat or falling in the rest-of-the-world.
How long before the cost of Chinese exports begins to increase and this inflation is literally exported to the rest-of-the-word? It can only be a matter of time, and not so long at that. Gold investors selling last week on fears that interest rates would go up in China are really barking up the wrong tree, as is anybody who thinks the Chinese are not buying more gold themselves. Oil producing countries have been very content with oil prices in the $70-80 range. But they worry about higher prices because that might give their customers another economic heart attack. There is also mounting concern about the durability of the Chinese economic recovery and the quality of recent GDP growth. Speculative bubbles inflated by cheap credit have a habit of going spectacularly bust and leaving the formerly rich and successful in deep trouble. Stimulus risk No country has ever masterminded a bigger per capita stimulus plan than China last year. It is the boldest ever plan of its kind, and therefore also carries the most risk. For one thing higher oil prices will be desperately bad news for the developed economies still struggling to emerge from the worst recession since the 1930s, and having saved the world with its massive reflation China risks blowing up its client’s economies with inflation. Not that the developed economies have been pursuing exactly deflationary policies themselves, and this just adds to the witches brew now imperiling the global economy. If there is an oil price spike now it may be nasty, brutal and short. Gold is the more solid inflation hedge.
-- Posted Sunday, 14 March 2010 | Digg This Article | Source: GoldSeek.com
Previous Articles by Peter Cooper
About Peter Cooper:
Oxford University educated financial journalist Peter Cooper found himself made redundant by Emap plc in London in the mid-1990s and decided to rebuild his career in Dubai as launch editor of the pioneering magazine Gulf Business. He returned briefly to London in
1999 to complete his first book, a history of the Bovis construction group.
Then in 2000 he went back to Dubai to become an Internet entrepreneur, just as the dot-com market crashed. But he stumbled across the opportunity to become a partner in www.ameinfo.com, which later became the Middle East's leading English language business news website.
 Over the course of the next seven years he had a ringside seat as editor-in-chief writing about the remarkable transformation of Dubai into a global business and financial hub city. At the same time www.ameinfo.com prospered and was sold in 2006 to Emap plc for $27 million, completing the career circle back to where it began a decade earlier.
He remains a lively commentator and columnist as a freelance journalist based in Dubai and travels extensively each summer with his wife Svetlana. His financial blog www.arabianmoney.net is attracting increasing attention with its focus on investment in gold and silver as a means of prospering during a time of great consumer price inflation and asset price deflation.
Order my book online from this link
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Will Chinese Inflation Hike Oil And Gold Prices Back Up?
