China Offer USD760 Billion For Obama Mug And Inflatable Pillow
China, who reportedly hold $760 billion in US Treasury bonds, plus billions more in currency reserves and other dollar-denominated assets, are probably feeling a little perturbed right now.
Treasury Secretary Timothy Geithner has reassured China that it's money is in safe hands and that it had expressed "justifiable confidence in the strength, resilience and dynamism of the American economy". What's that expression: Methinks thou doth protesteth too much?
I have this mental image of China now running round Duluth airport fifteen minutes before it's plane is about to leave, buying anything that's on the shelves, just to get rid of this bloody foreign currency it doesn't want. "I'll give you $760 billion dollars for the Barack Obama Mug and that inflatable pillow."
It can't be of any great surprise that China would rather like to swap what has suddenly become the largest collection of Monopoly money in the world for grains, metals, or just about anything else.
You want your $760 billion back China? Here you go mate, but mind the print it's still a bit wet.
The world could just about be ready to enter a new phase of mega-inflation.
UK Inflation Turns Negative
Inflation in the UK turned negative in March for the first time since March 1960. The RPI was -0.4% as mortgage and fuel costs fell, say the Office of National Statistics.
The news was pretty much as expected, indeed many thought that February's RPI might come in negative when in fact it was 0.0%.
The consumer price index also fell from 3.2% in February to 2.9% in March.
So there we have it, deflation is amongst us. How long will it last is the sixty trillion dollar question?
You will note that I've modernised that saying, as sixty million is bugger all these days.
Deflation Next, Bank Warns
Many economists' sights are set on inflationary signs and the stock market is bracing for an August interest rate increase, but now an important world bank is warning that deflationary pressures could be next.
The "central bank for central banks," the Bank for International Settlements, in its annual report released Monday said, "The current market turmoil is without precedent in the postwar period. With a significant risk of recession in the U.S., compounded by sharply rising inflation in many countries, fears are building that the global economy might be at some kind of tipping point.
"These fears are not groundless. The magnitude of the problems yet to be faced could be much greater than many now perceive," it said. "It is not impossible that the unwinding of the credit bubble could, after a temporary period of higher inflation, culminate in a deflation that might be hard to manage, all the more so given the high debt levels."
According to the Wall Street Journal, BIS put much of the blame for this economic crisis on the central banks themselves -- because they didn't set interest rates high enough earlier this decade, allowing the unsustainable credit boom.
What's to be done? The more immediate danger is still inflation, BIS said, so it is advising most central banks to raise key interest rates.
BOE Sees Inflation Accelerating, Limiting Scope for Rate Cuts
The Bank of England has said that inflation will accelerate, breaching the government's 3 percent limit for "several quarters," making it harder for policy makers to cut interest rates as economic growth slows.
The bank said inflation will overshoot its central 2 percent target in two years if it cuts the benchmark rate to 4.5 percent in 2009 as analysts have predict.
Policy makers, led by Governor Mervyn King, are trying to shore up an economy threatened by the worst housing slump in more than a decade and surging food and oil prices. Inflation accelerated to 3 percent in April, the most in more than a year.
The rate on the December interest-rate futures contract rose about 7 basis points to 5.6 percent after the report was released.
