China’s Inflation Surged to 4.5 Percent in November- Aren’t Central Banks Injecting Too Much Money In the Economy?
The Chinese inflation rate rose to 4,5% in November 2019 hitting a new record after the highest inflation rate in January 2012 according to the National Bureau of Statistics of China report.
The report argues that the cause of this increase was caused by the high pork prices after the African swine fever.
However, if we see the big picture the Chinese inflation rate has been averaging 5.13% in the last 3 decades with the highest rate at 28,4% in 1986 and the lowest rate at 2.2% in 1999.
Bu the main reason for high inflation rates, as usual, remains the increasing liquidity from central banks to stimulate economic growth. That is exactly what happened in China after 2009 with the credit boom unleashed by the government to incentivize economic growth.
Chinas government fears the increasing inflation rate and aims to keep it under 4%. Fear relies on the fact that high inflation may cause social instability. The Communist Party came in power in 1940 after the Nationalist Party having lost the civil war, as the legend says because it allowed the hyperinflation destroying the wealth of the Chinese middle class.
Central banks around the world have been injecting exaggerated amounts of money into the economy, especially during the last decade. And now the big question that poses itself is; Where are those central bankers driving the world economy and what do they think will happen next.
While central banks have been increasing and securing more their gold reserves, they are not going to tell the average Joe where the economy is headed. We just hear things like “the economy is doing great”, “liquidity injection is needed to support the growth rate”, etc.
While people need to work to earn money, elites can create it from thin air and even invest it or lend it with interest. But then suddenly a financial crisis hits and bakers are rescued with the taxpayers’ money again.
This madness is not going to continue infinitely. Time will come for the fiat bubble to pop and when this happens the average Joes are going to be hurt most.
On the other side, bitcoin has been growing since its inception 10 years ago and many predict huge price numbers after a wider world adoption of the digital currency in the coming years.
But in case of global hyperinflation with the world’s biggest central banks in the race to pour money in the economy these bitcoin price predictions may seem more realistic.