If United States In Hyperinflation And The One Who Get Cough Too

~In the 1930s, we had a huge stock market bubble which popped. And then politicians started making many mistakes. They became protectionist. They made solvent banks take over insolvent banks and then both banks failed in the end. They are making many of the same mistakes now. What’s different this time is that we are printing huge amounts of money which they did not print at that time. So, we are going to have inflation this time. ~ Jim Rogers, 20 June 2009.

Emhhh, how do I need to evaluate this situation to China and Malaysia?

Jim Rogers had predicted that inflation could set in. I guess he was mentioning to United States,,,,or maybe the whole world. I am interest to study the impact of the inflation in United States to the rest of the world.My prediction is that if inflation really to be taking place in United States in near future; China and Malaysia could be severely effected as well.

My analysis is based on the study of currency movement between US dollar and these 2 countries. When US dollar was strengthening against the Euro, British Pound and Australia Dollar in late 2008 and early 2009, the Yuan and Ringgit Malaysia were following the US dollar pattern to strengthen. Now, we are seeing the same happenning to Yuan and Ringgit when the US dollar weakening.

The summarize that US dollar, Yuan, Ringgit are moving in the same basket versus the basket that consist of Euro, British Pound, Brazil Real and Australian dollar.

So, if United States will go into inflation, I need not to tell the answer about China and Malaysia.

You can figure it out.


One Response to If United States In Hyperinflation And The One Who Get Cough Too

  1. hishamh says:

    Jim Rogers is right and wrong. One of the mistakes politicians and central bankers made during the Great Depression was to try and maintain parity against gold, which meant in effect contracting the money supply. In other words, it’s not obvious that monetary expansion is a mistake in the current situation.

    For a number of reasons, quantitative expansion is the correct policy response:
    1. The monetary transmission mechanism is broken – banks are not lending on the increase in liquidity, which means there’s very little pressure on prices.
    2. US M2 Money velocity has fallen a cumulative 10% in the past half year, which means an even greater than normal monetary expansion is required just to maintain a neutral monetary stance.
    3. The amount of US “printing”, i.e. monetization of national debt, is still small relative to total debt outstanding (approximately just 2%).

    Your analysis of currency movements would only be correct, if each of those currencies is fully free floating. They’re not. Both BNM and BOC intervened in the 2nd half of 2008 to prop up the value of RMB and MYR against the USD, thus the the increases seen in the cross rates. It should be noted that both also lost against the USD in the same period, but to a lesser degree. As such the story is still USD strength in the 2nd half of last year against all other currencies – not a tale of two baskets.

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