China must Kill the Dollar

While the entire world looks on at the despair being seen in places such as Greece and Ireland, many are failing to see what is fast becoming the worst economy in the developed world, America. There is not a single developed nation that is as dependent on another country for survival than the relationship the U.S has with China. In the last year, the US has been calling China a ‘currency manipulator’ – and they are quite right in their estimation, however, were it not for China manipulating the Yuan, then the U.S Dollar would have failed a long time ago.


It is because the Chinese have pegged their currency to the U.S dollar in order to keep the Yuan artificially low which benefits the Chinese export market, as many of their products are consumed in the U.S.

But, has that relationship come to an end? China has been experiencing extremely high inflation in food prices across the country, which has come as a result of having to print more money to mirror the actions of the Federal Reserve.

China’s food prices have sky rocketed by 10% over the past month, with the price of fruit & Vegetables rising to 20%. China have officially reported that they are suffering shortages in; Sugar, Cotton, Corn and other crops.

To combat the hike in food inflation, the Chinese government have hinted that they will implement price controls. As history has shown, government price controls do not work, The main reason that pricing controls do not work is that they try to muscle out the free market, which is nigh on impossible to achieve in the long-term. The only thing that controls on prices do is forcefully create an underground ‘black market’ for goods and services and that will be their only option for certain goods as the Chinese stores begin to empty, the likes of which that were seen in Zimbabwe in the midst of one of the worst economic conditions the world had ever seen.

However, these problems will not be localised to China for much longer, the warning signs of food inflation has already become apparent in certain areas of the U.S and when the inevitable problem becomes widespread in America, the outcome will be on a much more catastrophic scale than is currently being seen in China.

So, who will America turn to? China can just allow the Yuan to appreciate and it will eradicate their inflationary problems , but America, they will only have the Federal Reserve and their last remaining weapon; Print, print and print some more.

Americas saving grace is the fact that they have a rather substantial agricultural sector in which to produce the necessities to get by and form the basis of a self-sustaining economy, but this is becoming a more and more unlikely scenario because of the rising price of Oil, and without oil, a large scale of farming cannot function and the only purpose for the tractors will either be dust collectors, or assets in which the farmers can sell off and use the money to buy food.

Retailers in the U.S are already feeling the full weight of inflation, yet they are trying to hold out as long as possible before passing on the inflation to their customers. A mainstream publication put the CPI (consumer Price Index) at under 1% for the 2010 year, which is completely ludicrous.

The reason that the CPI is reporting <1% is because the method of calculating CPI is now, in my opinion completely fraudulent and deceptive, it has been so diluted and is now beyond any recognition from its original formula of the 1970’s, to get a more accurate view of the real rates, John Williams, owner of shadowstats.com is the leader in uncovering manipulative data.

The reason that the government re-calculated the method of CPI is too make it more ‘reporting friendly’ – to create a false sense of security for the people, although the people are now demanding the truth, however harsh it may be.

An example of the fraudulent calculation of the CPI and to illustrate how spectacularly the forecasts of the government are incorrect is; In 1975, the median household income was, $11,800. To translate that number into today’s U.S Dollars, using the current CPI would put the median household income today at; $44,777. However, using the real calculation of CPI would turn the 1975 total into a staggering $154,000.

The projection of the inflation association also states that, at present, U.S families allocate 13% of total expenditures on food and 34% on housing, it is reported that those two numbers will see a role reversal, suggesting that for every 1% increase in consumer wages it is expected that food inflation will rise by a further 4%.

China are now acting as their own worst enemy by playing along with demands of the U.S, all China need to do to resolve their current inflationary problems and stop them becoming any worse, they must un-peg the Yuan from the U.S Dollar and allow their currency to appreciate, there are only positive implications for China; They’re currency will appreciate and they will experience a temporary deflationary period which, combined with the rise in purchasing power of the Yuan, will allow the Chinese people to consume more.

The only looser will be the U.S, as there last remaining lifeline, remove themselves, I have no doubt that the Federal Reserve will do nothing but flick the printing press switch to the ‘on’ position.