I didn't manage to finish the article I am working on (70% done). I will tomorrow for sure.
I now view hyperinflation in China as absolutely guaranteed. Zero doubt. China is abandoning all the measures it has put in place to fight inflation. It is dropping restrictions on purchasing property, eliminating price controls, getting rid of loan quotas, lowering interest rates, ceasing its sterilization efforts, etc… It is also pulling out all the stops to boost government spending and new loan creation.
Meanwhile, China's 40 billion dollar trade deficit means that its base money supply looks set to double in 2009. There is also the fact that China's velocity of money is stagnant due to cash hoarding and can't slow any further. Finally, the commodity bubble has finished bursting, and China's economy looks set to shrink.
Every single factor in China suggest an enormous wave of hyperinflation will begin early this year. It is the event that will finally end the US's borrowing binge and the dollar.
Hyperinflation in China would be a monument event. Here are a two reasons why:
1) Because China makes most of the world cheap consumer goods, it will export its hyperinflation around the world. This will come as a shock to all those people who are expecting deflation. This means that no fiat/paper currencies will survive this . The only money that will retain its purchasing power in the face of Chinese hyperinflation is gold.
2) Since hyperinflation would hurt China worst than losing its exports to the US (millions of its citizens would starve as their savings got wiped out), China will drop its dollar peg and sell off its US holdings. While I have written about all the threats facing the dollar