Wen speaks on U.S. Treasurys owned by China:
“We have lent a huge amount of money to the U.S., so of course we are concerned about the safety of our assets. Frankly speaking, I do have some worries,” Mr. Wen said in response to a question.
We’re doing just swimmingly…
The conditions are ripe for hyperinflation.
Here’s a chart detailing the US money supply:
What else do we know about hyperinflation?
We’ve seen the massive increase in the amount of money, so what about the other side of the hyperinflation equation?
What is going on with “the output of goods and services”?
From CNN, 1/30/2009:
New economic data showed the U.S. economy shrank the most in 26 years in the last three months of 2008, with its Gross Domestic Product falling 3.8%.
So, the money supply is rising at an incredible rate, while the output of goods and services is falling with equal speed…what can we expect?
Hyperinflation effectively wipes out the purchasing power of private and public savings, distorts the economy in favor of extreme consumption and hoarding of real assets, causes the monetary base, whether specie or hard currency, to flee the country, and makes the afflicted area anathema to investment. Hyperinflation is met with drastic remedies, such as imposing the shock therapy of slashing government expenditures or altering the currency basis.
Why is China concerned?
Because in many cases hyperinflation leads to the devaluation of a nation’s currency (Mexico,1982), and if the US devalues the dollar in response to hyperinflation, China’s financial loss on their US receivables would be staggering.
Luis, I edited your comment. I’m sorry but our policy is that we don’t allow Wikipedia references here.
Aren’t the loans China have given us from the previous administration as well?
Sorry about that Henry, I guess I better read your posting guidelines.
Can I inject a definition of hyperinflation from another source into the comment at this time?
That definition remains pretty constant regardless of the source.
“Hyperinflation and Monetary Collapse” by David Eishen, reiterates the definition, paraphrased below:
Hyperinflation is defined as a massive increase in the monetary supply, not supported by a corresponding increase in production of goods.
No sweat. Most people don’t read the policies. I’m just very particular about Wikipedia because a lot of the stuff related to Cuba is written by marxists. You should be able to edit your own comment.