Niu Wenxin: Global Inflation Crisis Comes

Last night, oil prices hit $90 a barrel again. More importantly, I'm afraid it's hard to turn back after breaking $90 this time. If oil prices rise rigidly, the second "global inflation crisis" will become a reality. First time“ Global inflation crisis ”In the 1970s, the "Middle East War" led to the so-called "shortage of oil supply", which led to a sharp rise in oil prices and a "global inflation crisis". -

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Strictly speaking, the first "global inflation crisis" was not "inflation crisis", but“ oil crisis ”; It is because the purchase of oil must use dollars, and the sudden rise of oil prices has increased the demand for dollars around the world, which has made the dollar more passive. As Mr. Wang Jian, an economist and the secretariat of the Chinese Society of Macroeconomics, said: the price rise caused by insufficient supply“ Overissuance of currency ”It is only the result of price rise, not the cause of price rise. -

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This is a historical fact that we must clarify. Because the economics textbooks of the "neo liberalism school" and the textbooks of the monetarism school generally regard "tightening money to restrain inflation" in the late period of the "oil crisis" as a classic case of the success of monetarism. In fact, this is a serious "distortion of the facts". -

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First, oil and food are the most basic necessities of human life. Their rising prices will lead to the rise of all commodity prices in the whole society. This is a fact that must be clearly recognized. Therefore, the root cause of the general price rise at that time was the sharp rise of oil prices. To curb the price rise, we should also start from solving the root cause of the "oil crisis". Facts have proved that the reason why prices fell in the late 1970s was not the result of "interest rate increase" to 20%, but the inevitable result of the end of the Middle East war. -

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Second, ignoring the "causality" and wantonly tightening the currency, the result is that the global economy has paid a huge price of "stagflation for many consecutive years". Subsequently, almost all of the real economy moved to the developing countries in the East. -

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It is precisely because we understand such harsh historical facts that we speak out to the Chinese government to curb imported inflation and the price rise caused by insufficient supply. We must not use monetary means, otherwise the economic cost will be huge, and it will lead to unimaginable social unrest. Because the mistakes of economic policies will lead to large-scale bankruptcy of the real economy, national unemployment, and sudden decrease of income, which will give the hostile forces an opportunity to take advantage of. They will not blame the mistakes of China's economic policies on the misleading of western economic textbooks, but will incite the masses, blame the policy mistakes on corruption, government incompetence, and undemocratic, etc, And then bring down the Chinese economy. This is not a fantasy, but the fact and lesson of the "color revolution" in Eastern Europe.

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Now we can see that the decisions of the Central Committee have corrected the mistakes of the past and have generally moved in the right direction. However, we may have to face another disaster at this time; Global inflation crisis. Note that today's situation is completely different from that of the 1970s. Today is "real global inflation". -{page_break}

On April 14, 2009, I first proposed that "global deflation" would suddenly turn to "global inflation", and hoped that investors in the stock market would pay attention to this trend, and there would be a large round of so-called "inflation" in the future. Since then, we have repeatedly expressed a view that commodity prices may rise rigidly in the future regardless of the depreciation or appreciation of the US dollar.

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Why did you make such a judgment? Quite simply, countries around the world are issuing a large number of currencies, which will distort the appreciation or depreciation of the US dollar. It is difficult to express the strength of currencies between countries through exchange rates, but ultimately through commodity prices. The expression is: rigid rise in commodity prices. -

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It may have been said by us. Very simple. Put the historical and realistic trend chart of dollar index and commodity index together, and the conclusion will be drawn soon.

This is certainly not a good thing for China. Because China's monetary policy is invalid; No matter how tight it is, it cannot stop the rise of prices. Therefore, to cure the imminent "global inflation crisis", all countries in the world must tighten their currencies together, rather than individual countries. But the reality is just the opposite. The three major economies of the United States, Europe and Japan are all implementing "extremely loose" monetary policies. Countries that have started to tighten their currencies in the early days, such as Australia, Canada, India and Brazil, have recently stopped further tightening. -

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In fact, all fools know that in the context of economic globalization, when the international reserve currency is extremely loose, the weak currency countries who tighten, who "die". Because the inflow of "hot money" will not only hedge the tightening policy, but also make the country's liquidity flooded. China had tried before October, but it could not, which led to the policy change. -

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Is "global inflation" a good thing for investors in China's stock market? It all depends on whether the Chinese government's policy choice is correct.

There are two situations. First, China "must restrain" such inflation, and it will tighten its currency in the extreme. In this way, the stock market will fall immediately. Don't expect any hope for the real economy, because all demand will disappear. Second, the Chinese government adopts the "shoulder" method, and uses the method of "releasing price transmission and increasing residents' income" to maintain the real economy and maintain employment and social stability, then the Chinese stock market will be "empty cattle into real", and the economy will operate well.

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Now there is a "very bad" phenomenon in China that deserves the management's attention. This phenomenon is that the liquidity inside the banking system is very tight, but the liquidity outside the banking system is very loose. If this is the system's tactical means of "stock in and bank out", that's no problem. However, it would be a big mistake if the phenomenon caused by the wrong tightening of the currency was to continue tightening. I hope not the latter. -