2011-09-28

Liu Jun Luo: Six to ten months until Chinese hyperinflation

Liu Jun Luo has a new blog post up. He's notorious for not laying out all the details, so I will set this up a bit. The following is my interpretation of what he's writing, filling in some spaces. You can read his writing below in Chinese or English. The Chinese economy is unbalanced with far, far too much investment directed by government owned companies or government bureaucrats. Government investment is often negative in and of itself (relative to a similar private investment) since it tends to be less efficient, and while there were good infrastructure projects before, a lot of the recent spending only fueled real estate. China desperately needs to rebalance as fast as possible, and one way to do that is to create wage inflation. In this article Liu Jun Luo talks about how on a battlefield, you destroy some areas to slow the enemy. There's a depression in the West that's about to become more severe, exports are going to drop and Chinese will become unemployed. Defending this sector of the economy makes no sense. The bigger threat is that deflation takes hold in China because of the credit bubble. When investment bubbles in Asia burst, it's the currency that gets annihilated. Mr. Liu's advice is that China create the inflation itself, rather than suffer the "super" inflation that will result from a currency collapse that will wipe out stocks, real estate and the savings of ordinary Chinese. 回复刘军洛新浪微博粉丝提问
正确的预期是非常重要的,目前全球债务膨胀,美国、德国、英国的长期债券收益率全部下降的创记录低点,这已经说明全球大量私人资本正在大规模退出劳动力市场和资本市场。
中国目前的通货膨胀现象是一个严重的假现象,这就好像2008年3月份中国通货膨胀达到当时的高峰,结果,在2008年9月份的世界外部冲击打进了大萧条。
所以,目前正确的方式是中国中央银行要制造通货膨胀,就是大幅度提高工资。因为,如果我们再被外部像2008年9月份打进了大萧条,那么,中国将用6~10个月时间演变成真正的超级通货膨胀。这是,人民币汇率崩盘的通货膨胀,那么,这就是不可救药失控的通货膨胀。
目前,如果我们大幅度提高工资后的通货膨胀是不会危害的汇率的,但是,我们错误的选择了大萧条,那么,人民币汇率就必定崩盘。
这就好像战场,你必须选择局部地区的大量牺牲,因为,这也意味着大量敌人被你也严重拖延在局部地区。中国现在最失败的地方就是没有居民免费食品券机制。
你需要明白我们实际是在谈论人民币汇率问题。中国大萧条后演变的超级通货膨胀是迅速消灭所有人的股市资产、房地产资产和储蓄资产。
现在,中国的宏观层面无法理解我们真正问题是人民币汇率上面,所以,中国普通人只能自保,因为,这是一场中国普通人的人生灾难。
同时,世界的套利者也把这个事件看的清清楚楚,他们会顺应市场的趋势,把这场大规模的灾难变成更大数量级的灾难。
Below is the Google translation, which I touched up a bit.
Correct expectations is very important, the current expansion of global debt, the United States, Germany, the UK's long-term bond yields fell to a record low point, which has indicated that a large amount of private global capital is a large-scale withdrawal from the labor market and capital market.
China's current appearance of inflation is a serious false appearance, similar to China in March 2008 when inflation reached a peak as a result, in September 2008 global external shocks turned into the Great Depression.
So, now the proper way to create inflation is for China's central bank to substantially increase in wages. Because, outside shocks similar to September 2008 again bring the Great Depression, then, in 6 to 10 months China will evolve into a real super-inflation. This is the collapse of the RMB exchange rate inflation, then, this is hopelessly out of control inflation.
Currently, if we significantly increase wage inflation it is not harmful to the exchange rate, but we wrongly choose the Great Depression, then, the RMB exchange rate will collapse. It's like the battlefield, you must choose to sacrifice a large number of local areas, because this also means that a large number of enemies are seriously delayed in some areas. China most failed area now is that there are no food stamps.
You need to understand that we are actually talking about the RMB exchange rate issue. After China's Great Depression, the evolution of super-inflation will mean the rapid annihilation of all stock market assets, real estate assets and savings assets.
Now, China's macro level cannot understand our real problem is that of the RMB exchange rate, so all the Chinese ordinary people can do is protect themselves, because this is a catastrophe for the lives of ordinary Chinese.
Meanwhile, the world arbitrageurs also clearly see this event, they will follow the market trend, the large-scale disaster of this magnitude will become an even greater disaster.

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