China currency revaluation

China is expected to let their currency rise against the dollar in a few months.

Cheap imports and outsourcing of jobs to China has kept inflation low for the past few years. Might we expect a spike in inflation soon?

I don't spend alot of time thinking about such things, but my hunch is that we are about to see a huge jump in the inflation rate over the next 12 months. Seems that everything is in place for the perfect storm in the currency and fixed income markets. I can envision a number of doomsday scenarios next year in the mortgage and housing markets.

I'm a stock guy so i don't know much about these things. What do you currency folks think?

 

Funny ... the same thing occurred to me this weekend. Seems the only two deflationary influences have been recession and cheap labor. If the recession is over and China revalues what is to stop the inflation rate from ticking up?? Commodities are already pointing the way.

Would seem higher rates are right around the corner.

 

As we all made a ton of money in the markets , what's the best way to protect it from the upcoming inflation?

I am aware of TIPS and TIPS based mutual funds, but I was wondering if they really work, given the fact that they (TIPS) are tied to CPI and can therefore be manipulated by the government? Any other alternatives?

 

They are usually expensive as well...Never short a tip.

 

Huge over capacity still, no wage pressures, massive consumer debt, paranoia over future earnings.

Lots of things affect inflation.

Besides, IF china revalues their currency, it won't be by much. That is the engine of their growth. Don't worry about China, except for what they consume. They are single handedly driving the big rally in copper for example. Not helping out much on oil either.



Jay

 

Try platinum, gold and soybeans as well...

 

Don't forget the fibers like Cotton,now if we can only get the Chinese to drink OJ!

 

They can drive up the price of lots of raw commods, but this rarely equates to inflation, except in the case of oil. Not even a rise in oil has done anything this time however. Too many other variables pointing the other direction.

Give it a year though, could definitely change.

Jay

 

Dunno if you've noticed, but reserves have never been so high. Bush is building some really good arguments in his favor when he starts pouring the oil reserves into the market. A nice spread play, I think...

 

You can open a yuen(remibi) denominated account at Everbank.
The principal is insured by SPIC but the potential loss-in case there is a revolution there while you are holding it - is not.

By the way, would anyone know what would happen to Chinese ADR's in case of a revaluation?