China Forced To Deny It Will Experience HYPERinflation In 2011, As Russia Unexpectedly Hikes Interest Rates

Tyler Durden's picture

And now for this evening's stunner, via Dow Jones. "There won't be hyperinflation in China this year, the state-run China Securities Journal reported Tuesday, citing Yao Jingyuan, the chief economist of the National Bureau of Statistics. The abundant stocks of grains and main agricultural products in China are key factors in stabilizing consumer prices, the newspaper quoted Yao as saying. China's consumer price index rose 4.9% in January from a year earlier, picking up from December's 4.6%." So putting aside what official denial means about the validity of a story, not to mention this utterly bizzare and completely out of left field statement, China's best and only reason why it won't have hyperinflation is that it has "abundant stocks of grains and agricultural products."... We can, at best, hope that this has to be some early version of an April Fool's joke, or else things are truly far worse than anyone expected.

Also, just where does China put the threshold cut off on "hyper" - 10%? 20%? 50%? Is it at least safe to say that China may well experience mega, turbo, or nitrous inflation (and we generously put all three terms to the left of "hyper" on the X-axis)?

In the meantime, Russia, which will soon come out with comparable warnings, unexpectedly hiked interest rates by 0.25% to 8.00%:rest

The Russian Central Bank unexpectedly raised its key interest rate by 0.25 percent to 8 percent for the first time since the economic crisis over two years ago.

The Bank of Russia said in a statement that the rate hike, effective from Monday, was needed due to the high inflationary pressure and the expected rise of capital inflow into Russia as the world oil prices surge on the unrest in the Middle East.

“There are grounds for capital inflows into Russia due to higher oil prices,” the central bank said in a statement accompanying the decision.

By tightening its monetary policy, Russia is sending a strong signal that it views rising prices as a greater threat than slow economic growth.

Since the start of 2011, according to the Rosstat data, customer inflation in Russia reached 9.7 percent in a yearly term, mostly due to rising food prices. Earlier, in December 2010, central bank Chairman Sergey Ignatiev said monetary policy makers next year will focus on keeping inflation between 6 percent and 7 percent.

In addition to raising all of its rates by 0.25 percentage points, the central bank also tightened reserve requirements for liabilities to non-residents were raised by 100 basis points to 4.5 percent, and for other liabilities by 50 basis points to 3.5 percent. This should discourage inflows of speculative capital and a sign of the bank’s concern that a stronger ruble would hurt growth.

On Friday, Russia’s currency climbed 0.7 percent, hitting a 10-month high against the U.S. dollar.

Russia’s current bout of inflation was sparked by a summer drought that destroyed over one-third of its grain harvest last year and sent food prices soaring.

Although Russia has already scrapped food import duties and banned exports of grain, prices have continued to rise, throwing into doubt the central bank’s target of 6 percent to 7 percent inflation for 2011.

“It’s quite encouraging to see that they’re willing to adopt a quite unconventional … response,” David Oxley, an emerging markets economist with Capital Economics, said to Reuters.

Russia had responded with a deposit rate hike already from December 27, including increasing the one-week deposit rate to 3 percent from 2.75 percent, and reserve requirements for non-resident credit institutions to 3.5 percent from 2.5 percent in January, but this month’s moves stepped up the campaign.

“The most confusing thing about the central bank’s decision is that it followed the release of predominantly weak January macroeconomic indicators,” Alexander Morozov, chief economist at HSBC said to The Wall Street Journal.

Get used to many more such "confusing" decisions, as the Fed's policies force the developing world to stall their economies with preemptive tightening. And there are those who wonder why the currencies of these countries don't surge as a result, pushing the dollar lower.

h/t London Dude Trader and themos mitsos

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JW n FL's picture

I like China will be refusing to admit there is any hyper inflation at all, thusly hyper inflation will not be effecting me either in 2011... thank you for your support and no worries, the beatings will continue until moral improves markedly.

Bob Sponge's picture

The world powder keg is really heating up and we are only at QE2.

tellsometruth's picture

well put...stunner of a state-ment


Michael's picture

Steroidal Inflation anyone?

Michael's picture

I uploaded a high quality copy of Alex Jones on The View.

Alex Jones Hijacks The View for Charlie Sheen

spdrdr's picture

What a fucking wanker........

traderjoe's picture

Not that I want to get in the middle of it, but do you think your personal troll will stop by tonite? There's been a few threads (including others) that have lately devolved into personal arguments...

JW n FL's picture

mine? if so mine is dead and gone. no worries, lets get back to the work of educating or bashing each others arguements to make them stronger / fun!

ft65's picture

Quoting JW n FL / GLP ^TrInIty^

mine? if so mine is dead and gone. no worries, lets get back to the work of educating or bashing each others arguements to make them stronger / fun!

Why don't you allow the same on your wo-wo forum, instead come here to ZH to bespoil the comments section. Why do you never educate or bash my comment here at ZH do you have something to hide? Are my posts invisible to the HB Gary MacDill software you use / test?

JW n FL's picture

Jason / Alex / whoever,


Quit fucking stalking me... so that you can keep pasting your website here in ZeroHedge... you are a bottom feeding group who cant pay for your corp docs to be filed... last ditch or not, you picked the wrong person to stalk. now fuck off.


James Edward Workman

Michael's picture

You called? What the hell is it with the comment counts on these threads being so low? Lets get this party started.

Extra Extra, read all about it;

"9/11 was Assisted by the Government".

You have to nudge the MSM and make them say, "9/11 was Assisted by the Government".

Use these exact words 10,000 times and the MSM will talk about it. Don't use the old phrase, "9/11 is an inside job". There is too much cognitive dissonance with that phrase.

Write lots of blog stories with this headline;

"9/11 was Assisted by the Government".

Xkwisetly Paneful's picture

and all the mindless government drones somehow pulled it off and kept quiet about it. First nomination for king of the moronistas.

MolotovCockhead's picture

Building what?'s building7.

Alcoholic Native American's picture

They managed to commit war crimes in Iraq and get everybody and the MSM to shut up about it.  The two are very linked.

Remember the first time the WTC got bombed, it was government supervised, the underwear bomber ring a bell?

I understand the knee jerk protectionism of your country, but really, the U.S. has gone to shit since 9/11. Nobody is going to jail? Why? because no crimes were committed?  No, Financial crooks and war criminals are all that's left.

smlbizman's picture

i would just ask you to think of all the terroist attacks you can think of.  they all seem to be of  simple planning. now consider the complexity of the 911 plot. it does not seem to fit their m.o.  i do not think of a conspiracy, i dont even know who alex jones is, but from my own common sense it appears fishy.

Xkwisetly Paneful's picture

They can't deliver the mail or plow the streets properly but they assisted in the largest domestic attack on the continental USA right under our noses where people are on video at random 100times a day. In the country's most populous city of all places. 


If they went to all that trouble, why didn't they just plant WMDS in Iraq? Much simpler and they pinned the entire war on it. It must be because they had a bout of their conscience kicking in.



I really understand the self loathing having been indoctrinated in the same basic moonbat, whackjob educational institutions as the rest.  


JW n FL's picture
by Michael
on Tue, 03/01/2011 - 01:52


You called?


You are not a stalker, you are someone I talk too...

Bobbyrib's picture

By increasing their Treausury holdings they seem to be trying to stick us with the unwanted inflation they are experiencing.

ft65's picture

Quoting JW nFL / GLP ^TrInIty^

I like China will be refusing to admit there is any hyper inflation at all, thusly hyper inflation will not be effecting me either in 2011... thank you for your support and no worries, the beatings will continue until moral improves markedly.

Yep, that sound par for the course with you. Explains why you so love to dish out the bans at your forum I can sleep at night knowing we are safe for another 10 months... "But what then oh enlightened one?"

swanpoint's picture

My (Chinese) neighbor here at work just got back from China; 50% food increase over the New Year holiday.

holdbuysell's picture

In the continuum of being increasingly more extreme, what is the word for "being one notch below hyper". Ultra?

Maybe that's what China means.

Whew, we can relax. It's only ultrainflation to be expected in China.

Spitzer's picture

Are any of you aware that China has to print RMB to buy dollars to peg the RMB ?

So the second that China stops printing RMB, inflation will stop in China and start in the US ?

DonutBoy's picture

Yes - that's the Bernank's plan in a nutshell. They get massive inflation or they break the peg.

Spitzer's picture

haha, yeah and the act of breaking the peg automatically pushes the inflation on the US.

US dollar down, RMB up. And just in case you didnt know, you don't need a weak currency to be export competitive. Germany has higher wages then the US does yet it has trade surpluses with China.

DonutBoy's picture

The Germans never hollowed out their industrial base, they have built and maintained brands which garner deserved world-wide respect for quality.  Thus they can keep higher wages.  The US cannot, we don't have that base or the rep.  We need the lower currency.

Spitzer's picture

A lower value currency is the unfortunate result of Fed policy. Unless you live outside the US, there is no reason to want a low dollar. Thats like wanting low wages. The dollar will have fallen even if there was no bailouts or stimulus. There is no reason to try and lower the value of the USD, the market will price it.


Dr. Porkchop's picture

Yes, they've been pushing the weak dollar concept here in Canada for ages... because it's 'good' for our exports. What they are really saying is, here, have a weak currency and higher priced imports for your troubles, oh, and here's NAFTA for good measure, that will be a net benefit to the middle class too.

I find that when things grate against your common sense, it's because something is wrong.

Spalding_Smailes's picture


What the fuck are you talking about ... ? They are printing like mad in China ... M2 in U.S. up what, 2 % ....


By the end of January 2010, the balance of broad money supply (M2) in China was RMB 62.51 trillion ($9.15 trillion), a year-on-year increase of 25.98 percent but a decrease of 1.7 percent compared with the end of last year. Narrow money supply (M1) in China at the end of January stood at RMB 22.96 trillion ($3.36 trillion), indicating an increase of 38.96 percent year on year, while money in circulation (M0) was down by 0.79 percent year on year to RMB 4.08 trillion ($596.95 billion), with net cash flow in the month in question at RMB 251.2 billion, down by RMB 425.2 billion ($36.75 billion) year on year.

At the end of January, RMB loans of Chinese financial institutions stood at RMB 41.37 trillion ($6.05 trillion), a year-on-year increase of 29.31 percent, with the growth rate down by 2.43 percent compared with the end of 2009.

Domestic and foreign currency deposits at Chinese financial institutions increased by RMB 1.514 trillion ($221.51 billion) during the month of January. With a year-on-year increase of 26.77 percent, the domestic and foreign deposits stood at RMB 62.72 trillion ($9.18 trillion) at the end of January.

BEIJING (Dow Jones)--China's broadest measure of money supply, M2, is likely to rise by 16% this year, Gao Xiaoqiong, the head of a regional branch of the People's Bank of China, said in a commentary piece in the Financial News on Monday.

At the end of December, M2 was up 19.7% from a year earlier.

Gao, the head of a PBOC branch in Nanchang city, southern China's Jiangxi province, said in the article the shift in China's monetary policy stance to "prudent" from "moderately loose" will have an especially large impact on China's less-developed areas. The central bank should try to promote small-scale loans in rural areas and to poor individuals as well as loans to women starting businesses, he said.


Popo's picture

Yes, that is the Bernank plan.  Force China to raise rates by pushing inflation on them.  


Unfortunately,  Bernanke is a naive academic and believes that a stronger Chinese currency will magically manifest itself in a resurrection of American manufacturing and exports.   On this note he is hopelessly, tragically wrong.   Economists rely on animal spirits as a matter of religious belief -- but the US manufacturing base has been gutted and cannot be resurrected due to social and political obstructions which are not easily overcome in 10, 20 or even 30 years.  


The rise in Chinese rates will spell the beginning of the disastrous plunge in living standards which will be the most significant event in the American 21st century.  


Bernanke will scratch his bald head and wonder why our debauched currency isn't magically spawning industry, jobs and social order.  It worked on paper, afterall...



Bobbyrib's picture

Our manufacturing base can be resurrected, but corporations would have to make sacrifices.


As we all know labor is the only one who should be making sacrifices...

Mentaliusanything's picture

In the end (and I mean it literally) I'm betting on 

mega, turbo, or nitrous inflation - NUCLEAR

NUCLEAR - the modern way to clean the stains left by Capitalism

Harmonious_Dissonance's picture

Dude Trader?  By any chance does The Dude abide?

three chord sloth's picture

Heh. I thought dude trading went away when they closed all the bath houses.

Spitzer's picture

China will have to hyperinflate to keep the dollar peg so in other words, China is just saying they will not be purchasing as much dollars.


xPat's picture

>Also, just where does China put the threshold cut off on "hyper" - 10%? 20%? 50%?


Assuming you are referring to annual inflation rates, none of the above even begin to approach hyperinflation. There are several definitions, but 50% per MONTH is probably the most common.


Withdrawn Sanction's picture

There are several definitions, but 50% per MONTH is probably the most common.

True, there are several definitions, and 50% is the most widely cited.  It comes from Philip Cagan's work, but it is ultimately, an arbitrary threshold.  Perhaps "really fast" or "a lot" would be equally as accurate and useful.

In my view, the really interesting part of the left field Chinese comments is the staunch denial of an accusation not made.  As the old saying goes, "nothing is confirmed until it is officially denied."  

DonutBoy's picture

Whoa mate!  Who asked you about hyper-inflation?  I predict a career move in Yao Jingyuan's immediate future.

The rest of you move along, these aren't the droids you're looking for.

TJWP's picture

So first off all, China has so many people it stands to reason that if they do it they do it big. Secondly you didn't honestly think that China was going to allow Geithner and Bernanke to one up them. Over in China they do things BIG and authoritarian. 


Or perhaps they are simply pulling a Gadaffi - "deny till you die"

JW n FL's picture

Over in China they do things BIG and authoritarian. 


Or perhaps they are simply pulling a Gadaffi - "deny till you die"


++++++++++++++++++++++++++++++++++ InfiniTimmy and Beyond in Gold for Great Style and Delivery!

bob_dabolina's picture

I agree.

I am observing healthy inflation due to a robust global recovery. It is by nature that prices would rise in congruence with my observations.

Unemployment as measured by U3 remains lofty, however, the birth-death rate as well as people no longer caring to even find work should off-set this figure in the coming months. I expect a 0% unemployment figure by 2015 according to our models.

-Ben Bernanke.


Bob Sponge's picture

Yes, Ben. When the economy is not creating jobs, in 4 years many, many people will have given up on finding a job. Are you figuring on starvation and suicides increasing the death rate part of your models?

chump666's picture

China is the big danger now, they can't fudge hyperinflation. Tea prices are a good example as is rice..

Oil crunch coming for China.

reader2010's picture

The price of pork is the ultimate gauge of inflation for the Chinks. I heard they had about 500 million pigs last year.